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: