Exhibit 10.12

PROMISSORY NOTE

$1,853,904.82

December 21, 2005

 

Tulsa, Oklahoma

 

FOR VALUE RECEIVED, the undersigned, XETA TECHNOLOGIES, INC., an Oklahoma
corporation (“Maker”), promises to pay to the order of BANK OF OKLAHOMA, N.A.
(“Lender”), at its offices in Tulsa, Oklahoma, the principal sum of One Million
Eight Hundred Fifty-Three Thousand Nine Hundred Four And 82/100 Dollars
($1,853,904.82) under the terms of the Revolving Credit and Term Loan Agreement
between Maker and Lender dated October 1, 2003 (as amended, the “Credit
Agreement”), payable as follows (all capitalized terms used but not defined
herein shall have the meanings given in the Credit Agreement):

a.                  Principal. Principal shall be payable in consecutive monthly
installments on the 1st day of each month, commencing on January 1, 2006, with
each installment except the last equal to $14,257.48.  The last installment, due
September 30, 2009 (“Maturity”), shall equal the remaining balance of principal
hereunder.

b.                 Interest. Interest shall be payable on the first day of each
month, commencing the 1st day of January, 2006, and at maturity. Interest shall
accrue on the principal balance outstanding hereunder and on any past due
interest hereunder at a rate at all times equal to the Note Rate (defined
below).

“Note Rate” shall mean a rate at all times equal to the Adjusted Prime Rate or
the Adjusted LIBOR Rate, as elected by Maker pursuant to a properly made
Interest Rate Election (defined below); provided, that at the end of any
applicable Interest Period (defined below), the Note Rate shall revert to the
Adjusted Prime Rate unless a new Interest Rate Election has been properly made
by Maker. The Adjusted Prime Rate and the Adjusted LIBOR Rate shall be
calculated, on any date of determination thereof, as follows:

Funded Debt to Cash Flow

 

Adjusted
LIBOR Rate

 

Adjusted
Prime Rate

Greater than or equal to 2.50 to 1

 

LIBOR Rate plus 2.50%

 

Prime Rate

Greater than or equal to 2.0 to 1 but less than 2.5 to 1

 

LIBOR Rate plus 2.00%

 

Prime Rate

Greater than or equal to 1.50 to 1 but less than 2.0 to 1

 

LIBOR Rate plus 1.75%

 

Prime Rate minus .50%

Greater than or equal to 1.0 to 1but less than 1.5 to 1

 

LIBOR Rate plus 1.50%

 

Prime Rate minus 1.00%

Less than 1.0 to 1

 

LIBOR Rate plus 1.25%

 

Prime Rate minus 1.00%

 

The Adjusted LIBOR Rate and Adjusted Prime Rate shall be recalculated on not
less than a quarterly basis, on the date on which the Lender is in receipt of
Maker’s most recent financial statements (and, in the case of the year-end
financial statements, audit report) for the fiscal quarter then ended (“Pricing
Date”). From the date of this Agreement to the first recalculation, the Adjusted
LIBOR Rate shall be set at the LIBOR Rate plus 1.75 percent (1.75%), and the
Adjusted Prime Rate shall be set at the Prime Rate minus .50 percent (-.50%).
The

--------------------------------------------------------------------------------

Note Rate shall be established based on the ratio of Funded Debt to Cash Flow
for the most recently completed fiscal quarter and the Note Rate established on
a Pricing Date shall remain in effect until the next Pricing Date.  If the Maker
has not delivered its financial statements by the date such financial statements
(and, in the case of the year-end financial statements, audit report) are
required to be delivered under the Credit Agreement, until such financial
statements and audit report are delivered, the Note Rate shall be the LIBOR Rate
plus one and one half of one percent (1.5%). If the Maker subsequently delivers
such financial statements before the next Pricing Date, the Note Rate
established by such late delivered financial statements shall take effect from
the date of delivery until the next Pricing Date, In all other circumstances,
the Note Rate established by such financial statements shall be in effect from
the Pricing Date that occurs immediately after the end of the fiscal quarter
covered by such financial statements until the next Pricing Date. Each
determination of the Note Rate made by the Lender in accordance with the
foregoing shall be conclusive and binding on the Maker and the Lender if
reasonably determined. Any change in the Note Rate resulting from a change in
the Prime Rate shall be effective as of the opening of business on the day on
which such change in the Prime Rate becomes effective.

“Funded Debt” (for purposes of this Note) shall mean all interest bearing debt.

“Cash Flow” (for purposes of this Note) shall mean EBITDA less Cash Taxes.

“Interest Rate Election” means written notice from Maker to Lender no earlier
than twenty (20) days and no later than five (5) days prior to the contemplated
effective date, substantially in form and content as set forth on Exhibit “A”
hereto, whereby Maker may elect from time to time that interest shall accrue
hereunder at the Adjusted Prime Rate or the Adjusted LIBOR Rate.

“LIBOR Rate” means the London Interbank Offered Rate composite rate per annum
for U.S. Dollars for the applicable Interest Period which appears on the LIBOR
01 page of the Reuters information service on the day the Interest Rate Election
is received by Lender.  The LIBOR Rate shall remain fixed during the applicable
Interest Period.

“Interest Period” shall mean a period of time equal to the lesser of: (i) at the
election of the Maker, thirty (30), sixty (60), or ninety (90) days; or (ii) the
number of days between the contemplated effective date specified by the Maker in
the applicable Interest Rate Election and the maturity date hereunder.

“Prime Rate” shall mean a fluctuating interest rate per annum as in effect from
time to time, which interest rate per annum shall at all times be equal to the
rate of interest announced publicly from time to time (whether or not charged in
each instance), by JP Morgan Chase Bank, at New York, New York (“Rate Bank”), as
its base rate or general reference rate. Each change in the Prime Rate (or any
component thereof) shall become effective hereunder without notice to Maker
(which notice is hereby expressly waived by Maker), on the effective date of
each such change. Should the Rate Bank abolish or abandon the practice of
announcing or publishing a Prime Rate, then the Prime Rate used during the
remaining term of this Note shall be that interest rate or other general
reference rate then in effect at the Rate Bank which, from time to time, in the
reasonable judgment of Bank, most effectively approximates the initial
definition of the “Prime Rate.” Maker acknowledges that Lender may, from time to
time, extend credit to other borrowers at rates of interest varying from, and
having no relationship to, the Prime Rate. The rate of interest payable upon the
indebtedness evidenced by this Note shall not, however, at any time exceed the
maximum rate of interest permitted under the laws of the State of Oklahoma for
loans of the type and character evidenced by this Note.

If any payment shall be due on a Saturday or Sunday or upon any other day on
which state or national banks in the State of Oklahoma are closed for business
by virtue of a legal holiday for such banks, such

--------------------------------------------------------------------------------

payment shall be due and payable on the next succeeding banking day and interest
shall accrue to such day. All interest due hereon shall be computed on the
actual number of days elapsed (365 or 366) based upon a 360-day year.

All payments under this Note shall be made in legal tender of the United States
of America or in other immediately available funds at Lender’s office described
above, and no credit shall be given for any payment received by check, draft or
other instrument or item until such time as the holder hereof shall have
received credit therefor from the holder’s collecting agent or, in the event no
collecting agent is used, from the bank or other financial institution upon
which said check, draft or other instrument or item is drawn.

From time to time the maturity date of this Note may be extended or this Note
may be renewed, in whole or in part, or a new note of different form may be
substituted for this Note and/or the rate of interest may be changed, or changes
may be made in consideration of loan extensions, and the holder, from time to
time, may waive or surrender, either in whole or in part, any rights,
guarantees, security interests or liens given for the benefit of the holder in
connection herewith; but no such occurrences shall in any manner affect, limit,
modify or otherwise impair any rights, guarantees or security of the holder not
specifically waived, released or surrendered in writing, nor shall any maker,
guarantor, endorser or any person who is or might be liable hereon, either
primarily or contingently, be released from such liability by reason of the
occurrence of any such event. The holder hereof, from time to time, shall have
the unlimited right to release any person who might be liable hereon; and such
release shall not affect or discharge the liability of any other person who is
or might be liable hereon.

If any payment required by this Note to be made is not made when due, or if any
default occurs under any loan agreement or under the provisions of any mortgage,
security agreement, assignment, pledge or other document or agreement which
provides security for the indebtedness evidenced by this Note, the holder hereof
may, at its option, without notice or demand, declare this Note in default and
all indebtedness due and owing hereunder immediately due and payable. Interest
from the date of default on such principal balance and on any past due interest
hereunder shall accrue at the rate of five percent (5%) per annum above the
nondefault interest rate accruing hereunder. The Maker and any endorsers,
guarantors and sureties hereby severally waive protest, presentment, demand, and
notice of protest and nonpayment in case this Note or any payment due hereunder
is not paid when due; and they agree to any renewal, extension, acceleration,
postponement of the time of payment, substitution, exchange or release of
collateral and to the release of any party or person primarily or contingently
liable without prejudice to the holder and without notice to the Maker or any
endorser, guarantor or surety. Maker and any guarantor, endorser, surety or any
other person who is or may become liable hereon will, on demand, pay all costs
of collection, including reasonable attorney fees of the holder hereof in
attempting to enforce payment of this Note and reasonable attorney fees for
defending the validity of any document securing this Note as a valid first and
prior lien.

Upon the occurrence of any default hereunder, Lender shall have the right,
immediately and without further action by it, to set off against this Note all
money owed by Lender in any capacity to the Maker or any guarantor, endorser or
other person who is or might be liable for payment hereof, whether or not due,
and also to set off against all other liabilities of Maker to Lender all money
owed by Lender in any capacity to Maker; and Lender shall be deemed to have
exercised such right of setoff and to have made a charge against such money
immediately upon the occurrence of such default even though such charge is made
or entered into the books of Lender subsequently thereto.

The holder of this Note may collect a late charge not to exceed an amount equal
to five percent (5%) of the amount of any payment which is not paid within ten
(10) days from the due date thereof, for the purposes of covering the extra
expenses involved in handling delinquent payments. This late charge provision
shall not be

--------------------------------------------------------------------------------

applicable in the event the holder hereof, at its option, elects to receive
interest at the increased rate as provided hereunder in the event of default.

This Note is given for an actual loan of money for business purposes and not for
personal, agricultural or residential purposes, and is executed and delivered in
the State of Oklahoma and shall be governed by and construed in accordance with
the laws of the State of Oklahoma.

This Note constitutes an decrease and modification of, and replacement for, the
$2,238,333.48 Promissory Note from Maker to Lender dated October 1, 2003.

XETA TECHNOLOGIES, INC.

 

 

 

 

 

By

/s/ Robert B. Wagner

 

 

Robert B. Wagner, Chief Financial Officer

 

--------------------------------------------------------------------------------

EXHIBIT “A”

(Interest Rate Election Notice)

Bank of Oklahoma, N.A.

P.O. Box 2300

Tulsa, Oklahoma 74192-2300

Attn:      Mr. Stephen R. Wright, Senior Vice President

Re:                                Revolving Credit and Term Loan Agreement
(“Loan Agreement”) dated October 1, 2003, between XETA TECHNOLOGIES, INC.
(“Borrowers”) and BANK OF OKLAHOMA, N.A. — Interest Rate Election

Ladies and Gentlemen:

Please be advised that no Initial Default or Matured Default exists under the
Loan Agreement, and the Borrower hereby provides the following interest rate
election:

A.            Revolving Line. (Insert applicable information as to the (i)
Adjusted Prime Rate or (ii) Adjusted LIBOR Rate, including requested interest
rate period) 30-day LIBOR

B.             Term Loan. (Insert applicable information as to the (i) Adjusted
Prime Rate or (ii) Adjusted LIBOR Rate, including requested interest rate
period) 30-day LIBOR

C.             Real Estate Loan. (Insert applicable information as to the (i)
Adjusted Prime Rate or (ii) Adjusted LIBOR Rate, including requested interest
rate period) 30-day LIBOR.

 

“Borrower”

 

 

 

XETA TECHNOLOGIES, INC., an Oklahoma corporation

 

 

 

 

 

By

/s/ Robert B. Wagner

 

 

Robert B. Wagner, Chief Financial Officer

 

 

Date Received by Bank of Oklahoma:

 

 

 

--------------------------------------------------------------------------------