Exhibit 10.11
[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 000 X. Xxxxxxx Xxx,
00xx Xxxxx, XX0-0000, Xxxxxxx, XX 00000, and TASER INTERNATIONAL, INC. (the
"Borrower"), whose address is 0000 Xxxx XxXxxxx Xxxxx #0, Xxxxxxxxxx, XX
00000-0000.
1. CREDIT FACILITIES.
1.1 SCOPE. This agreement governs Facility A, 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 $2,500,000.00 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: Working capital and
issuance of 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 $1,500,000.00, (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 standby
or 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 standby letter of credit
that is issued, calculated at the rate of 2.00% per annum of the
original maximum amount available of such standby letter of credit,
with such fee being calculated on the basis of a 360-day year and
the actual number of days in the period during which the standby
letter of credit will be outstanding; provided, however, that such
fee shall not be less than $100.00 for each letter 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 BORROWING BASE. The aggregate principal amount of advances
outstanding at any one time under Facility A 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
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. 80% of Eligible Accounts; plus
B. 50% of Eligible Inventory, not to exceed the lower of
$1,000,000.00 or 75% of margined Eligible Accounts Receivable.
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 not been paid in full within ninety (90) days from the
invoice date; and (12) due from any one Account Debtor to the extent such
Accounts constitute more than 25% of all Eligible Accounts. In no event
will the balance of any Account of any single Account Debtor be eligible
whenever the portion of the 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.
2.9 "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, raw materials, foreign, in-transit or unfit
for further processing; and (3) Work in process.
2
2.10 "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.
2.11 "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.
2.12 "Tangible Net Worth" means total assets less than 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;
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; and
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.
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, the Notes or any agreement related to the Credit
Facilities 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.
3
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. Via either the XXXXX System or its Home Page, within forth-five (45)
days after the filing of its Quarterly Report on Form 10-Q for the fiscal
quarter then ended with the Securities and Exchange Commission, but in no
event later than forty-five (45) days after the end of such fiscal quarter,
copies of the financial statements for such fiscal quarter as contained in
such quarterly Report on Form 10-Q, and, as soon as it shall become
available, a quarterly report to shareholders of the Borrower for the
fiscal quarter then ended.
B. Via either the XXXXX System or its Home Page, with ninety (90) days
after the filing of its Annual Report on Form 10-K for the fiscal year then
ended with the Securities and Exchange Commission, but in no event later
than ninety (90) days after the end of such fiscal year, the financial
statements for such fiscal year as contained in such Annual Report on Form
10-K and, as soon as it shall become available, the annual report to
shareholders of the Borrower for the fiscal year then ended.
If for any reason the XXXXX System and/or its Home Page are not available
to the Borrower as is required for making available the financial
statements or reports referred to above, the Borrower shall then furnish a
copy of such financial statements or reports to the Bank.
For the purposes of this section "XXXXX System" means the Electronic Data
Gathering Analysis and Retrieval System owned and operated by the United
States Securities and Exchange Commission or any replacement system, and
"Home Page" means the Borrower's corporate home page on the World Wide Web
accessible through the Internet via the universal resource locator (URL)
identified as _____________________________ or such other universal
resource locator that the borrower shall designate in writing to the Bank
as its corporate home page on the World Wide Web.
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 inventory, valued in the lower of cost or market.
D. Within forty-five (45) days after each monthly period, a borrowing
base certificate, in the form of Exhibit A attached hereto, 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 or 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.
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. Comply 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
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.
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, except in the absence of the
occurrence of any default, dividends in its capital stock.
B. SALE OF SHARES. Issue, sell or otherwise dispose of any shares of
its capital stock or other securities, or rights, warrants or options
to purchase or acquire those shares or securities, except for stock
options or warrants issued in the ordinary course of business or
shares of capital stock issued upon the exercise of stock options or
warrants.
C. 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.
D. 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.
E. 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.
F. 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-1.
G. 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.
H. 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.
I. 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.
J. LEVERAGE RATIO. Permit at any time, its ratio of total liabilities
to Tangible Net Worth to be greater than 1.00 to 1.00.
K. FIXED CHARGE COVERAGE RATIO. Permit at any time, its ratio of net
income before taxes, plus amortization, depreciation, interest
expense, rent and operating lease payments minus any Distributions,
for the twelve month period then ending to prior period current
maturities of long term debt and capital leases, interest expense,
taxes, rent and operating lease payments for the same such twelve
month period, to be less than 1.25 to 1.00.
6. REPRESENTATIONS.
5
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.
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 NOTES. 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 exchange its
address for
6
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 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 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
7
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 or gross negligence. 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.
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.
8.16 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.
"THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK"
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 31, 2003
ADDRESS(ES) FOR NOTICES: BORROWER:
0000 Xxxx Xxxxxxx Xxxxx #0 TASER INTERNATIONAL, INC.
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxx By: Xxxxxxxx X. Xxxxxxxx
____________________________
Xxxxxxxx X. Xxxxxxxx CFO
Corp Secy
____________________________
Printed Name Title
Dated: June 25, 2003
_____________________________
ADDRESS FOR NOTICES: BANK:
000 X. Xxxxxxx Xxx., 00xx Xxxxx, XX0-0000 Bank One, N.A. with its main office
Xxxxxxx, XX 00000 in Chicago, IL
Attn:_________________________ By: Xxxxxxxxx X. Xxxxxxxx
_____________________________
Xxxxxxxxx X. Xxxxxxxx AVP
_____________________________
Printed Name Title
Dated: June 25, 2003
_____________________________
9
EXHIBIT A
TASER INTERNATIONAL, INC.
COMMERCIAL BORROWING BASE CERTIFICATE
Line of Credit Commitment $2,500,000.00
-------------
Line of Credit Balance (including Letters of Credit) $0.00 as of 5/31/2003
------------- ---------------
(Date)
A/R Agings should be as of the same date above
-----------------------------------------------------------------------------------------------------------------------------------
Total Assigned Inventory $0.00
-----
Deduct Book Overdraft $0.00
-----
Total Eligible Inventory $0.00
-----
Advance Rate 50.00%
-----
Total Margined Eligible Inventory $0.00
-----
Inventory CAP in Dollars (Lower of $1,000,000.00 or 75% of margined Eligible Accounts Receivable) $0.00
=====
(A) Lesser of Total Margined Eligible Inventory or CAP $0.00
-----
Total Assigned Accounts Receivable $0.00
-----
Deduct the Following Standard Ineligibles:
* Accounts Receivable 90 Days or More Past Due from Date of Invoice (only that portion over 90 Days
is ineligible) $0.00
-----
* Accounts in which more than 25% of the A/R is over 90 Days Past Due from Date of Invoice
(entire A/R ineligible) $0.00
-----
* Concentration Accounts (only that portion over 25% of all Eligible Accounts is ineligible) $0.00
-----
* Related Accounts Receivable $0.00
-----
* Foreign Accounts Receivable $0.00
-----
* U.S. Government Accounts Receivable $0.00
-----
* Other Ineligibles defined in the Credit Agreement $0.00
-----
Total Eligible Accounts Receivable $0.00
-----
Advance Rate 80.00%
-----
(B) Total Margined Eligible Accounts Receivable $0.00
=====
(C) Total Borrowing Potential (Sum of A and B above) $0.00
=====
Collateral Margin (or Deficit): Total Borrowing Potential minus Outstandings on Line $0.00
-----
-----------------------------------------------------------------------------------------------------------------------------------
Description of other ineligibles incl. specific concentrations:
(TYPE HERE)
-----------------------------------------------------------------------------------------------------------------------------------
COLLATERAL ANALYSIS
Total Assigned Collateral (Sum of Assigned Inventory and Assigned Accounts Receivable) $0.00
-----
Loan to Value Ratios:
RLC Commitment / Total Borrowing Potential #DIV/01
-------
RLC Outstandings / Total Borrowing Potential #DIV/01
-------
RLC Commitment / Total Assigned Collateral #DIV/01
-------
RLC Outstandings / Total Assigned Collateral #DIV/01
-------
-----------------------------------------------------------------------------------------------------------------------------------
The Borrower, by the execution of this Borrowing Base Certificate, hereby
certifies, represents and warrants: (1) that this Report is true, correct,
complete and based upon information contained in Borrower's own financial
records as of ____________________ (date), and (2) that no default has occurred
in any provision of the Agreement and is continuing or would result from the
extension of any credit contemplated by the Agreement, and no event has
occurred which would constitute the occurrence of any default under the
Agreement but for the lapse of time until the end of any grace or cure period.
Borrower: TASER International, Inc.
By: __________________________________________
Its: __________________________________________
Date: __________________________________________
[BANK ONE LOGO]
LINE OF CREDIT NOTE
$2,500,000.00
DUE: MAY 31, 2004 DATE: MAY 31, 2003
PROMISE TO PAY. On or before May 31, 2004, 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 000 X. Xxxxxxx Xxx, 00xx Xxxxx,
XX0-0000, Xxxxxxx, XX 00000 (the "Bank") or order, in lawful money of the
United States of America, the sum of Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000.00) 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, 2.50% 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 Business 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 Business 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
(1), 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 (1), 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.
"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, or 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; provided, however, that the Borrower
may not elect an Interest Period ending after the maturity date of this Note.
Each Eurodollar Advance shall be in a minimum amount of Five Hundred Thousand
and 00/100 Dollars ($500,000.00) with multiples of One Hundred Thousand and
00/100 Dollars ($100,000.00). 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 00/100 Dollars
($500,000.00), with multiples of One Hundred Thousand and 00/100 Dollars
($100,000.00) and (ii) a Eurodollar Advance can only be converted on the last
day of the Interest Period for the Advance; and (iii) the Borrower may not elect
an Interest Period ending after the maturity date of this Note. 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, 2004, which is defined herein as the "Principal Payment Date".
2
DEFAULT RATE OF INTEREST. After a default has occurred under this Note, whether
or not the Bank elects to accelerate the maturity of this Note because of such
default, all Advances outstanding under this Note, including all Eurodollar
Advances, shall bear interest at a per annum rate equal to the Prime Rate, plus
the Applicable Margin for a Prime Rate Advance, plus three percent (3.00%) from
the date the Bank elects to impose such rate. Imposition of this rate shall not
affect any limitations contained in this Note on the Borrower's right to repay
principal on any Eurodollar Advance before the expiration of the Interest Period
for that Advance.
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 Bank's 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. No Additional Costs would be assessed against
Borrower without the Bank assessing similar costs to its other commercial
borrowers.
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 Period applicable to the Advance,
provided, however, that, subject to the
3
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.
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 00/100 Dollars ($25.00), up to the maximum amount of One
Thousand Five Hundred and 00/100 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 subject to the terms of the Related Documents.
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 OR 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
4
excluding any XXX or Xxxxx 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 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, or a guardian or conservator is
appointed for the Borrower or any Guarantor or all or any portion of the
Borrower's assets, any Guarantor's assets, or the Collateral.
12. The Borrower or any Guarantor, without the Bank's written consent (a) is
dissolved, (b) mergers 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 xxxxx xxxxx 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
5
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.
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 Procedures, 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, if any,
in the Borrower.
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.
RENEWAL AND EXTENSION. This Note is given replacement, renewal and/or extension
of, but not extinguishing the indebtedness evidenced by, those Line of Credit
Notes dated May 31, 2002 executed by the Borrower in the original principal
amount of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00)
and One Million and 00/100 Dollars ($1,000,000.00), including previous renewals
or modifications thereof, if any (the "Prior Note"), and is not a novation
thereof. All interest evidenced by the Prior Note shall continue to be due and
payable until paid. If applicable, all Collateral continues to secure the
payment of this Note and the Liabilities. The provisions of this Note are
effective on May 31, 2003.
6
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 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: 0000 Xxxx Xxxxxxx Xxxxx #0 TASER INTERNATIONAL, INC.
Xxxxxxxxxx, XX 00000-0000
By: /s/ Xxxxxxxx X. Xxxxxxxx
---------------------------
X. Xxxxxxxx CFO
---------------------------
Printed Name Title
