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Sample Business ContractsHome: Sample Business Contracts:
[BANK ONE LOGO] CREDIT AGREEMENT
This agreement between Bank One, NA, with its main office in Chicago, IL, and
its successors and assigns, (the "Bank"), whose address is 201 N. Central Ave,
21st Floor, AZ1-1178, Phoenix, AZ 85004, and TASER International, Inc. (the
"Borrower"), whose address is 7860 East McClain Drive #2, Scottsdale, AZ
85260-1627.
1. CREDIT FACILITIES.
1.1 SCOPE. This agreement governs Facility A and Facility B, and, unless
otherwise agreed to in writing by the Bank and the Borrower or
prohibited by applicable law, governs the Credit Facilities.
1.2 FACILITY A (LINE OF CREDIT). The Bank has approved a credit facility
to the Borrower in the principal sum not to exceed $1,500,000.00 in
the aggregate at any one time outstanding ("Facility A"). Credit
under Facility A shall be repayable as set forth in a Line of Credit
Note executed concurrently with this agreement, and any renewals,
modifications or extensions thereof. The proceeds of Facility A
shall be used for the following purpose: to provide working funds
and commercial letters of credit.
LETTER OF CREDIT SUB-LIMIT. At any time the Borrower is entitled to
an advance under Facility A, the Bank agrees to issue letters of
credit for the account of the Borrower in an amount not in excess of
the maximum advance that the Borrower would then be entitled to
obtain under Facility A, provided that (a) the aggregate maximum
available amount which is drawn and unreimbursed or may be drawn
under all letters of credit which are outstanding at any time,
including without limitation all letters of credit issued for the
account of the Borrower which are outstanding on the date of the
Line of Credit Note, shall not exceed $1,000,000.00, (b) the
issuance of any letter of credit with an expiration date beyond the
maturity date of the Line of Credit Note shall be entirely at the
discretion of the Bank, (c) any letter of credit shall be a
commercial letter of credit and the form of the requested letter of
credit shall be satisfactory to the Bank, in the Bank's sole
discretion, and (d) the Borrower shall have executed an application
and reimbursement agreement for any letter of credit in the Bank's
standard form. While any letter of credit is outstanding, the
maximum amount of advances that may be outstanding under the Line of
Credit Note shall be automatically reduced by the maximum amount
available to be drawn under any and all such letters of credit. The
Borrower shall pay the Bank a fee for each commercial letter of
credit that is issued, equal to the greater of $100.00 or 1.00% of
the original maximum available amount of such commercial letter of
credit. No credit shall be given for fees paid due to early
termination of any letter of credit. The Borrower shall also pay the
Bank's standard transaction fees with respect to any transactions
occurring on an account of any letter of credit. Each fee shall be
payable when the related letter of credit is issued, and transaction
fees shall be payable upon completion of the transaction as to which
they are charged. All fees may be debited by the Bank to any deposit
account of the Borrower carried with the Bank without further
authority and, in any event, shall be paid by the Borrower within
ten (10) days following billing.
1.3 FACILITY B (LINE OF CREDIT). The Bank has approved a credit facility
to the Borrower in the principal sum not to exceed $1,000,000.00 in
the aggregate at any one time outstanding ("Facility B"). Credit
under Facility B shall be repayable as set forth in a Line of Credit
Note executed concurrently with this agreement, and any renewals,
modifications or extensions thereof. The proceeds of Facility B
shall be used for the following purpose: to provide working capital.
1.4 BORROWING BASE. The aggregate principal amount of advances
outstanding at any one time under Facility A and B shall not exceed
the lesser of the Borrowing Base or $2,500,000.00. If at any time
the aggregate principal amount of advances outstanding under
Facility A and B plus the aggregate maximum amount drawn and
unreimbursed or available to be drawn under all outstanding letters
of credit issued by the Bank for the account of the Borrower under
the letter of credit sub-limit exceeds the Borrowing Base, the
Borrower shall immediately pay to the Bank an amount equal to the
difference between such aggregate principal amount of advances and
the Borrowing Base. "Borrowing Base" means the aggregate of:
A. 75% of Eligible Accounts;
B. 50% of Eligible Equipment; plus
C. 50% of Eligible Inventory, not to exceed the aggregate of
$500,000.00.
D. 100% of cash in deposit accounts at Bank, in which Bank has a
first perfected security interest.
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E. 95% of money market funds held in investment accounts in which
Bank has a first perfected security interest.
2. DEFINITIONS. As used in this agreement, the following terms have the
following respective meanings:
2.1 "Credit Facilities" means all extensions of credit from the Bank to
the Borrower, whether now existing or hereafter arising, including
but not limited to those described in Section 1.
2.2 "Liabilities" means all obligations, indebtedness and liabilities of
the Borrower to any one or more of the Bank, BANK ONE CORPORATION,
and any of their subsidiaries, affiliates or successors, now
existing or later arising, including, without limitation, all loans,
advances, interest, costs, overdraft indebtedness, credit card
indebtedness, lease obligations, or obligations relating to any Rate
Management Transaction, all monetary obligations incurred or accrued
during the pendency of any bankruptcy, insolvency, receivership or
other similar proceedings, regardless of whether allowed or
allowable in such proceeding, and all renewals, extensions,
modifications, consolidations or substitutions of any of the
foregoing, whether the Borrower may be liable jointly with others or
individually liable as a debtor, maker, co-maker, drawer, endorser,
guarantor, surety or otherwise, and whether voluntarily or
involuntarily incurred, due or not due, absolute or contingent,
direct or indirect, liquidated or unliquidated. The term "Rate
Management Transaction" in this agreement means any transaction
(including an agreement with respect thereto) now existing or
hereafter entered into among the Borrower, the Bank or BANK ONE
CORPORATION, or any of its subsidiaries or affiliates or their
successors, which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect
to any of these transactions) or any combination thereof, whether
linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
2.3 "Notes" means the Line of Credit Note(s) described in Section 1, and
all promissory notes, instruments and/or contracts evidencing the
terms and conditions of the Liabilities.
2.4 "Account" means a trade account, account receivable, other
receivable, or other right to payment for goods sold or leased or
services rendered owing to the Borrower (or to a third party grantor
acceptable to the Bank).
2.5 "Account Debtor" means the person or entity obligated upon an
Account.
2.6 "Affiliate" means any person, corporation or other entity directly
or indirectly controlling, controlled by or under common control
with the Borrower and any director or officer of the Borrower or any
subsidiary of the Borrower.
2.7 "Distributions" means all dividends and other distributions made by
the Borrower to its shareholders, partners, owners or members, as
the case may be, other than salary, bonuses, and other compensation
for services expended in the current accounting period.
2.8 "Eligible Accounts" means, at any time, all of the Borrower's
Accounts which contain selling terms and conditions acceptable to
the Bank. The net amount of any Eligible Account against which the
Borrower may borrow shall exclude all returns, discounts, credits,
and offsets of any nature. Unless otherwise agreed to by the Bank in
writing, Eligible Accounts do not include Accounts: (1) with respect
to which the Account Debtor is an employee or agent of the Borrower;
(2) with respect to which the Account Debtor is affiliated with or
related to the Borrower; (3) with respect to which goods are placed
on consignment, guaranteed sale, or other terms by reason of which
the payment by the Account Debtor may be conditional; (4) with
respect to which the Account Debtor is not a resident of the United
States, except to the extent such Accounts are supported by
insurance, bonds or other assurances satisfactory to the Bank; (5)
with respect to which the Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account
Debtor to the Borrower; (6) which are subject to dispute,
counterclaim, or setoff; (7) with respect to which the goods have
not been shipped or delivered, or the services have not been
rendered, to the Account Debtor; (8) with respect to which the Bank,
in its sole discretion, deems the creditworthiness or financial
condition of the Account Debtor to be unsatisfactory; (9) of any
Account Debtor who has filed or has had filed against it a petition
in bankruptcy or an application for relief under any provision of
any state or federal bankruptcy, insolvency, or debtor-in-relief
acts; or who has had appointed a trustee, custodian, or receiver for
the assets of such Account Debtor; or who has made an assignment for
the benefit of creditors or has become insolvent or fails generally
to pay its debts (including its payrolls) as such debts become due;
(10) with respect to which the Account Debtor is the United States
government or any department or agency of the United States; (11)
which have standard terms (i.e., are due and payable within thirty
(30) days of the invoice date) and have not been paid in full
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within ninety (90) days from the invoice date; (12) which (i) are in
an amount of less than $100,000.00, (ii) have extended terms (i.e.,
are due and payable within more than thirty (30) days, but not more
than one hundred twenty (120) days of the invoice date), and (iii)
have not been paid within one hundred fifty (150) days of the
invoice date; (13) which (i) are in an amount of $l00,000.00 or
more, (ii) have extended terms, and (iii) have not been expressly
approved by Bank, in its sole and absolute discretion as an Eligible
Account; (14) due from any one Account Debtor to the extent such
Account constitutes more than 15% of all Accounts, if the portion of
such Account which has not been paid within ninety (90) days from
the invoice date is in excess of 25% of the total amount outstanding
on the Account; (15) which are subject to any lien or security
interest other than the lien or security interest in favor of Bank;
and (16) which are not denominated in U.S. Dollars.
2.9 "Eligible Equipment" means, at any time, all of the Borrower's
Equipment, except Equipment: (1) which is not owned by the Borrower
free and clear of all security interests, liens, encumbrances, and
claims of third parties; (2) which the Bank, in its sole discretion,
deems to be obsolete, unsalable, damaged, defective, or unfit for
operation; (3) which consists of titled vehicles; and (4) which is
fixtures, including any equipment or trade fixtures which may be
attached or affixed to the realty upon which the equipment is
situated.
2.10 "Eligible Inventory" means, at any time, all of the Borrower's
Inventory except: (1) Inventory which is not owned by the Borrower
free and clear of all security interests, liens, encumbrances, and
claims of third parties; (2) Inventory which the Bank, in its sole
discretion, deems to be obsolete, unsalable, damaged, defective, or
unfit for further processing; and (3) Work in process.
2.11 "Equipment" means all of the Borrower's goods used or bought for use
primarily in the Borrower's business and which are not included in
Inventory, whether now or hereafter existing.
2.12 "Inventory" means all of the Borrower's raw materials, work in
process, finished goods, merchandise, parts and supplies, of every
kind and description, and goods held for sale or lease or furnished
under contracts of service in which the Borrower now has or
hereafter acquires any right, whether held by the Borrower or
others, and all documents of title, warehouse receipts, bills of
lading, and all other documents of every type covering all or any
part of the foregoing. Inventory includes inventory temporarily out
of the Borrower's custody or possession and all returns on Accounts.
2.13 "Intangible Assets" means the aggregate amount of all assets
classified as intangible assets under generally accepted accounting
principles, including, without limitation, goodwill, trademarks,
patents, copyrights, organization expenses, franchises, licenses,
trade names, brand names, mailing lists, catalogs, excess of cost
over book value of assets acquired, and bond discount and
underwriting expenses.
2.14 "Tangible Assets" means total assets excluding Intangible Assets,
stockholder and affiliate receivables
2.15 "Tangible Net Worth" means total assets less the sum of Intangible
Assets, and total liabilities.
3. CONDITIONS PRECEDENT.
3.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before the
first extension of credit governed by this agreement, whether by
disbursement of a loan, issuance of a letter of credit, or
otherwise, the Borrower shall deliver to the Bank, in form and
substance satisfactory to the Bank:
A. LOAN DOCUMENTS. The Notes, and as applicable, the letter of
credit applications, the security agreements, the pledge agreements,
financing statements, mortgages or deeds of trust, the guaranties,
the subordination agreements, and any other loan documents which the
Bank may reasonably require to give effect to the transactions
described in this agreement;
B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING. Evidence,
satisfactory to the Bank, of the due organization and good standing
of the Borrower and every other business entity that is a party to
this agreement or any other loan document required by this
agreement; and
C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOCUMENTS. Evidence that
(i) each party to this agreement and any other loan document
required by this agreement is authorized to enter into the
transactions described in this agreement and the other loan
documents, and (ii) the person signing on behalf of each such party
is authorized to do.
D. FEES. Payment of the following fees, all of which the Borrower
acknowledges have been earned by the Bank: a commitment fee in the
amount of $5,000.00.
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3.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any extension of
credit governed by this agreement, whether by disbursement of a loan,
issuance of a letter of credit or otherwise, the following conditions must
be satisfied:
A. REPRESENTATIONS. The representations of the Borrower are true on and as
of the date of the extension of credit;
B. NO EVENT OF DEFAULT. No default has occurred in any provision of this
agreement and is continuing or would result from the extension of credit,
and no event has occurred which would constitute the occurrence of any
default but for the lapse of time until the end of any grace or cure
period; and
C. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank has received
any other approvals, opinions and documents as it may reasonably request.
4. AFFIRMATIVE COVENANTS. The Borrower shall:
4.1 INSURANCE. Maintain insurance with financially sound and reputable
insurers covering its properties and business against those
casualties and contingencies and in the types and amounts as are in
accordance with sound business and industry practices.
4.2 EXISTENCE. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and
regulations, pay its debts and obligations when due under normal
terms, and pay on or before their due date, all taxes, assessments,
fees and other governmental monetary obligations, except as they may
be contested in good faith if they have been properly reflected on
its books and, at the Bank's request, adequate funds or security has
been pledged to insure payment.
4.3 FINANCIAL RECORDS. Maintain proper books and records of account, in
accordance with generally accepted accounting principles, and
consistent with financial statements previously submitted to the
Bank.
4.4 INSPECTION. Permit the Bank to inspect and copy the Borrower's
business records at such times and at such intervals as the Bank may
reasonably require, and to discuss the Borrower's business,
operations, and financial condition with the Borrower's officers and
accountants.
4.5 FINANCIAL REPORTS. Furnish to the Bank whatever information, books
and records the Bank may reasonably request, including at a minimum:
A. Within forty-five (45) days after each quarterly period, a
balance sheet as of the end of that period and statements of income,
cash flow and retained earnings, from the beginning of that fiscal
year to the end of that period, certified as correct by one of its
authorized agents.
B. Within ninety (90) days after and as of the end of each of its
fiscal years, a detailed financial statement including a balance
sheet and statements of income, cash flow and retained earnings,
such financial statement, to be audited by an independent certified
public accountant of recognized standing acceptable to the Bank in
the Bank's sole discretion.
C. Within forty-five (45) days after and as of the end of each
calendar month, the following lists, each certified as correct by
one of its authorized agents:
(1) a list of accounts receivable, aged from date of invoice,
and
(2) a list of accounts payable, aged from date of receipt.
D. Within forty-five (45) days after each monthly period, the
Borrower shall deliver to the Bank a borrowing base certificate, in
the form of the attached Exhibit "A", along with such supporting
documentation as the Bank may request.
4.6 NOTICES OF CLAIMS, LITIGATION, DEFAULTS, ETC. Promptly inform the Bank in
writing of (1) all existing and all threatened litigation, claims,
investigations, administrative proceedings and similar actions affecting
the Borrower which could materially affect the financial condition of the
Borrower; (2) the occurrence of any event which gives rise to the Bank's
option to terminate the Credit Facilities; (3) the institution of steps by
the Borrower to withdraw from, or the institution of any steps to
terminate, any employee benefit plan as to which the Borrower may have
liability; (4) any additions to or changes in the locations of the
Borrower's businesses; and (5) any alleged breach of any provision of this
agreement or of any other agreement related to the Credit Facilities by
the Bank.
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<PAGE>
4.7 ADDITIONAL INFORMATION. Furnish such additional information and
statements, as the Bank may request, from time to time.
4.8 INSURANCE REPORTS. Furnish to the Bank, upon request of the Bank, reports
on each existing insurance policy showing such information as the Bank may
reasonably request.
4.9 OTHER AGREEMENTS. Corn&y with all terms and conditions of all other
agreements, whether now or hereafter existing, between the Borrower and
any other party.
4.10 TITLE TO ASSETS AND PROPERTY. Maintain good and marketable title to all of
the Borrower's assets and properties.
4.11 ADDITIONAL ASSURANCES. Make, execute and deliver to the Bank such other
agreements as the Bank may reasonably request to evidence the Credit
Facilities and to perfect any security interests.
4.12 EMPLOYEE BENEFIT PLANS. Maintain each employee benefit plan as to which
the Borrower may have any liability, in compliance with all applicable
requirements of law and regulations.
4.13 COMPLIANCE CERTIFICATES. Provide the Bank, within forty-five (45) days
after the end of each fiscal quarter, with a certificate executed by the
Borrower's chief financial officer, or other officer or a person
acceptable to the Bank, certifying that, as of the date of the
certificate, no default exists under any provision of this agreement.
5. NEGATIVE COVENANTS.
5.1 Unless otherwise noted, the financial requirements set forth in this
section will be computed in accordance with generally accepted
accounting principles applied on a basis consistent with financial
statements previously submitted by the Borrower to the Bank.
5.2 Without the written consent of the Bank, the Borrower will not:
A. DIVIDENDS. Acquire or retire any of its shares of capital stock,
or declare or pay dividends or make any other distributions upon any
of its shares of capital stock in excess of the current year's net
profit, except in the absence of the occurrence of any default.
B. DEBT. Incur, or permit to remain outstanding, debt for borrowed
money or installment obligations, except debt reflected in the
latest financial statement of the Borrower furnished to the Bank
prior to execution of this agreement and not to be paid with
proceeds of borrowings under the Credit Facilities. For purposes of
this covenant, the sale of any account receivable is the incurring
of debt for borrowed money.
C. GUARANTIES. Guarantee or otherwise become or remain secondarily
liable on the undertaking of another, except for endorsement of
drafts for deposit and collection in the ordinary course of
business.
D. LIENS. Create or permit to exist any lien on any of its property,
real or personal, except: existing liens known to the Bank; liens to
the Bank; liens incurred in the ordinary course of business securing
current nondelinquent liabilities for taxes, worker's compensation,
unemployment insurance, social security and pension liabilities.
E. USE OF PROCEEDS. Use, or permit any proceeds of the Credit
Facilities to be used, directly or indirectly, for the purpose of
"purchasing or carrying any margin stock" within the meaning of
Federal Reserve Board Regulation U. At the Bank's request, the
Borrower will furnish a completed Federal Reserve Board Form U-l.
F. CONTINUITY OF OPERATIONS. (1) Engage in any business activities
substantially different from those in which the Borrower is
presently engaged; (2) cease operations, liquidate, merge, transfer,
acquire or consolidate with any other entity, change its name,
dissolve, or sell any assets out of the ordinary course of business;
or (3) enter into any arrangement with any person providing for the
leasing by the Borrower to any subsidiary of real or personal
property which has been sold or transferred by the Borrower or
subsidiary to such person.
G. LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into any agreement
with any person other than the Bank which prohibits or limits the
ability of the Borrower or any of its subsidiaries to create or
permit to exist any lien on any of its property, assets or revenues,
whether now owned or hereafter acquired.
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H. CONFLICTING AGREEMENTS. Enter into any agreement containing any
provision which would be violated or breached by the performance of the
Borrower's obligations under this agreement.
I. FIXED CHARGE COVERAGE RATIO. Permit as of each fiscal quarter end,
its ratio of net income before taxes, plus interest expense,
amortization and depreciation, rent and operating lease payments minus
any Distributions, for the rolling 4 quarters period then ending to
interest expense, taxes, rent and operating lease payments, prior period
current maturities of long, term debt and capital leases, to be less
than 1.25 to 1.00.
J. TANGIBLE NET WORTH RATIO. Permit as of each fiscal quarter end, its
ratio of Tangible Net Worth to Tangible Assets to be less than 0.35 to
1.00.
6. REPRESENTATIONS.
6.1 REPRESENTATIONS BY THE BORROWER. Each Borrower represents that: (a) the
execution and delivery of this agreement and the Notes, and the
performance of the obligations they impose, do not violate any law,
conflict with any agreement by which it is bound, or require the consent
or approval of any governmental authority or other third party, (b) this
agreement and the Notes are valid and binding agreements, enforceable
according to their terms, (c) all balance sheets, profit and loss
statements, and other financial statements and other information
furnished to the Bank in connection with the Liabilities are accurate
and fairly reflect the financial condition of the organizations and
persons to which they apply on their effective dates, including
contingent liabilities of every type, which financial condition has not
changed materially and adversely since those dates, (d) no litigation,
claim, investigation, administrative proceeding or similar action
(including those for unpaid taxes) against the Borrower is pending or
threatened, and no other event has occurred which may in any one case or
in the aggregate materially adversely affect the Borrower's financial
condition and properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by the Bank
in writing, (e) all of the Borrower's tax returns and reports that are
or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full,
except those presently being contested by the Borrower in good faith and
for which adequate reserves have been provided, (f) the Borrower is not
a "holding company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended, (g) the Borrower is not a "holding company", or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended, (h) there
are no defenses or counterclaims, offsets or adverse claims, demands or
actions of any kind, personal or otherwise, that the Borrower could
assert with respect to this agreement or the Credit Facilities, (i) the
Borrower owns, or is licensed to use, all trademarks, trade names,
copyrights, technology, know-how and processes necessary for the conduct
of its business as currently conducted, and (j) no part of the proceeds
of the Credit Facilities will be used for "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal
Reserve System of the United States (the "Board") as now and from time
to time hereafter in effect or for any purpose which violates the
provisions of any regulations of the Board. Each Borrower, other than a
natural person, further represents that: (a) it is duly organized,
existing and in good standing pursuant to the laws under which it is
organized, and (b) the execution and delivery of this agreement and the
Notes and the performance of the obligations they impose (i) are within
its powers, (ii) have been duly authorized by all necessary action of
its governing body, and (iii) do not contravene the terms of its
articles of incorporation or organization, its by-laws, or any
partnership, operating or other agreement governing its affairs.
6.2 REPRESENTATIONS REGARDING ASSETS. With respect to any asset of the
Borrower utilized in the calculation of the Borrowing Base set forth in
this agreement, the Borrower represents and warrants to the Bank: (1)
each asset represented by the Borrower to be eligible for Borrowing Base
purposes of this agreement conforms to the eligibility definitions set
forth in this agreement (2) all asset values delivered to the Bank will
be true and correct, subject to immaterial variance; and be determined
on a consistent accounting basis; (3) except as agreed to the contrary
by the Bank in writing, each asset is now and at all times hereafter
will be in the Borrower's physical possession and shall not be held by
others on consignment, sale or approval, or sale or return; (4) except
as reflected in schedules delivered to the Bank, each asset is now and
at all times hereafter will be of good and merchantable quality, free
from defects; (5) each asset is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party
without the Bank's prior written consent, and in such event, the
Borrower will concurrently at the time of bailment cause any such
bailee, warehouseman, or similar party to issue and deliver to the Bank,
warehouseman receipts in the Bank's name evidencing the storage of the
assets; and (6) the Bank, its assigns, or agents shall have the right at
any time and at the Borrower's expense to inspect, examine and audit the
Borrower's records, and if Accounts are included in the calculation of
Borrowing Base, confirm with Account Debtors the accuracy of such
Accounts, and inspect and examine the assets and to check and test the
same as to quality, quantity, value, and condition.
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7. DEFAULT/REMEDIES. If any of the Credit Facilities are not paid at
maturity, whether by acceleration or otherwise, or if a default by anyone
occurs under the terms of this agreement, the Notes or any agreement
related to the Credit Facilities, then the Bank shall have all of the
rights and remedies provided by any law or agreement.
8. MISCELLANEOUS.
8.1 NOTICE. Any notices and demands under or related to this document
shall be in writing and delivered to the intended party at its
address stated herein, and if to the Bank, at its main office if no
other address of the Bank is specified herein, by one of the
following means: (a) by hand, (b) by a nationally recognized
overnight courier service, or (c) by certified mail, postage
prepaid, with return receipt requested. Notice shall be deemed
given: (a) upon receipt if delivered by hand, (b) on the Delivery
Day after the day of deposit with a nationally recognized courier
service, or (c) on the third Delivery Day after the notice is
deposited in the mail. "Delivery Day" means a day other than a
Saturday, a Sunday or any other day on which national banking
associations are authorized to be closed. Any party may change its
address for purposes of the receipt of notices and demands by giving
notice of such change in the manner provided in this provision.
8.2 No WAIVER. No delay on the part of the Bank in the exercise of any
right or remedy waives that right or remedy. No single or partial
exercise by the Bank of any right or remedy precludes any other
future exercise of it or the exercise of any other right or remedy.
No waiver or indulgence by the Bank of any default is effective
unless it is in writing and signed by the Bank, nor shall a waiver
on one occasion bar or waive that right on any future occasion.
8.3 INTEGRATION. This agreement, the Notes, and any agreement related to
the Credit Facilities embody the entire agreement and understanding
between the Borrower and the Bank and supersede all prior agreements
and understandings relating to their subject matter. If any one or
more of the obligations of the Borrower under this agreement or the
Notes is invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining obligations
of the Borrower shall not in any way be affected or impaired, and
the invalidity, illegality or unenforceability in one jurisdiction
shall not affect the validity, legality or enforceability of the
obligations of the Borrower under this agreement or the Notes in any
other jurisdiction.
8.4 JOINT AND SEVERAL LIABILITY. Each Borrower, if more than one, is
jointly and severally liable.
8.5 GOVERNING LAW AND VENUE. This agreement is delivered in the State of
Arizona and governed by Arizona law (without giving effect to its
laws of conflicts). The Borrower agrees that any legal action or
proceeding with respect to any of its obligations under this
agreement may be brought by the Bank in any state or federal court
located in the State of Arizona, as the Bank in its sole discretion
may elect. By the execution and delivery of this agreement, the
Borrower submits to and accepts, for itself and in respect of its
property, generally and unconditionally, the non-exclusive
jurisdiction of those courts. The Borrower waives any claim that the
State of Arizona is not a convenient forum or the proper venue for
any such suit, action or proceeding.
8.6 CAPTIONS. Section headings are for convenience of reference only and
do not affect the interpretation of this agreement.
8.7 SUBSIDIARIES AND AFFILIATES OF THE BORROWER. To the extent the
context of any provisions of this agreement makes it appropriate,
including without limitation any representation, warranty or
covenant, the word "Borrower" as used in this agreement shall
include all of the Borrower's subsidiaries and affiliates.
Notwithstanding the foregoing, however, under no circumstances shall
this agreement be construed to require the Bank to make any loan or
other financial accommodation to any of the Borrower's subsidiaries
or affiliates.
8.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Borrower understands
and agrees that in extending the Credit Facilities, the Bank is
relying on all representations, warranties, and covenants made by
the Borrower in this agreement or in any certificate or other
instrument delivered by the Borrower to the Bank under this
agreement. The Borrower further agrees that regardless of any
investigation made by the Bank, all such representations, warranties
and covenants will survive the making of the Credit Facilities and
delivery to the Bank of this agreement, shall be continuing in
nature, and shall remain in full force and effect until such time as
the Borrower's indebtedness to the Bank shall be paid in full.
8.9 NON-LIABILITY OF THE BANK The relationship between the Borrower and
the Bank created by this agreement is strictly a debtor and creditor
relationship and not fiduciary in nature, nor is the relationship to
be construed as creating any partnership or joint venture between
the Bank and the Borrower. The Borrower is exercising the Borrower's
own judgement with respect to the Borrower's business. All
information supplied to the Bank is for the Bank's protection only
and no other party is entitled to rely on such information. There is
no duty for Bank to review, inspect, supervise or inform the
Borrower of any matter with respect to the Borrower's business. The
Bank and the Borrower intend that the
7
<PAGE>
Bank may reasonably rely on all information supplied by the Borrower
to the Bank, together with all representations and warranties given
by the Borrower to the Bank, without investigation or confirmation
by the Bank and that any investigation or failure to investigate
will not diminish the Bank's right to so rely.
8.10 INDEMNIFICATION OF THE BANK. The Borrower agrees to indemnify,
defend and hold the Bank and BANK ONE CORPORATION, or any of its
subsidiaries or affiliates or their successors, and each of their
respective shareholders, directors, officers, employees and agents
(collectively, the "Indemnified Persons") harmless from any and all
obligations, claims, liabilities, losses, damages, penalties, fines,
forfeitures, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature (including, without limitation,
any Indemnified Person's attorneys' fees) (collectively, the
"Claims") which may be imposed upon, incurred by or assessed against
any Indemnified Person (whether or not caused by any Indemnified
Person's sole, concurrent, or contributory negligence) arising out
of or relating to this agreement; the exercise of the rights and
remedies granted under this agreement (including, without
limitation, the enforcement of this agreement and the defense of any
Indemnified Person's action or inaction in connection with this
agreement); and in connection with the Borrower's failure to perform
all of the Borrower's obligations under this agreement, except to
the limited extent that the Claims against any such Indemnified
Person are proximately caused by such Indemnified Person's willful
misconduct. The indemnification provided for in this section shall
survive the termination of this agreement and shall extend to and
continue to benefit each individual or entity who is or has at any
time been an Indemnified Person.
The Borrower's indemnity obligations under this section shall not in
any way be affected by the presence or absence of covering
insurance, or by the amount of such insurance or by the failure or
refusal of any insurance carrier to perform any obligation on its
part under any insurance policy or policies affecting the Borrower's
assets or the Borrower's business activities. Should any Claim be
made or brought against any Indemnified Person by reason of any
event as to which the Borrower's indemnification obligations apply,
then, upon any Indemnified Person's demand, the Borrower, at its
sole cost and expense, shall defend such Claim in the Borrower's
name, if necessary, by the attorneys for the Borrower's insurance
carrier (if such Claim is covered by insurance), or otherwise by
such attorneys as any Indemnified Person shall approve. Any
Indemnified Person may also engage its own attorneys at its
reasonable discretion to defend the Borrower and to assist in its
defense and the Borrower agrees to pay the fees and disbursements of
such attorneys.
8.11 COUNTERPARTS. This agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts, taken together, shall
constitute one and the same agreement.
8.12 SOLE DISCRETION OF THE BANK. Whenever the Bank's consent or approval
is required under this agreement, the decision as to whether or not
to consent or approve shall be in the sole and exclusive discretion
of the Bank and the Bank's decision shall be final and conclusive.
8.13 ADVICE OF COUNSEL. The Borrower acknowledges that it has been
advised by counsel, or had the opportunity to be advised by counsel,
in the negotiation, execution and delivery of this agreement and any
documents executed and delivered in connection with the Credit
Facilities.
8.14 RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in
any law, rule, regulation, or guideline, or the interpretation or
application of any thereof by any court or administrative or
governmental authority (including any request or policy not having
the force of law) shall impose, modify, or make applicable any taxes
(except federal, state, or local income or franchise taxes imposed
on the Bank), reserve requirements, capital adequacy requirements,
or other obligations which would (A) increase the cost to the Bank
for extending or maintaining the Credit Facilities, (B) reduce the
amounts payable to the Bank under the Credit Facilities, or (C)
reduce the rate of return on the Bank's capital as a consequence of
the Bank's obligations with respect to the Credit Facilities, then
the Borrower agrees to pay the Bank such additional amounts as will
compensate the Bank therefor, within five (5) days after the Bank's
written demand for such payment. The Bank's demand shall be
accompanied by an explanation of such imposition or charge and a
calculation in reasonable detail of the additional amounts payable
by the Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
8.15 CONFLICTING TERMS. If this agreement is inconsistent with any
provision in any agreement related to the Credit Facilities, the
Bank shall determine, in the Bank's sole and absolute discretion,
which of the provisions shall control any such inconsistency.
8
<PAGE>
8.16 EXPENSES. The Borrower agrees to pay or reimburse the Bank for all
its out-of-pocket costs and expenses and reasonable attorneys' fees
(including the fees of in-house counsel) incurred in connection with
the development, preparation and execution of, and in connection
with the enforcement or preservation of any rights under, this
agreement, any amendment, supplement, or modification thereto, and
any other documents prepared in connection herewith or therewith.
These costs and expenses include without limitation any costs or
expenses incurred by the Bank in any bankruptcy, reorganization,
insolvency or other similar proceeding.
9. WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER
FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.
10. JURY WAIVER. THE BORROWER AND THE BANK HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE)
BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO
THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO
PROVIDE THE FINANCING DESCRIBED HEREIN.
Dated: May 15,2002
ADDRESS(ES) FOR NOTICES: BORROWER:
7860 East McClain Drive #2 TASER International, Inc.
Scottsdale, AZ 85260-1627
Attn: Kathy Hanrahan, CFO By: /s/ Thomas P. Smith
--------------------------- ----------------------------
Thomas P. Smith President
----------------------------
Printed Name Title
Date: 6-6-02
--------------------------
ADDRESS FOR NOTICES: BANK:
201 N. Central Ave, 21st Floor, AZl-1178 Bank One, NA, with its main
Phoenix, AZ 85004 office in Chicago, IL
Attn: Steven J. Krakoski By: /s/ Christine D. Peterson
--------------------------- ----------------------------
Christine D. Peterson AVP
----------------------------
Printed Name Title
Date: 6-6-02
--------------------------
Christy MurphyAZ13044
9
<PAGE>
[BANK ONE LOGO] LINE OF CREDIT NOTE
$1,500,000.00
DUE: MAY 31,2003 DATE: MAY 31,2002
PROMISE TO PAY. On or before May 31,2003, for value received, TASER
International, Inc. (the "Borrower") promises to pay to Bank One, NA, with its
main office in Chicago, IL, whose address is 201 N. Central Ave, 21st Floor,
AZl-1178, Phoenix, AZ 85004 (the "Bank") or order, in lawful money of the United
States of America, the sum of One Million Five Hundred Thousand and 00/l00
Dollars ($1,500,000.00) or such lesser sum as is indicated on Bank records, plus
interest as-provided below.
DEFINITIONS. As used in this Note, the following terms have the following
respective meanings:
"ADVANCE" means a Eurodollar Advance or a Prime Rate Advance and "ADVANCES"
means all Eurodollar Advances and all Prime Rate Advances under this Note.
"APPLICABLE MARGIN" means with respect to any Prime Rate Advance, 0.00% per
annum and with respect to any Eurodollar Advance, 3.00% per annum.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Arizona and/or New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day other than a Saturday, Sunday or any other day on
which national banking associations are authorized to be closed.
"EURODOLLAR BASE RATE" means, with respect to the relevant Interest Period, the
applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars
as reported by any generally recognized financial information service as of
11:OO a.m. (London time) two Eurodollar Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period, provided
that, if no such British Bankers' Association LIBOR rate is available to the
Bank, the applicable Eurodollar Base Rate for the relevant Interest Period shall
instead be the rate determined by the Bank to be the rate at which BANK ONE
CORPORATION or one of its affiliate banks offers to place deposits in U.S.
dollars with first-class banks in the London interbank market at approximately
11:00 a.m. (London time) two Eurodollar Days prior to the first day of such
Interest Period, in the approximate amount of the principal amount outstanding
on such date and having a maturity equal to such Interest Period.
"EURODOLLAR ADVANCE" means any borrowing under this Note when and to the extent
that its interest rate is determined by reference to the Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to a Eurodollar Advance for the relevant
Interest Period, the sum of (i) the Applicable Margin plus (ii) the quotient of
(a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b)
one minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period.
"INTEREST PERIOD" means, with respect to a Eurodollar Advance, a period of one
(l), two (2), three (3) or six (6) month(s) commencing on a Business Day
selected by the Borrower pursuant to this Note. Such Interest Period shall end
on the day which corresponds numerically to such date one (l), two (2), three
(3) or six (6) month(s) thereafter, as applicable, provided, however, that if
there is no such numerically corresponding day in such first, second, third or
sixth succeeding month(s), as applicable, such Interest Period shall end on the
last Business Day of such first, second, third or sixth succeeding month(s), as
applicable. If an Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.
"PRIME RATE" means a rate per annum equal to the prime rate of interest
announced from time to time by the Bank or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.
"PRIME RATE ADVANCE" means any Advance under this Note when and to the extent
that its interest rate is determined by reference to the Prime Rate.
"PRINCIPAL PAYMENT DATE" is defined in the paragraph entitled "Principal
Payments" below.
<PAGE>
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"RESERVE REQUIREMENT" means, with respect to an Interest Period, the maximum
aggregate reserve requirement (including all basic, supplemental, marginal and
other reserves) which is imposed under Regulation D.
INTEREST RATES. The Advance(s) evidenced by this Note may be drawn down and
remain outstanding as up to five (5) Eurodollar Advances and/or a Prime Rate
Advance. The Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of each Prime Rate Advance at the Prime Rate plus the
Applicable Margin and each Eurodollar Advance at the Eurodollar Rate. Interest
shall be calculated on the basis of the actual number of days elapsed in a year
of 360 days. In no event shall the interest rate applicable to any Advance
exceed the maximum rate allowed by law. Any interest payment which would for any
reason be deemed unlawful under applicable law shall be applied to principal.
Borrower hereby agrees to pay an effective rate of interest that is the sum of
the interest rate provided for in this Note together with any additional rate of
interest resulting from any other charges of interest or in the nature paid or
to be paid in connection with this Note or the Related Documents.
BANK RECORDS. The Bank shall, in the ordinary course of business, make notations
in its records of the date, amount, interest rate and Interest Period of each
Advance hereunder, the amount of each payment on the Advances, and other
information. Such records shall, in the absence of manifest error, be conclusive
as to the outstanding principal balance of and interest rate or rates applicable
to this Note.
NOTICE AND MANNER OF ELECTING INTEREST RATES ON ADVANCES. The Borrower shall
give the Bank written notice (effective upon receipt) of the Borrower's intent
to draw down an Advance under this Note no later than 11:00 a.m. Mountain time,
one (1) Business Day before disbursement, if the full amount of the drawn
Advance is to be disbursed as a Prime Rate Advance and three (3) Business Days
before disbursement, if any part of such Advance is to be disbursed as a
Eurodollar Advance. The Borrower's notice must specify: (a) the disbursement
date, (b) the amount of each Advance, (c) the type of each Advance (Prime Rate
Advance or Eurodollar Advance), and (d) for each Eurodollar Advance, the
duration of the applicable Interest Period. Each Eurodollar Advance shall be in
a minimum amount of Five Hundred Thousand and 00/l00 Dollars ($500,000.00), with
multiples of One Hundred Thousand and 00/l00 Dollars ($l00,0000.00). All notices
under this paragraph are irrevocable. By the Bank's close of business on the
disbursement date and upon fulfillment of the conditions set forth herein and in
any other of the Related Documents, the Bank shall disburse the requested
Advances in immediately available funds by crediting the amount of such Advances
to the Borrower's account with the Bank.
CONVERSION AND RENEWALS. The Borrower may elect from time to time to convert one
type of Advance into another or to renew any Advance by giving the Bank written
notice no later than 11:00 a.m. Mountain time, one (1) Business Day before
conversion into a Prime Rate Advance and three (3) Business Days before
conversion into or renewal of a Eurodollar Advance, specifying: (a) the renewal
or conversion date, (b) the amount of the Advance to be converted or renewed,
(c) in the case of conversion, the type of Advance to be converted into (Prime
Rate Advance or Eurodollar Advance), and (d) in the case of renewals of or
conversion into a Eurodollar Advance, the applicable Interest Period, provided
that (i) the minimum principal amount of each Eurodollar Advance outstanding
after a renewal or conversion shall be Five Hundred Thousand and 00/l00 Dollars
($500,000.00), with multiples of One Hundred Thousand and 00/l00 Dollars
($l00,000.00) and (ii) a Eurodollar Advance can only be converted on the last
day of the Interest Period for the Advance. All notices given under this
paragraph are irrevocable. If the Borrower fails to give the Bank the notice
specified above for the renewal or conversion of a Eurodollar Advance by 11:00
a.m. Mountain time three (3) Business Days before the end of the Interest Period
for that Advance, the Advance shall automatically be converted to a Prime Rate
Advance on the last day of the Interest Period for the Advance.
INTEREST PAYMENTS. Interest on the Advances shall be paid as follows:
A. For each Prime Rate Advance, on the last day of each month beginning with the
first month following disbursement of the Advance or following conversion of an
Advance into a Prime Rate Advance, and at the maturity or conversion of the
Advance into a Eurodollar Advance;
B. For each Eurodollar Advance, on the last day of the Interest Period for the
Advance and, if the Interest Period is longer than three months, at three-month
intervals beginning with the day three months from the date the Advance is
disbursed.
PRINCIPAL PAYMENTS. All outstanding principal and interest is due and payable in
full on May 31,2003, which is defined herein as the "Principal Payment Date".
The Borrower shall select interest rates and Interest Periods such that on each
Principal Payment Date the sum of the principal amount of the Prime Rate Advance
outstanding on that date plus the aggregate principal amount of the Eurodollar
Advances with Interest Periods ending on that date is greater than or equal to
the principal payment due on that date. Any election which does not comply with
this requirement will be invalid and the Bank may, but will not be required to,
honor such election.
2
<PAGE>
OVERDUE AMOUNTS. Any principal amount not paid when due (at maturity, by
acceleration, or otherwise) shall bear interest thereafter until paid in full,
payable on demand, at a per annum rate equal to the Prime Rate plus the
Applicable Margin plus three percent (3.00%).
PREPAYMENT. The Borrower may prepay all or any part of any Prime Rate Advance at
any time without premium or penalty. The Borrower may prepay any Eurodollar
Advance only at the end of an Interest Period.
FUNDING LOSS INDEMNIFICATION. Upon the Banks request, the Borrower shall pay the
Bank amounts sufficient (in the Bank's reasonable opinion) to compensate it for
any loss, cost, or expense incurred as a result of:
A. Any payment of a Eurodollar Advance on a date other than the last day of the
Interest Period for the Advance, including, without limitation, acceleration of
the Advances by the Bank pursuant to this Note or the Related Documents; or
B. Any failure by the Borrower to borrow or renew a Eurodollar Advance on the
date specified in the relevant notice from the Borrower to the Bank.
ADDITIONAL COSTS. If any applicable domestic or foreign law, treaty, government
rule or regulation now or later in effect (whether or not it now applies to the
Bank) or the interpretation or administration thereof by a governmental
authority charged with such interpretation or administration, or compliance by
the Bank with any guideline, request or directive of such an authority (whether
or not having the force of law), shall (a) affect the basis of taxation of
payments to the Bank of any amounts payable by the Borrower under this Note or
the Related Documents (other than taxes imposed on the overall net income of the
Bank by the jurisdiction or by any political subdivision or taxing authority of
the jurisdiction in which the Bank has its principal office), or (b) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
the Bank, or (c) impose any other condition with respect to this Note or the
Related Documents and the result of any of the foregoing is to increase the cost
to the Bank of maintaining any Eurodollar Advance or to reduce the amount of any
sum receivable by the Bank on such an Advance, or (d) affect the amount of
capital required or expected to be maintained by the Bank (or any corporation
controlling the Bank) and the Bank determines that the amount of such capital is
increased by or based upon the existence of the Bank's obligations under this
Note or the Related Documents and the increase has the effect of reducing the
rate of return on the Bank's (or its controlling corporation's) capital as a
consequence of the obligations under this Note or the Related Documents to a
level below that which the Bank (or its controlling corporation) could have
achieved but for such circumstances (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by the Bank to be material,
then the Borrower shall pay to the Bank, from time to time, upon request by the
Bank, additional amounts sufficient to compensate the Bank for the increased
cost or reduced sum receivable. Whenever the Bank shall learn of circumstances
described in this section which are likely to result in additional costs to the
Borrower, the Bank shall give prompt written notice to the Borrower of the basis
for and the estimated amount of any such anticipated additional costs. A
statement as to the amount of the increased cost or reduced sum receivable,
prepared in good faith and in reasonable detail by the Bank and submitted by the
Bank to the Borrower, shall be conclusive and binding for all purposes absent
manifest error in computation.
ILLEGALITY. If any applicable domestic or foreign law, treaty, rule or
regulation now or later in effect (whether or not it now applies to the Bank) or
the interpretation or administration thereof by a governmental authority charged
with such interpretation or administration, or compliance by the Bank with any
guideline, request or directive of such an authority (whether or not having the
force of law), shall make it unlawful or impossible for the Bank to maintain or
fund the Eurodollar Advances, then, upon notice to the Borrower by the Bank, the
outstanding principal amount of the Eurodollar Advances, together with accrued
interest and any other amounts payable to the Bank under this Note or the
Related Documents on account of the Eurodollar Advances shall be repaid (a)
immediately upon the Bank's demand if such change or compliance with such
requests, in the Bank's judgment, requires immediate repayment, or (b) at the
expiration of the last Interest Period to expire before the effective date of
any such change or request provided, however, that subject to the terms and
conditions of this Note and the Related Documents the Borrower shall be entitled
to simultaneously replace the entire outstanding balance of any Eurodollar
Advance repaid in accordance with this section with a Prime Rate Advance in the
same amount.
INABILITY TO DETERMINE INTEREST RATE. If the Bank determines that (a) quotations
of interest rates for the relevant deposits referred to in the definition of
Eurodollar Rate are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the interest rate on a
Eurodollar Advance as provided in this Note, or (b) the relevant interest rates
referred to in the definition of Eurodollar Rate do not accurately cover the
cost to the Bank of making or maintaining Eurodollar Advances, then the Bank
shall forthwith give notice of such circumstances to the Borrower, whereupon (i)
the obligation of the Bank to make Eurodollar Advances shall be suspended until
the Bank notifies the Borrower that the circumstances giving rise to the
suspension no longer exists, and (ii) the Borrower shall repay in full the then
outstanding principal amount of each Eurodollar Advance, together with accrued
interest, on the last day of the then current Interest Period applicable to the
Advance, provided, however, that, subject to the terms and conditions of this
Note and the Related Documents, the Borrower shall be entitled to simultaneously
replace the entire outstanding balance of any Eurodollar Advance repaid in
accordance with this section with a Prime Rate Advance in the same amount.
3
<PAGE>
OBLIGATIONS DUE ON NON-BUSINESS DAY. Whenever any payment under this Note
becomes due and payable on a day that is not a Business Day, if no default then
exists under this Note, the maturity of the payment shall be extended to the
next succeeding Business Day, except, in the case of a Eurodollar Advance, if
the result of the extension would be to extend the payment into another calendar
month, the payment must be made on the immediately preceding Business Day.
MATTERS REGARDING PAYMENT. The Borrower will pay the Bank at the Bank's address
shown above or at such other place as the Bank may designate. Payments shall be
allocated among principal, interest and fees at the discretion of the Bank
unless otherwise agreed or required by applicable law. Acceptance by the Bank of
any payment which is less than the payment due at the time shall not constitute
a waiver of the Bank's right to receive payment in full at that time or any
other time.
LATE FEE. If any payment is not received by the Bank within ten (10) days after
its due date, the Bank may assess and the Borrower agrees to pay a late fee
equal to the greater of: (a) five percent (5.00%) of the past due amount or (b)
Twenty Five and 00/l00 Dollars ($25.00), up to the maximum amount of One
Thousand Five Hundred and 00/l00 Dollars ($1,500.00) per late charge.
BUSINESS LOAN. The Borrower acknowledges and agrees that this Note evidences a
loan for a business, commercial, agricultural or similar commercial enterprise
purpose, and that all advances made under this Note shall not be used for any
personal, family or household purpose.
CREDIT FACILITY. The Bank has approved a credit facility to the Borrower in a
principal amount not to exceed the face amount of this Note. The credit facility
is in the form of advances made from time to time by the Bank to the Borrower.
This Note evidences the Borrower's obligation to repay those advances. The
aggregate principal amount of debt evidenced by this Note is the amount
reflected from time to time in the records of the Bank. Until the earliest of
maturity, the occurrence of any default, or the occurrence of any event that
would constitute the occurrence of any default but for the lapse of time until
the end of any grace or cure period, the Borrower may borrow, pay down and
reborrow under this Note.
LIABILITIES. The term "Liabilities" in this Note means all obligations,
indebtedness and liabilities of the Borrower to any one or more of the Bank,
BANK ONE CORPORATION, and any of their subsidiaries, affiliates or successors,
now existing or later arising, including, without limitation, all loans,
advances, interest, costs, overdraft indebtedness, credit card indebtedness,
lease obligations, or obligations relating to any Rate Management Transaction,
all monetary obligations incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other similar proceedings, regardless of
whether allowed or allowable in such proceeding, and all renewals, extensions,
modifications, consolidations or substitutions of any of the foregoing, whether
the Borrower may be liable jointly with others or individually liable as a
debtor, maker, co-maker, drawer, endorser, guarantor, surety or otherwise, and
whether voluntarily or involuntarily incurred, due or not due, absolute or
contingent, direct or indirect, liquidated or unliquidated. The term "Rate
Management Transaction" in this Note means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into among the
Borrower, the Bank or BANK ONE CORPORATION, or any of its subsidiaries or
affiliates or their successors, which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
RELATED DOCUMENTS. The term "Related Documents" in this Note means all loan
agreements, credit agreements, reimbursement agreements, security agreements,
mortgages, deeds of trust, pledge agreements, assignments, guaranties, or any
other instrument or document executed in connection with this Note or in
connection with any of the Liabilities.
SECURITY. The term "Collateral" in this Note means all real or personal property
described in all security agreements, pledge agreements, mortgages, deeds of
trust, assignments, or other instruments now or hereafter executed in connection
with this Note or in connection with any of the Liabilities. If applicable, the
Collateral secures the payment of this Note and the Liabilities.
BANK'S RIGHT OF SETOFF. In addition to the Collateral, if any, the Borrower
grants to the Bank a security interest in, and the Bank is authorized to setoff
and apply, all Accounts, Securities and Other Property, and Bank Debt against
any and all Liabilities of the Borrower. This right of setoff may be exercised
at any time and from time to time, and without prior notice to the Borrower.
This security interest and right of setoff may be enforced or exercised by the
Bank regardless of whether or not the Bank has made any demand under this
paragraph or whether the Liabilities are contingent, matured, or unmatured. Any
delay, neglect or conduct by the Bank in exercising its rights under this
paragraph will not be a waiver of the right to exercise this right of setoff or
enforce this security interest. The rights of the Bank under this paragraph are
in addition to other rights the Bank may have in the Related Documents or by
law. In this paragraph: (a) the term "Accounts" means any and all accounts and
deposits of the Borrower (whether general, special, time, demand, provisional or
final) at any time held by the Bank (including all Accounts held jointly with
another, but excluding any IRA or Keogh Account, or any trust Account in which a
security interest would be prohibited by law); (b) the term "Securities and
Other Property" means any and all securities and other property of the Borrower
in the custody, possession or control
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<PAGE>
of the Bank (other than property held by the Bank in a fiduciary capacity); and
(c) the term "Bank Debt" means all indebtedness at any time owing by the Bank,
to or for the credit or account of the Borrower.
REPRESENTATIONS BY BORROWER. Each Borrower represents that: (a) the execution
and delivery of this Note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) this Note is a valid and binding agreement, enforceable according to
its terms; and (c) all balance sheets, profit and loss statements, and other
financial statements furnished to the Bank in connection with the Liabilities
are accurate and fairly reflect the financial condition of the organizations and
persons to which they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not changed materially
and adversely since those dates. Each Borrower, other than a natural person,
further represents that: (a) it is duly organized, existing and in good standing
pursuant to the laws under which it is organized; and (b) the execution and
delivery of this Note and the performance of the obligations it imposes (i) are
within its powers and have been duly authorized by all necessary action of its
governing body, and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any partnership, operating or
other agreement governing its affairs.
EVENTS OF DEFAULT/ACCELERATION. If any of the following events occurs this Note
shall become due immediately, without notice, at the Bank's option:
1. The Borrower, or any guarantor of this Note (the "Guarantor"), fails to
pay when due any amount payable under this Note, under any of the
Liabilities, or under any agreement or instrument evidencing debt to any
creditor.
2. The Borrower or any Guarantor (a) fails to observe or perform any other
term of this Note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults
under the terms of any agreement or instrument relating to any debt for
borrowed money (other than the debt evidenced by this Note) and the effect
of such default will allow the creditor to declare the debt due before its
maturity.
3. In the event (a) there is a default under the terms of any Related
Document, (b) any guaranty of the loan evidenced by this Note is
terminated or becomes unenforceable in whole or in part, (c) any Guarantor
fails to promptly perform under its guaranty, or (d) the Borrower fails to
comply with, or pay, or perform under any agreement, now or hereafter in
effect, between the Borrower and BANK ONE CORPORATION, or any of its
subsidiaries or affiliates or their successors.
4. There is any loss, theft, damage, or destruction of any Collateral not
covered by insurance.
5. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of the
Borrower or any affiliate of the Borrower.
6. The Borrower or any Guarantor becomes insolvent or unable to pay its debts
as they become due.
7. The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction.
8. A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent.
9. Proceedings are commenced against the Borrower or any Guarantor under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and they remain undismissed for thirty (30) days after
commencement; or the Borrower or the Guarantor consents to the
commencement of those proceedings.
10. Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor.
11. The Borrower or any Guarantor dies.
12. The Borrower or any Guarantor, without the Bank's written consent (a) is
dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business
outside the ordinary course of its business, (d) leases, purchases, or
otherwise acquires a material part of the assets of any other business
entity, except in the ordinary course of its business, or (e) agrees to do
any of the foregoing (notwithstanding the foregoing, any subsidiary may
merge or consolidate with any other subsidiary, or with the Borrower, so
long as the Borrower is the survivor).
13. There is a substantial change in the existing or prospective financial
condition of the Borrower or any Guarantor that the Bank in good faith
determines to be materially adverse.
14. The Bank in good faith deems itself insecure.
REMEDIES. If this Note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of any
other person or business entity, with or without designating the capacity of
that nominee. Without limiting any other available remedy, the Borrower is
liable for any deficiency remaining after disposition of any Collateral. The
Borrower is liable to the Bank for all reasonable costs and expenses of every
kind incurred in the making or collection of this Note, including without
limitation reasonable attorneys' fees and court costs. These costs and expenses
include without limitation any costs or expenses incurred by the Bank in any
bankruptcy, reorganization, insolvency or other similar proceeding.
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<PAGE>
WAIVERS. Any party liable on this Note waives (a) to the extent permitted by
law, all rights and benefits under any laws or statutes regarding sureties, as
may be amended; (b) any right to receive notice of the following matters before
the Bank enforces any of its rights: (i) the Bank's acceptance of this Note,
(ii) any credit that the Bank extends to the Borrower, (iii) the Borrower's
default, (iv) any demand, diligence, presentment, dishonor and protest, or (v)
any action that the Bank takes regarding the Borrower, anyone else, any
Collateral, or any of the Liabilities, that it might be entitled to by law or
under any other agreement; (c) any right to require the Bank to proceed against
the Borrower, any other obligor or guarantor of the Liabilities, or any
Collateral, or pursue any remedy in the Bank's power to pursue; (d) any
defense based on any claim that any endorser or other parties' obligations
exceed or are more burdensome than those of the Borrower; (e) the benefit of any
statute of limitations affecting liability of any endorser or other party liable
hereunder or the enforcement hereof; (f) any defense arising by reason of any
disability or other defense of the Borrower or by reason of the cessation from
any cause whatsoever (other than payment in full) of the obligation of the
Borrower for the Liabilities; and (g) any defense based on or arising out of any
defense that the Borrower may have to the payment or performance of the
Liabilities or any portion thereof. Any party liable on this Note consents to
any extension or postponement of time of its payment without limit as to the
number or period, to any substitution, exchange or release of all or any part of
the Collateral, to the addition of any other party, and to the release or
discharge of, or suspension of any rights and remedies against, any person who
may be liable for the payment of this Note. The Bank may waive or delay
enforcing any of its rights without losing them. Any waiver affects only the
specific terms and time period stated in the waiver. No modification or waiver
of any provision of this Note is effective unless it is in writing and signed by
the party against whom it is being enforced. Without limiting any foregoing
waiver, consent or agreement, any party liable on this Note further waives any
and all benefits under Arizona Revised Statutes Sections 12-1641 through
12-1646, inclusive, and Rule 17(f) of the Arizona Rules of Civil Procedure,
including any revision or replacement of such statutes or rules hereafter
enacted.
SUBORDINATION. Any rights of any party liable on this Note, whether now existing
or hereafter arising, to receive payment on account of any indebtedness
(including interest) owed to any party liable on this Note by the Borrower, or
to withdraw capital invested by it in the Borrower, or to receive distributions
from the Borrower, shall at all times be subordinate to the full and prior
repayment to the Bank of the Liabilities. No party liable on this Note shall be
entitled to enforce or receive payment of any sums hereby subordinated until the
Liabilities have been paid in full and any such sums received in violation of
this paragraph shall be received by such party in trust for the Bank. Any party
liable on this Note agrees to stand still with regard to the Bank's enforcement
of its rights, including taking no action to delay, impede or otherwise
interfere with the Bank's rights to realize on the Collateral. The foregoing
notwithstanding, until the occurrence of any default, any party liable on this
Note is not prohibited from receiving distributions from the Borrower in an
amount equal to any income tax liability imposed on such party liable on this
Note attributable to an ownership interest in the Borrower, if any.
RIGHTS OF SUBROGATION. Any party liable on this Note waives and agrees not to
enforce any rights of subrogation, contribution or indemnification that it may
have against the Borrower, any person liable on the Liabilities, or the
Collateral, until the Borrower and such party liable on this Note have fully
performed all their obligations to the Bank, even if those obligations are not
covered by this Note.
REINSTATEMENT. All parties liable on this Note agree that to the extent any
payment is received by the Bank in connection with the Liabilities, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by the Bank or paid over to
a trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then this Note shall continue to be effective or shall be reinstated,
as the case may be, and whether or not the Bank is in possession of this Note,
and, to the extent of such payment or repayment by the Bank, the Liabilities or
part thereof intended to be satisfied by such Preferential Payment shall be
revived and continued in full force and effect as if said Preferential Payment
had not been made.
GOVERNING LAW AND VENUE. This Note is delivered in the State of Arizona and
governed by Arizona law (without giving effect to its laws of conflicts). The
Borrower agrees that any legal action or proceeding with respect to any of its
obligations under this Note may be brought by the Bank in any state or federal
court located in the State of Arizona, as the Bank in its sole discretion may
elect. By the execution and delivery of this Note, the Borrower submits to and
accepts, for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of those courts. The Borrower
waives any claim that the State of Arizona is not a convenient forum or the
proper venue for any such suit, action or proceeding.
MISCELLANEOUS. The Borrower, if more than one, is jointly and severally liable
for the obligations represented by this Note, the term "Borrower" means any one
or more of them, and the receipt of value by any one of them constitutes the
receipt of value by the others. This Note binds the Borrower and its successors,
and benefits the Bank, its successors and assigns. Any reference to the Bank
includes any holder of this Note. Section headings are for convenience of
reference only and do not affect the interpretation of this Note. Any notices
and demands under or related to this document shall be in writing and delivered
to the intended party at its address stated herein, and if to the Bank, at its
main office if no other address of the Bank is specified herein, by one of the
following means: (a) by hand, (b) by a nationally recognized overnight courier
service, or (c) by certified mail, postage prepaid, with return receipt
requested. Notice shall be deemed given: (a) upon receipt if delivered by hand,
(b) on the Delivery Day after the day of deposit with a nationally recognized
courier service, or (c) on the third Delivery Day after the notice is deposited
in the mail. "Delivery Day" means a day other
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<PAGE>
than a Saturday, a Sunday, or any other day on which national banking
associations are authorized to be closed. Any party may change its address for
purposes of the receipt of notices and demands by giving notice of such change
in the manner provided in this provision. This Note and any Related Documents
embody the entire agreement between the Borrower and the Bank regarding the
terms of the loan evidenced by this Note and supercede all oral statements and
prior writings relating to that loan. If any provision of this Note cannot be
enforced, the remaining portions of this Note shall continue in effect. The
Borrower agrees that the Bank may provide any information or knowledge the Bank
may have about the Borrower or about any matter relating to this Note or the
Related Documents to BANK ONE CORPORATION, or any of its subsidiaries or
affiliates or their successors, or to any one or more purchasers or potential
purchasers of this Note or the Related Documents. The Borrower agrees that the
Bank may at any time sell, assign or transfer one or more interests or
participations in all or any part of its rights and obligations in this Note to
one or more purchasers whether or not related to the Bank.
WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
JURY WAIVER. THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS NOTE OR THE OTHER RELATED DOCUMENTS. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.
BORROWER:
Address: 7860 East McClain Drive #2 TASER International, Inc.
Scottsdale, AZ 85260-1627
By: /s/ K. Hanrahan
________________________________
K. Hanrahan CFO
________________________________
Printed Name Title
Christy Murphy AZ13044
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<PAGE>
[BANK ONE LOGO] LINE OF CREDIT NOTE
$1,000,000.00
DUE: MAY 31,2003 DATE: MAY 31,2002
PROMISE TO PAY. On or before May 31,2003, for value received, TASER
International, Inc. (the "Borrower") promises to pay to Bank One, NA, with its
main office in Chicago, IL, whose address is 201 N. Central Ave, 21st Floor,
AZl-1178, Phoenix, AZ 85004 (the "Bank") or order, in lawful money of the United
States of America, the sum of One Million and 00/l00 Dollars ($l,000,000.00) or
such lesser sum as is indicated on Bank records, plus interest as provided
below.
DEFINITIONS. As used in this Note, the following terms have the following
respective meanings:
"ADVANCE" means a Eurodollar Advance or a Prime Rate Advance AND "ADVANCES"
means all Eurodollar Advances and all Prime Rate Advances under this Note.
"APPLICABLE MARGIN" means with respect to any Prime Rate Advance, 1.00% per
annum and with respect to any Eurodollar Advance, 1.50% per annum.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Arizona and/or New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day other than a Saturday, Sunday or any other day on
which national banking associations are authorized to be closed.
"EURODOLLAR BASE RATE" means, with respect to the relevant Interest Period, the
applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars
as reported by any generally recognized financial information service as of
11:00 a.m. (London time) two Eurodollar Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period, provided
that, if no such British Bankers' Association LIBOR rate is available to the
Bank, the applicable Eurodollar Base Rate for the relevant Interest Period shall
instead be the rate determined by the Bank to be the rate at which BANK ONE
CORPORATION or one of its affiliate banks offers to place deposits in U.S.
dollars with first-class banks in the London interbank market at approximately
1l:00 a.m. (London time) two Eurodollar Days prior to the first day of such
Interest Period, in the approximate amount of the principal amount outstanding
on such date and having a maturity equal to such Interest Period.
"EURODOLLAR ADVANCE" means any borrowing under this Note when and to the extent
that its interest rate is determined by reference to the Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to a Eurodollar Advance for the relevant
Interest Period, the sum of(i) the Applicable Margin plus (ii) the quotient of
(a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b)
one minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period.
"INTEREST PERIOD" means, with respect to a Eurodollar Advance, a period of one
(l), two (2), three (3) or six (6) month(s) commencing on a Business Day
selected by the Borrower pursuant to this Note. Such Interest Period shall end
on the day which corresponds numerically to such date one (l), two (2), three
(3) or six (6) month(s) thereafter, as applicable, provided, however, that if
there is no such numerically corresponding day in such first, second, third or
sixth succeeding month(s), as applicable, such Interest Period shall end on the
last Business Day of such first, second, third or sixth succeeding month(s), as
applicable. If an Interest Period would otherwise end ON a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day, provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.
"PRIME RATE" means a rate per annum equal to the prime rate of interest
announced from time to time by the Bank or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.
"PRIME RATE ADVANCE" means any Advance under this Note when and to the extent
that its interest rate is determined by reference to the Prime Rate.
"PRINCIPAL PAYMENT DATE" is defined in the paragraph entitled "Principal
Payments" below.
<PAGE>
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"RESERVE REQUIREMENT" means, with respect to an Interest Period, the maximum
aggregate reserve requirement (including all basic, supplemental, marginal and
other reserves) which is imposed under Regulation D.
INTEREST RATES, The Advance(s) evidenced by this Note may be drawn down and
remain outstanding as up to five (5) Eurodollar Advances and/or a Prime Rate
Advance. The Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of each Prime Rate Advance at the Prime Rate minus the
Applicable Margin and each Eurodollar Advance at the Eurodollar Rate. Interest
shall be calculated on the basis of the actual number of days elapsed in a year
of 360 days. In no event shall the interest rate applicable to any Advance
exceed the maximum rate allowed by law. Any interest payment which would for any
reason be deemed unlawful under applicable law shall be applied to principal.
Borrower hereby agrees to pay an effective rate of interest that is the sum of
the interest rate provided for in this Note together with any additional rate of
interest resulting from any other charges of interest or in the nature paid or
to be paid in connection with this Note or the Related Documents.
BANK RECORDS. The Bank shall, in the ordinary course of business, make notations
in its records of the date, amount, interest rate and Interest Period of each
Advance hereunder, the amount of each payment on the Advances, and other
information. Such records shall, in the absence of manifest error, be conclusive
as to the outstanding principal balance of and interest rate or rates applicable
to this Note.
NOTICE AND MANNER OF ELECTING INTEREST RATES ON ADVANCES. The Borrower shall
give the Bank written notice (effective upon receipt) of the Borrower's intent
to draw down an Advance under this Note no later than 11:00 a.m. Mountain time,
one (1) Business Day before disbursement, if the full amount of the drawn
Advance is to be disbursed as a Prime Rate Advance and three (3) Business Days
before disbursement, if any part of such Advance is to be disbursed as a
Eurodollar Advance. The Borrower's notice must specify: (a) the disbursement
date, (b) the amount of each Advance, (c) the type of each Advance (Prime Rate
Advance or Eurodollar Advance), and (d) for each Eurodollar Advance, the
duration of the applicable Interest Period. Each Eurodollar Advance shall be in
a minimum amount of Five Hundred Thousand and 00/l00 Dollars ($500,000.00) with
multiples of One Hundred Thousand and 00/l00 Dollars ($l00,000.00). All notices
under this paragraph are irrevocable. By the Banks close of business on the
disbursement date and upon fulfillment of the conditions set forth herein and in
any other of the Related Documents, the Bank shall disburse the requested
Advances in immediately available funds by crediting the amount of such Advances
to the Borrower's account with the Bank.
CONVERSION AND RENEWALS. The Borrower may elect from time to time to convert one
type of Advance into another or to renew any Advance by giving the Bank written
notice no later than 11:00 a.m. Mountain time, one (1) Business Day before
conversion into a Prime Rate Advance and three (3) Business Days before
conversion into or renewal of a Eurodollar Advance, specifying: (a) the renewal
or conversion date, (b) the amount of the Advance to be converted or renewed,
(c) in the case of conversion, the type of Advance to be converted into (Prime
Rate Advance or Eurodollar Advance), and (d) in the case of renewals of or
conversion into a Eurodollar Advance, the applicable Interest Period, provided
that (i) the minimum principal amount of each Eurodollar Advance outstanding
after a renewal or conversion shall be Five Hundred Thousand and 00/l00 Dollars
($500,000.00), with multiples of One Hundred Thousand and 00/l00 Dollars
($l00,000.00) and (ii) a Eurodollar Advance can only be converted on the last
day of the Interest Period for the Advance. All notices given under this
paragraph are irrevocable. If the Borrower fails to give the Bank the notice
specified above for the renewal or conversion of a Eurodollar Advance by 11:00
a.m. Mountain time three (3) Business Days before the end of the Interest Period
for that Advance, the Advance shall automatically be converted to a Prime Rate
Advance on the last day of the Interest Period for the Advance.
INTEREST PAYMENTS. Interest on the Advances shall be paid as follows:
A . For each Prime Rate Advance, on the last day of each month beginning with
the first month following disbursement of the Advance or following conversion of
an Advance into a Prime Rate Advance, and at the maturity or conversion of the
Advance into a Eurodollar Advance;
B. For each Eurodollar Advance, on the last day of the Interest Period for the
Advance and, if the Interest Period is longer than three months, at three-month
intervals beginning with the day three months from the date the Advance is
disbursed.
PRINCIPAL PAYMENTS. All outstanding principal and interest is due and payable in
full on May 3 1,2003, which is defined herein as the "Principal Payment Date".
The Borrower shall select interest rates and Interest Periods such that on each
Principal Payment Date the sum of the principal amount of the Prime Rate Advance
outstanding on that date plus the aggregate principal amount of the Eurodollar
Advances with Interest Periods ending on that date is greater than or equal to
the principal payment due on that date. Any election which does not comply with
this requirement will be invalid and the Bank may, but will not be required to,
honor such election.
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<PAGE>
OVERDUE AMOUNTS. Any principal amount not paid when due (at maturity, by
acceleration, or otherwise) shall bear interest thereafter until paid in full,
payable on demand, at a per annum rate equal to the Prime Rate plus the
Applicable Margin plus three percent (3.00%).
PREPAYMENT. The Borrower may prepay all or any part of any Prime Rate Advance at
any time without premium or penalty. The Borrower may prepay any Eurodollar
Advance only at the end of an Interest Period.
FUNDING LOSS INDEMNIFICATION. Upon the Banks request, the Borrower shall pay the
Bank amounts sufficient (in the Banks reasonable opinion) to compensate it for
any loss, cost, or expense incurred as a result of:
A. Any payment of a Eurodollar Advance on a date other than the last day of the
Interest Period for the Advance, including, without limitation, acceleration of
the Advances by the Bank pursuant to this Note or the Related Documents; or
B. Any failure by the Borrower to borrow or renew a Eurodollar Advance on the
date specified in the relevant notice from the Borrower to the Bank.
ADDITIONAL COSTS. If any applicable domestic or foreign law, treaty, government
rule or regulation now or later in effect (whether or not it now applies to the
Bank) or the interpretation or administration thereof by a governmental
authority charged with such interpretation or administration, or compliance by
the Bank with any guideline, request or directive of such an authority (whether
or not having the force of law), shall (a) affect the basis of taxation of
payments to the Bank of any amounts payable by the Borrower under this Note or
the Related Documents (other than taxes imposed on the overall net income of the
Bank by the jurisdiction or by any political subdivision or taxing authority of
the jurisdiction in which the Bank has its principal office), or (b) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
the Bank, or (c) impose any other condition with respect to this Note or the
Related Documents and the result of any of the foregoing is to increase the cost
to the Bank of maintaining any Eurodollar Advance or to reduce the amount of any
sum receivable by the Bank on such an Advance, or (d) affect the amount of
capital required or expected to be maintained by the Bank (or any corporation
controlling the Bank) and the Bank determines that the amount of such capital is
increased by or based upon the existence of the Banks obligations under this
Note or the Related Documents and the increase has the effect of reducing the
rate of return on the Banks (or its controlling corporation's) capital as a
consequence of the obligations under this Note or the Related Documents to a
level below that which the Bank (or its controlling corporation) could have
achieved but for such circumstances (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by the Bank to be material,
then the Borrower shall pay to the Bank, from time to time, upon request by the
Bank, additional amounts sufficient to compensate the Bank for the increased
cost or reduced sum receivable. Whenever the Bank shall learn of circumstances
described in this section which are likely to result in additional costs to the
Borrower, the Bank shall give prompt written notice to the Borrower of the basis
for and the estimated amount of any such anticipated additional costs. A
statement as to the amount of the increased cost or reduced sum receivable,
prepared in good faith and in reasonable detail by the Bank and submitted by the
Bank to the Borrower, shall be conclusive and binding for all purposes absent
manifest error in computation.
ILLEGALITY. If any applicable domestic or foreign law, treaty, rule or
regulation now or later in effect (whether or not it now applies to the Bank) or
the interpretation or administration thereof by a governmental authority charged
with such interpretation or administration, or compliance by the Bank with any
guideline, request or directive of such an authority (whether or not having the
force of law), shall make it unlawful or impossible for the Bank to maintain or
fund the Eurodollar Advances, then, upon notice to the Borrower by the Bank, the
outstanding principal amount of the Eurodollar Advances, together with accrued
interest and any other amounts payable to the Bank under this Note or the
Related Documents on account of the Eurodollar Advances shall be repaid (a)
immediately upon the Banks demand if such change or compliance with such
requests, in the Bank's judgment, requires immediate repayment, or (b) at the
expiration of the last Interest Period to expire before the effective date of
any such change or request provided, however, that subject to the terms and
conditions of this Note and the Related Documents the Borrower shall be entitled
to simultaneously replace the entire outstanding balance of any Eurodollar
Advance repaid in accordance with this section with a Prime Rate Advance in the
same amount.
INABILITY TO DETERMINE INTEREST RATE. If the Bank determines that (a) quotations
of interest rates for the relevant deposits referred to in the definition of
Eurodollar Rate are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the interest rate on a
Eurodollar Advance as provided in this Note, or (b) the relevant interest rates
referred to in the definition of Eurodollar Rate do not accurately cover the
cost to the Bank of making or maintaining Eurodollar Advances, then the Bank
shall forthwith give notice of such circumstances to the Borrower, whereupon (i)
the obligation of the Bank to make Eurodollar Advances shall be suspended until
the Bank notifies the Borrower that the circumstances giving rise to the
suspension no longer exists, and (ii) the Borrower shall repay in full the then
outstanding principal amount of each Eurodollar Advance, together with accrued
interest, on the last day of the then current Interest Period applicable to the
Advance, provided, however, that, subject to the terms and conditions of this
Note and the Related Documents, the Borrower shall be entitled to simultaneously
replace the entire outstanding balance of any Eurodollar Advance repaid in
accordance with this section with a Prime Rate Advance in the same amount.
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OBLIGATIONS DUE ON NON-BUSINESS DAY. Whenever any payment under this Note
becomes due and payable on a day that is not a Business Day, if no default then
exists under this Note, the maturity of the payment shall be extended to the
next succeeding Business Day, except, in the case of a Eurodollar Advance, if
the result of the extension would be to extend the payment into another calendar
month, the payment must be made on the immediately preceding Business Day.
MATTERS REGARDING PAYMENT. The Borrower will pay the Bank at the Bank's address
shown above or at such other place as the Bank may designate. Payments shall be
allocated among principal, interest and fees at the discretion of the Bank
unless otherwise agreed or required by applicable law. Acceptance by the Bank of
any payment which is less than the payment due at the time shall not constitute
a waiver of the Bank's right to receive payment in full at that time or any
other time.
LATE FEE. If any payment is not received by the Bank within ten (10) days after
its due date, the Bank may assess and the Borrower agrees to pay a late fee
equal to the greater of: (a) five percent (5.00%) of the past due amount or (b)
Twenty Five and 00/l00 Dollars ($25.00), up to the maximum amount of One
Thousand Five Hundred and 00/l00 Dollars ($1,500.00) per late charge.
BUSINESS LOAN. The Borrower acknowledges and agrees that this Note evidences a
loan for a business, commercial, agricultural or similar commercial enterprise
purpose, and that all advances made under this Note shall not be used for any
personal, family or household purpose.
CREDIT FACILITY. The Bank has approved a credit facility to the Borrower in a
principal amount not to exceed the face amount of this Note. The credit facility
is in the form of advances made from time to time by the Bank to the Borrower.
This Note evidences the Borrower's obligation to repay those advances. The
aggregate principal amount of debt evidenced by this Note is the amount
reflected from time to time in the records of the Bank. Until the earliest of
maturity, the occurrence of any default, or the occurrence of any event that
would constitute the occurrence of any default but for the lapse of time until
the end of any grace or cure period, the Borrower may borrow, pay down and
reborrow under this Note.
LIABILITIES. The term "Liabilities" in this Note means all obligations,
indebtedness and liabilities of the Borrower to any one or more of the Bank,
BANK ONE CORPORATION, and any of their subsidiaries, affiliates or successors,
now existing or later arising, including, without limitation, all loans,
advances, interest, costs, overdraft indebtedness, credit card indebtedness,
lease obligations, or obligations relating to any Rate Management Transaction,
all monetary obligations incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other similar proceedings, regardless of
whether allowed or allowable in such proceeding, and all renewals, extensions,
modifications, consolidations or substitutions of any of the foregoing, whether
the Borrower may be liable jointly with others or individually liable as a
debtor, maker, co-maker, drawer, endorser, guarantor, surety or otherwise, and
whether voluntarily or involuntarily incurred, due or not due, absolute or
contingent, direct or indirect, liquidated or unliquidated. The term "Rate
Management Transaction" in this Note means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into among the
Borrower, the Bank or BANK ONE CORPORATION, or any of its subsidiaries or
affiliates or their successors, which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
RELATED DOCUMENTS. The term "Related Documents" in this Note means all loan
agreements, credit agreements, reimbursement agreements, security agreements,
mortgages, deeds of trust, pledge agreements, assignments, guaranties, or any
other instrument or document executed in connection with this Note or in
connection with any of the Liabilities.
SECURITY. The term "Collateral" in this Note means all real or personal property
described in all security agreements, pledge agreements, mortgages, deeds of
trust, assignments, or other instruments now or hereafter executed in connection
with this Note or in connection with any of the Liabilities. If applicable, the
Collateral secures the payment of this Note and the Liabilities.
BANK'S RIGHT OF SETOFF. In addition to the Collateral, if any, the Borrower
grants to the Bank a security interest in, and the Bank is authorized to setoff
and apply, all Accounts, Securities and Other Property, and Bank Debt against
any and all Liabilities of the Borrower. This right of setoff may be exercised
at any time and from time to time, and without prior notice to the Borrower.
This security interest and right of setoff may be enforced or exercised by the
Bank regardless of whether or not the Bank has made any demand under this
paragraph or whether the Liabilities are contingent, matured, or unmatured. Any
delay, neglect or conduct by the Bank in exercising its rights under this
paragraph will not be a waiver of the right to exercise this right of setoff or
enforce this security interest. The rights of the Bank under this paragraph are
in addition to other rights the Bank may have in the Related Documents or by
law. In this paragraph: (a) the term "Accounts" means any and all accounts and
deposits of the Borrower (whether general, special, time, demand, provisional or
final) at any time held by the Bank (including all Accounts held jointly with
another, but excluding any IRA or Keogh Account, or any trust Account in which a
security interest would be prohibited by law); (b) the term "Securities and
Other Property" means any and all securities and other property of the Borrower
in the custody, possession or control
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of the Bank (other than property held by the Bank in a fiduciary capacity); and
(c) the term "Bank Debt" means all indebtedness at any time owing by the Bank,
to or for the credit or account of the Borrower.
REPRESENTATIONS BY BORROWER. Each Borrower represents that: (a) the execution
and delivery of this Note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) this Note is a valid and binding agreement, enforceable according to
its terms; and (c) all balance sheets, profit and loss statements, and other
financial statements furnished to the Bank in connection with the Liabilities
are accurate and fairly reflect the financial condition of the organizations and
persons to which they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not changed materially
and adversely since those dates. Each Borrower, other than a natural person,
further represents that: (a) it is duly organized, existing and in good standing
pursuant to the laws under which it is organized; and (b) the execution and
delivery of this Note and the performance of the obligations it imposes (i) are
within its powers and have been duly authorized by all necessary action of its
governing body, and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any partnership, operating or
other agreement governing its affairs.
EVENTS OF DEFAULT/ACCELERATION. If any of the following events occurs this Note
shall become due immediately, without notice, at the Bank's option:
1. The Borrower, or any guarantor of this Note (the "Guarantor"), fails to
pay when due any amount payable under this Note, under any of the
Liabilities, or under any agreement or instrument evidencing debt to any
creditor.
2. The Borrower or any Guarantor (a) fails to observe or perform any other
term of this Note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults
under the terms of any agreement or instrument relating to any debt for
borrowed money (other than the debt evidenced by this Note) and the effect
of such default will allow the creditor to declare the debt due before its
maturity.
3. In the event (a) there is a default under the terms of any Related
Document, (b) any guaranty of the loan evidenced by this Note is
terminated or becomes unenforceable in whole or in part, (c) any Guarantor
fails to promptly perform under its guaranty, or (d) the Borrower fails to
comply with, or pay, or perform under any agreement, now or hereafter in
effect, between the Borrower and BANK ONE CORPORATION, or any of its
subsidiaries or affiliates or their successors.
4. There is any loss, theft, damage, or destruction of any Collateral not
covered by insurance.
5. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of the
Borrower or any affiliate of the Borrower.
6. The Borrower or any Guarantor becomes insolvent or unable to pay its debts
as they become due.
7. The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction.
8. A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent.
9. Proceedings are commenced against the Borrower or any Guarantor under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and they remain undismissed for thirty (30) days after
commencement; or the Borrower or the Guarantor consents to the
commencement of those proceedings.
10. Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor.
11. The Borrower or any Guarantor dies.
12. The Borrower or any Guarantor, without the Banks written consent (a) is
dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business
outside the ordinary course of its business, (d) leases, purchases, or
otherwise acquires a material part of the assets of any other business
entity, except in the ordinary course of its business, or (e) agrees to do
any of the foregoing (notwithstanding the foregoing, any subsidiary may
merge or consolidate with any other subsidiary, or with the Borrower, so
long as the Borrower is the survivor).
13. There is a substantial change in the existing or prospective financial
condition of the Borrower or any Guarantor that the Bank in good faith
determines to be materially adverse.
14. The Bank in good faith deems itself insecure.
REMEDIES. If this Note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of any
other person or business entity, with or without designating the capacity of
that nominee. Without limiting any other available remedy, the Borrower is
liable for any deficiency remaining after disposition of any Collateral. The
Borrower is liable to the Bank for all reasonable costs and expenses of every
kind incurred in the making or collection of this Note, including without
limitation reasonable attorneys' fees and court costs. These costs and expenses
include without limitation any costs or expenses incurred by the Bank in any
bankruptcy, reorganization, insolvency or other similar proceeding.
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WAIVERS. ANY party liable on this Note waives (a) to the extent permitted by
law, all rights and benefits under any laws or statutes regarding sureties, as
may be amended; (b) any right to receive notice of the following matters before
the Bank enforces any of its rights: (i) the Bank's acceptance of this Note,
(ii) any credit that the Bank extends to the Borrower, (iii) the Borrower's
default, (iv) any demand, diligence, presentment, dishonor and protest, or (v)
any action that the Bank takes regarding the Borrower, anyone else, any
Collateral, or any of the Liabilities, that it might be entitled to by law or
under any other agreement; (c) any right to require the Bank to proceed against
the Borrower, any other obligor or guarantor of the Liabilities, or any
Collateral, or pursue any remedy in the Bank's power to pursue; (d) any defense
based on any claim that any endorser or other parties' obligations exceed or
are more burdensome than those of the Borrower; (e) the benefit of any statute
of limitations affecting liability of any endorser or other party liable
hereunder or the enforcement hereof; (f) any defense arising by reason of any
disability or other defense of the Borrower or by reason of the cessation from
any cause whatsoever (other than payment in full) of the obligation of the
Borrower for the Liabilities; and (g) any defense based on or arising out of any
defense that the Borrower may have to the payment or performance of the
Liabilities or any portion thereof. Any party liable on this Note consents to
any extension or postponement of time of its payment without limit as to the
number or period, to any substitution, exchange or release of all or any part of
the Collateral, to the addition of any other party, and to the release or
discharge of, or suspension of any rights and remedies against, any person who
may be liable for the payment of this Note. The Bank may waive or delay
enforcing any of its rights without losing them. Any waiver affects only the
specific terms and time period stated in the waiver. No modification or waiver
of any provision of this Note is effective unless it is in writing and signed by
the party against whom it is being enforced. Without limiting any foregoing
waiver, consent or agreement, any party liable on this Note further waives any
and all benefits under Arizona Revised Statutes Sections 12-1641 through
12-1646, inclusive, and Rule 17(f) of the Arizona Rules of Civil Procedure,
including any revision or replacement of such statutes or rules hereafter
enacted.
SUBORDINATION. Any rights of any party liable on this Note, whether now existing
or hereafter arising, to receive payment on account of any indebtedness
(including interest) owed to any party liable on this Note by the Borrower, or
to withdraw capital invested by it in the Borrower, or to receive distributions |
