Exhibit 10.6
LOAN AGREEMENT
This Loan Agreement dated as of October 14, 1998, is by and between
Daktronics, Inc., a South Dakota corporation (the "Borrower"), and U.S. Bank
National Association, a national banking association (the "Lender").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the following
terms shall have the following respective meanings:
"Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of South Dakota) on which national banks are
permitted to be open for business in Sioux Falls, South Dakota.
"Closing Date": The date on which the conditions set forth in
Section 4.1 have been satisfied and the Loan is closed.
"Default": Any event which, with the giving of notice (whether
such notice is required under Section 7.1, or under some other
provision of this Agreement, or otherwise) or lapse of time, or both,
would constitute an Event of Default.
"Default Rate": As defined in the Notes.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Event of Default": Any event described in Section 1.1.
"GAAP": Generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable
to the circumstances as of any date of determination.
"Governmental Requirements": All laws, statutes, codes,
ordinances, and
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governmental rules, regulations and requirements applicable to the
Borrower and the Lender.
"Loan Documents": This Agreement, the Notes and any other
document collateral to or as security for the Loan.
"Notes": The Revolving Note and Term Note.
"Obligations": The Borrower's obligations in respect of the
due and punctual payment of principal and interest on the Revolving
Note and Term Note when and as due, whether by acceleration or
otherwise and all fees, expenses, indemnities, reimbursements and other
obligations of the Borrower under this Agreement or any other Loan
Document, in all cases whether now existing or hereafter arising or
incurred.
"Person": Any natural person, corporation, partnership,
limited partnership, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Regulatory Change": Any change after the date of this
Agreement in federal, state or foreign laws or regulations or the
adoption or making after such date of any interpretations, directives
or requests applying to a class of banks including the Lender under any
federal, state or foreign laws or regulations (whether or not having
the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Revolving Loan": As defined in Section 2.1.
"Revolving Loan Maturity Date": October 1, 2001.
"Revolving Note": The Revolving Note dated of even date
herewith, in the amount of the Revolving Loan, executed by the Borrower
and payable to the order of the Lender.
"Term Loan": As defined in Section 3.1.
"Term Loan Maturity Date": November 1, 2003.
"Term Note": The Term Note dated of even date herewith, in the
amount of the Loan, executed by the Borrower and payable to the order
of the Lender.
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Section 1.2 Accounting Terms and Calculations. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP.
Section 1.3 Other Definitional Terms, Terms of Construction. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to Sections, Exhibits, Schedules and
like references are to Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise expressly provided. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". All
incorporations by reference of covenants, terms, definitions or other provisions
from other agreements are incorporated into this Agreement as if such provisions
were fully set forth herein, and include all necessary definitions and related
provisions from such other agreements. All covenants, terms, definitions and
other provisions from other agreements incorporated into this Agreement by
reference shall survive any termination of such other agreements until the
obligations of the Borrower under this Agreement and the Notes are irrevocably
paid in full.
ARTICLE II
TERMS OF REVOLVING LOAN
Section 2.1 Revolving Loan. Upon the terms and subject to the
conditions hereof, the Lender agrees to make available a revolving loan (the
"Revolving Loan") to the Borrower of Fifteen Million and No/100 Dollars
($15,000,000.00) on the Closing Date. Borrower may request and Lender shall
issue as part of the Revolving Loan, letters of credit in an amount not to
exceed Two Million and No/100 Dollars ($2,000,000.00). The amount available to
be borrowed under the Revolving Loan shall be correspondingly reduced by the
face amount of all letters of credit issued. Lender shall not charge an
origination fee or a maintenance fee for the issuance of the letters of credit,
but may charge its standard issuance, documentation and examination fees
therefor.
Section 2.2 The Revolving Note; Interest and Repayment. The Revolving
Loan shall be evidenced by the Revolving Note. The Lender shall enter in its
ledgers and records the payments made on the Revolving Loan, and the Lender is
authorized by the
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Borrower to enter on a schedule attached to the Revolving Note a record of such
payments. The Revolving Note shall accrue interest and shall be payable,
together with interest thereon, and may be prepaid, if at all, and is subject to
mandatory prepayment, as provided in the Revolving Note. If not sooner paid, the
Revolving Note, together with all accrued and unpaid interest thereon, shall be
due and payable in full on the Revolving Loan Maturity Date. Lender shall not be
required to permit advances under the Revolving Loan if Borrower remains in
default following the Occurrence of an Event of Default that remains uncured
subsequent to the expiration of any applicable cure period.
Section 2.3 Use of Proceeds. The proceeds of the Loan shall be used for
the refinancing of loans issued by Norwest Bank National Association and
operations in the ordinary course of business.
ARTICLE III
TERMS OF TERM LOAN
Section 3.1 Term Loan. Upon the terms and subject to the conditions
hereof, the Lender agrees to make available a term loan (the "Term Loan") to the
Borrower of Five Million and No/100 Dollars ($5,000,000.00) on the Closing Date.
Section 3.2 The Term Note; Interest and Repayment. The Term Loan shall
be evidenced by the Term Note. The Lender shall enter in its ledgers and records
the payments made on the Term Loan, and the Lender is authorized by the Borrower
to enter on a schedule attached to the Term Note a record of such payments. The
Term Note shall accrue interest and shall be payable, together with interest
thereon, and may be prepaid, if at all, and is subject to mandatory prepayment,
as provided in the Term Note. If not sooner paid, the Term Note, together with
all accrued and unpaid interest thereon, shall be due and payable in full on the
Term Loan Maturity Date.
Section 3.3 Use of Proceeds. The proceeds of the Loan shall be used for
the refinancing of loans issued by Norwest Bank National Association and
operations in the ordinary course of business.
ARTICLE IV
CONDITIONS PRECEDENT
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Section 4.1 Conditions of the Loan. The obligation of the Lender to
make the Loan hereunder shall be subject to the prior or simultaneous
fulfillment of each of the following conditions:
4.1(a) Documents. The Lender shall have received the documents
and other materials as set forth on Schedule 4.1(a) attached hereto and
hereby made a part hereof.
4.1(b) Other Matters. All organizational and legal proceedings
relating to the Borrower and all instruments and agreements in
connection with the transactions contemplated by this Agreement shall
be satisfactory in scope, form and substance to the Lender and its
counsel, and the Lender shall have received all information and copies
of all documents, including records of corporate proceedings, which it
may reasonably have requested in connection therewith, such documents
where appropriate to be certified by Borrower or governmental
authorities.
4.1(c) Fees and Expenses. The Lender shall have received
amounts due and payable by the Borrower on or prior to the Closing
Date, including the reasonable fees and expenses of counsel to the
Lender payable pursuant to Section 8.2.
4.1(d) No Default. All representations and warranties of the
Borrower made in this Agreement shall remain true and correct and no
Default or Event of Default shall exist.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender:
Section 5.1 Organization, Standing, Etc. The Borrower is a corporation
duly incorporated and validly existing and in good standing under the laws of
the jurisdiction of its incorporation, and has all requisite corporate power and
authority to own its properties and to carry on its business as now conducted,
to enter into this Agreement and the other Loan Documents to which it is a party
and to issue the Notes and to perform its
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obligations hereunder and thereunder. This Agreement, the Notes and the other
Loan Documents to which it is a party have been duly authorized by all necessary
corporate action and when executed and delivered will be the legal and binding
obligations of the Borrower. The execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents to which it is a party will
not violate the Borrower's Articles of Incorporation or Bylaws or any law
applicable to the Borrower, and will not violate or cause a default under or
permit acceleration of any agreement to which Borrower is a party. Except for
consents, approvals and exemptions previously obtained (copies of which have
been delivered to the Lender), no approval of or exemption by any Person is
required in connection with the Borrower's execution, delivery and performance
of this Agreement, the Notes and the other Loan Documents to which it is a
party. To the Borrower's knowledge, it is not in material default (beyond any
applicable grace period) in the performance of any material agreement, order,
writ, injunction, decree or demand to which it is a party or by which it is
bound.
Section 5.2 Financial Statements and No Material Adverse Change. The
Borrower's audited financial statements as of May 2, 1998, and its unaudited
financial statements as of August 1, 1998, as heretofore furnished to the
Lender, have been prepared in accordance with GAAP. The Borrower has no material
obligation, liability or asset not disclosed in such financial statements, and
there has been no material adverse change in the condition of the Borrower since
the dates of such financial statements.
Section 5.3 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower which, if determined adversely to the Borrower, would have a
material adverse effect on the condition of the Borrower or on the ability of
the Borrower to perform its obligations under the Loan Documents. However,
Borrower is currently defending the actions, suits and proceedings identified in
Schedule 5.3. The Borrower is not in violation of any Governmental Requirement
where such violation could reasonably be expected to impose a material liability
on the Borrower.
Section 5.4 Taxes. The Borrower has filed all federal, state and local
tax returns required to be filed and has paid or made provision for the payment
of all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property (other than taxes, fees or
charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).
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Section 5.5 Subsidiaries. The Borrower has no operating subsidiaries,
except for Star Circuits, Inc., and MSC Technologies, Inc.
Section 5.6 Employee Benefit Plans. Except as disclosed in writing to
the Lender: (a) the Borrower is not an employee benefit plan as defined in
Section 3(1) of ERISA, whether or not subject to ERISA; (b) no assets of the
Borrower constitute assets of any such plan under ERISA regulations or rulings;
(c) with respect to any such plan that the Borrower sponsors, participates in or
has fiduciary duties with respect to, the Borrower has materially complied with
all federal and state laws, plan documents and funding requirements; (d) the
Borrower does not sponsor, participate in, or have fiduciary duties with respect
to any defined benefit pension plan subject to Title IV of ERISA or any
multi-employer pension plan as defined in Section 3(37)(A) of ERISA or any plan
providing medical or other welfare benefits to retirees or other former
employees (except as required by federal or state law); and (e) the Borrower is
not (and has not ever been) a member of a group of trades or businesses (whether
or not incorporated) that is treated as a single employer under Section 414 of
the Internal Revenue Code.
Section 5.7 Federal Reserve Regulations. The Borrower is not engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying margin stock (as defined in
Regulation U of the Board of Governors of the Federal Reserve System or any
successor thereto). The value of all margin stock owned by the Borrower does not
constitute more than 25% of the value of the assets of the Borrower.
Section 5.8 Year 2000. The Borrower has reviewed and assessed its
business operations and computer systems and applications to address the "year
2000 problem" (that is, that computer applications and equipment used by the
Borrower, directly or indirectly through third parties, may be unable to
properly perform date-sensitive functions before, during and after January 1,
2000); (b) has developed a plan which is projected to complete remediation of
material year 2000 problems by March 1, 1999, including the testing thereof. In
any event, remediation will be completed by July 1, 1999. The Borrower will
promptly deliver to Lender such information relating to this representation and
covenant as Lender requests from time to time.
ARTICLE VI
COVENANTS
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Until the Notes and all of the Borrower's other Obligations shall have
been paid and performed in full, unless the Lender shall otherwise consent in
writing:
Section 6.1 Financial Statements and Reports. The Borrower will furnish
to the Lender:
6.1(a) As soon as available and in any event within ninety
(90) days after the end of each fiscal year of the Borrower, financial
statements of Borrower consisting of at least statements of income,
cash flow and changes in stockholders' equity, a balance sheet as at
the end of such year, and a statement of contingent liabilities as at
the end of such year, setting forth in each case in comparative form
corresponding figures from the previous annual audit, certified without
qualification by an independent Certified Public Accountant or other
independent certified public accountants of recognized regional
standing selected by the Borrower, as the case may be, and acceptable
to the Lender.
6.1(b) As soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of the Borrower,
unaudited financial statements for Borrower for such quarter and for
the period from the beginning of such fiscal year to the end of such
quarter, substantially similar to the annual audited statements.
6.1(c) As soon as available and in any event within ninety
(90) days after the deadline for filing the same, copies of all federal
income tax returns (with all supporting schedules) of the Borrower.
6.1(d) As soon as available and in any event at least thirty
(30) days prior to the beginning of each fiscal year, a financial
forecast for the upcoming fiscal year, setting forth the projected
income and expenses for such year.
6.1(e) As soon as practicable and in any event within
forty-five (45) days after the end of each fiscal quarter, a statement
signed by the Chief Executive Officer or the Chief Financial Officer of
the Borrower stating that as at the end of such quarter there did not
exist any Default or Event of Default or, if such Default or Event of
Default existed, specifying the nature and period of existence thereof
and what action the Borrower proposes to take with respect thereto.
6.1(f) Immediately upon any officer of the Borrower becoming
aware of any Default or Event of Default, a notice describing the
nature thereof and what
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action the Borrower proposes to take with respect thereto.
6.1(g) From time to time, such other information regarding the
business, operation and financial condition of the Borrower as the
Lender may reasonably request.
Section 6.2 Books and Records. The Borrower will keep adequate and
proper records and books of account in which full and correct entries will be
made of its dealings, business and affairs.
Section 6.3 Inspection. The Borrower will permit any Person designated
by the Lender to visit and inspect any of the properties, books and financial
records of the Borrower, to examine and to make copies of the books of accounts
and other financial records of the Borrower, and to discuss the affairs,
finances and accounts of the Borrower with its President/Chief Executive Officer
and Chief Financial Officer/Treasurer at such reasonable times and intervals as
the Lender may designate.
Section 6.4 Existence. The Borrower will maintain its existence in good
standing under the laws of its jurisdiction of incorporation or formation, and
its qualification to transact business in each jurisdiction where failure so to
qualify would permanently preclude the Borrower from enforcing its rights with
respect to any material asset or would expose the Borrower to any material
liability.
Section 6.5 Notice of Litigation. The Borrower will give prompt written
notice to the Lender of the commencement of any action, suit or proceeding
affecting the Borrower alleging claims of Fifty Thousand and No/100 Dollars
($50,000.00) or more.
Section 6.6 Employee Benefit Plans. The Borrower shall neither take any
action, nor omit to take any action, if such action or omission would result in
any of the statements set forth in Section 5.6 (including any written
disclosures made by the Borrower to the Lender under Section 5.6) becoming
inaccurate or misleading at any time while the Notes remain outstanding.
Section 6.7 Insurance. The Borrower will maintain with financially
sound and reputable insurance companies such insurance as may be required by law
and such other insurance in such amounts and against such hazards as is
customary in the case of reputable companies engaged in the same or similar
business.
Section 6.8 Payment of Taxes. The Borrower will file all tax returns
and reports
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which are required by law to be filed by it and will pay before they become
delinquent, all taxes, assessments and governmental charges and levies imposed
upon it or its property and all claims or demands of any kind (including those
of suppliers, mechanics, carriers, warehousemen, landlords and other like
Persons) which, if unpaid, might result in the creation of a Lien upon its
property.
Section 6.9 Maintenance of Properties, Compliance. The Borrower will
maintain its properties in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times. The Borrower will comply in all material
respects with all laws, rules and regulations to which it may be subject.
Section 6.10 Merger. The Borrower will not merge or consolidate or
enter into any analogous reorganization or transaction with any Person or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution).
Section 6.11 Acquisitions. The Borrower will not acquire during any
fiscal year another business, firm or company at a price in excess of One
Million and No/100 Dollars ($1,000,000.00).
Section 6.12 Sale of Assets. The Borrower will not sell, transfer,
lease or otherwise convey all or any substantial part of its assets except for
sales and leases of inventory in the ordinary course of business, except for the
sale of demonstration equipment, and except for advertising rights.
Section 6.13 Additional Covenants. For additional covenants, see
Schedule VI attached hereto and hereby made a part hereof.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:
7.1(a) The Borrower shall fail to make when due, whether by
acceleration
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or otherwise, any payment of principal of or interest on the Notes or
any other obligations of the Borrower to the Lender pursuant to this
Agreement or any of the other Loan Documents.
7.1(b) Any representation or warranty made by or on behalf of
the Borrower in this Agreement or any of the other Loan Documents or by
or on behalf of the Borrower in any certificate, statement, report or
document herewith or hereafter furnished to the Lender pursuant to this
Agreement or any of the other Loan Documents shall prove to have been
false or misleading in any material respect on the date as of which the
facts set forth are stated or certified.
7.1(c) The Borrower shall fail to comply with Section 6.10 or
6.11 or any covenant contained in Schedule VI hereto.
7.1(d) A sale, transfer, conveyance or encumbrance of
Borrower's properties except as permitted under Section 6.12.
7.1(e) The Borrower shall fail to comply with any other
agreement, covenant, condition, provision or term contained in this
Agreement or any of the other Loan Documents (other than those
hereinabove set forth in this Section 7.1) and such failure to comply
shall continue for thirty (30) calendar days after whichever of the
following dates is the earliest: (i) the date the Borrower gives notice
of such failure to the Lender, (ii) the date the Borrower should have
given notice of such failure to the Lender pursuant to Section 6.1, or
(iii) the date the Lender gives notice of such failure to the Borrower.
7.1(f) The Borrower shall become insolvent or shall generally
not pay its debts as they mature or shall apply for, shall consent to,
or shall acquiesce in the appointment of a custodian, trustee or
receiver of itself or for a substantial part of its property, or, in
the absence of such application, consent or acquiescence, a custodian,
trustee or receiver shall be appointed for the Borrower or for a
substantial part of the property thereof and shall not be discharged
within forty-five (45) days, or the Borrower shall make an assignment
for the benefit of creditors.
7.1(g) Any bankruptcy, reorganization, debt arrangement or
other proceedings under any bankruptcy or insolvency law shall be
instituted by or against the Borrower and, if instituted against the
Borrower, shall have been consented to or acquiesced in by the
Borrower, as the case may be, or shall remain undismissed for sixty
(60) days, or an order for relief shall have been entered
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against the Borrower.
7.1(h) Any dissolution or liquidation proceeding shall be
instituted by or against the Borrower and, if instituted against the
Borrower, shall be consented to or acquiesced in by the Borrower, as
the case may be, or shall remain for forty-five (45) days undismissed.
7.1(i) A judgment or judgments for the payment of money in
excess of the sum of Five Hundred Thousand and No/100 Dollars
($500,000.00) in the aggregate, excluding any amount covered by
insurance, shall be rendered against the Borrower and either (i) the
judgment creditor executes on such judgment or (ii) such judgment
remains unpaid or undischarged for more than sixty (60) days from the
date of entry thereof or such longer period during which execution of
such judgment shall be stayed during an appeal from such judgment.
7.1(j) The maturity of any material indebtedness of the
Borrower (other than the Revolving Loan and Term Loan) shall be
accelerated, or the Borrower shall fail to pay any such material
indebtedness when due (after the lapse of any applicable grace period)
or any event shall occur or condition shall exist and shall continue
for more than the period of grace, if any, applicable thereto and shall
have the effect of causing, or permitting the holder of any such
indebtedness to cause, such material indebtedness to become due prior
to its stated maturity or to realize upon any collateral given as
security therefor. For purposes of this Section, indebtedness shall be
deemed "material" if it exceeds Five Hundred Thousand and No/100
Dollars ($500,000.00) as to any item of indebtedness or in the
aggregate for all items of indebtedness with respect to which any of
the events described in this Section has occurred.
7.1(k) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower shall be taken or
attempted to be taken and the same shall not have been vacated or
stayed within thirty (30) days after the issuance thereof.
7.1(l) Any default shall occur under any other Loan Document,
and shall continue beyond any grace or cure period provided therein
with respect to such default.
Section 7.2 Remedies. If (a) any Event of Default described in Sections
7.1 (f), (g) or (h) shall occur with respect to the Borrower, the Notes and all
other obligations of
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the Borrower to the Lender under this Agreement and the other Loan Documents
shall automatically become immediately due and payable, or (b) any other Event
of Default shall occur and be continuing, then the Lender may declare the Notes
and all other obligations of the Borrower to the Lender under this Agreement and
the other Loan Documents to be forthwith due and payable, whereupon the same
shall immediately become due and payable, in each case without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, anything in this Agreement or in the Notes or in any of the other Loan
Documents to the contrary notwithstanding. Upon the occurrence of any of the
events described in clauses (a) or (b) of the preceding sentence the Lender may
exercise all rights and remedies under this Agreement, the Notes and any of the
other Loan Documents and under any applicable law. In addition, the Lender may
cure the Event of Default on behalf of the Borrower, and, in doing so, may enter
upon the Borrower's properties, and may expend such sums as it may deem
desirable, including attorneys' fees, all of which shall be deemed to be
advances hereunder and under the Notes, even though causing the Loan to exceed
the face amount of the Notes, shall bear interest at the Default Rate and shall
be payable by the Borrower on demand.
Section 7.3 Offset. In addition to the remedies set forth in Section
7.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes the Lender to set off
all sums owing by the Borrower to the Lender against all deposits and credits of
the Borrower with, and any and all claims of the Borrower against, the Lender.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Modifications. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
Section 8.2 Costs and Expenses. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to reimburse the Lender
upon demand for
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all reasonable out-of-pocket expenses paid or incurred by the Lender (including
fees and expenses of Woods, Fuller, Shultz & Smith P.C., counsel to the Lender)
in connection with the negotiation, preparation, approval, review, execution,
delivery, amendment, modification, interpretation, collection and enforcement of
this Agreement, the Notes and the other Loan Documents. The obligations of the
Borrower under this Section shall survive any termination of this Agreement.
Section 8.3 Waivers, etc. No failure on the part of the Lender or the
holder of the Notes to exercise and no delay in exercising any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof or
the exercise of any other power or right. The rights and remedies of the Lender
hereunder are cumulative and not exclusive of any right or remedy the Lender
otherwise has.
Section 8.4 Notices. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed. Either party may change
its address for notices by a notice given not less than five (5) Business Days
prior to the effective date of the change.
Section 8.5 Successors and Assigns; Disposition of Loans. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns,
except that the Borrower may not assign its rights or delegate its obligations
hereunder without the prior written consent of the Lender. The Lender may at any
time sell, assign, transfer, grant participations in, or otherwise dispose of
any portion of the Loans to banks or other financial institutions. The Lender
may disclose any information regarding the Borrower in the Lender's possession
to any prospective buyer or participant.
SECTION 8.6 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE
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OF SOUTH DAKOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS OR PRINCIPLES
THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO
NATIONAL BANKS. WHENEVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT AND ANY
OTHER STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING
HERETO, SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
SUCH APPLICABLE LAW, BUT, IF ANY PROVISION OF THIS AGREEMENT OR ANY OTHER
STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO
SHALL BE HELD TO BE PROHIBITED OR INVALID UNDER SUCH APPLICABLE LAW, SUCH
PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT OR ANY OTHER STATEMENT, INSTRUMENT OR
TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO.
SECTION 8.7 CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER, THIS
AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR SOUTH DAKOTA
CIRCUIT COURT SITTING IN SIOUX FALLS OR BROOKINGS, SOUTH DAKOTA; AND THE
BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
AGREEMENT, THE LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
SECTION 8.8 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES AND ANY OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.9 Captions. The captions or headings herein and any table of
contents
-16-
hereto are for convenience only and in no way define, limit or describe the
scope or intent of any provision of this Agreement.
Section 8.10 Number; Gender. The singular of all terms used herein
shall include the plural and the plural shall include the singular, and the use
of any gender herein shall include all other genders, where the context so
requires or permits.
Section 8.11 Entire Agreement. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the Borrower and
the Lender with respect to the subject matter hereof and thereof. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof.
Section 8.12 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
DAKTRONICS, INC.
By ______________________________________
Print Name____________________________
Title________________________________
Borrower's Address:
331 32nd Avenue
Brookings, South Dakota 57006
Fax: (605) __________________
U.S. BANK NATIONAL ASSOCIATION
By ______________________________________
Print Name____________________________
Title________________________________
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Lender's Address:
U.S. Bank National Association
141 North Main Avenue
Post Office Box 5308
Sioux Falls, South Dakota 57117
Fax: (605) 333-3825
SCHEDULE 4.1(a)
This Agreement, the Revolving Note and the Term Note, each duly
executed by the Borrower and dated the Closing Date.
The opinion of counsel to the Borrower covering such matters as the
Lender may request.
The most current available financial statements of the Borrower, as
well as financial statements of the Borrower for each of their preceding three
(3) full fiscal years together with copies of all federal income tax returns
(with all supporting schedules) of the Borrower for their three (3) most recent
fiscal years, all signed and certified as true, correct and complete by the
Borrower.
A copy of the corporate resolutions of such party authorizing the
execution, delivery and performance of the Loan Documents to which Borrower is a
party, and containing an incumbency certificate showing the names and titles,
and bearing the signatures of, the officers of such party authorized to execute
the Loan Documents to which Borrower is a party, certified as of the Closing
Date by the Secretary or an Assistant Secretary of Borrower.
A certificate of good standing for such party in the jurisdiction of
its incorporation, certified by the appropriate governmental officials as of a
date not more than 15 days prior to the Closing Date.
A copy of the Articles of Incorporation of Borrower with all amendments
thereto, certified as of the Closing Date by the Secretary or an Assistant
Secretary of Borrower.
A copy of the bylaws of Borrower, certified as of the Closing Date by
the Secretary or an Assistant Secretary of Borrower.
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SCHEDULE 5.3
ACTIONS, SUITS AND PROCEEDINGS PENDING
AGAINST BORROWER
SCHEDULE VI
ADDITIONAL COVENANTS
Until the Notes and all of the other Obligations shall have been paid
and performed in full, unless the Lender shall otherwise consent in writing:
Dividends. The Borrower will not pay in excess of current year's net
profit after tax any dividends or otherwise make any distributions on, or
redemptions of, any of its outstanding stock.
Tangible Net Worth. The Borrower will not permit its Tangible Net Worth
(the excess of its assets, excluding intangible assets, over its liabilities) at
any time to be less than Twenty-three Million and No/100 Dollars
($23,000,000.00).
Current Ratio. The Borrower will not permit the ratio of its current
assets to its current liabilities to be less than 1.4 to 1 at any time.
Minimum Adjusted Fixed Charge Coverage Ratio. The Borrower will not
permit the Minimum Adjusted Fixed Charge Coverage Ratio, as of the last day of
any fiscal quarter for the four consecutive fiscal quarters ending on that date
to be less than 2 to 1.
For purposes hereof, the following definitions have the following
meanings:
"EBITDA": For any period of determination, the net income of the
Borrower before deductions for income taxes, interest expense, depreciation and
amortization, all as determined in accordance with GAAP.
"Adjusted Fixed Charge Coverage Ratio": For any period of determination
with respect to the Borrower, the ratio of
(a) EBITDA minus the sum of (i) any dividends or other
distributions, (ii) expenditures in the sum of Seven Hundred Fifty
Thousand and No/100 Dollars ($750,000.00) for fixed and capital assets
not financed and (iii) tax expenses,
to
(b) all required principal and interest payments with respect
to Indebtedness (including but not limited to all payments with respect
to
capitalized lease obligations of the Borrower), in each case determined
for said period in accordance with GAAP.
"Indebtedness": All interest-bearing obligations, including those
represented by bonds, debentures, or other debt securities, except principal
reductions on the Revolving Loan.
REVOLVING NOTE
$15,000,000.00 Brookings, South Dakota
October 14, 1998
FOR VALUE RECEIVED, Daktronics, Inc., a South Dakota corporation
("Borrower"), hereby promises to pay to the order of U.S. Bank National
Association, a national banking association, 141 North Main Avenue, Post Office
Box 5308, Sioux Falls, South Dakota 57117 ("Lender", which term shall include
any future holder hereof), at or at such other place as Lender may from time to
time designate in writing, in lawful money of the United States of America, the
principal sum of Fifteen Million and No/100 Dollars ($15,000,000.00) or so much
thereof as may be advanced hereunder and to pay interest on the outstanding
principal balance hereof from time to time at a daily fluctuating rate tied to
the One-Month Reserve Adjusted Reuters London Inter-Bank Offering Rate
("LIBOR"), with the rate tiers determined on the last day of each fiscal quarter
of Borrower's accounting year, and based upon the following rate tiers:
- --- ----------------------------------------------------------------------------- ------------------------
1. Total Liabilities/Tangible Net Worth Ratio = or (less than) .6 LIBOR + 140 basis points
- --- ----------------------------------------------------------------------------- ------------------------
2. Total Liabilities/Tangible Net Worth Ratio (more than).6 but (less than) 1.0 LIBOR + 155 basis points
- --- ----------------------------------------------------------------------------- ------------------------
3. Total Liabilities/Tangible Net Worth Ratio = or (more than) 1.0 LIBOR + 190 basis points
- --- ----------------------------------------------------------------------------- ------------------------
Lender will tell Borrower the current LIBOR rate interest rate and rate tier
upon Borrower's request. The initial rate tier shall be #2 above. The rate tier
shall not be adjusted more often than quarterly. Interest shall be computed on
the basis of actual days elapsed and a year of 360 days. Interest only shall be
paid on the first day of each month, commencing November 1, 1998, and continuing
on the first day of each month thereafter. The total unpaid principal amount and
all interest thereon shall be payable on October 1, 2002 (the "Revolving Loan
Maturity Date"). THIS NOTE REQUIRES A BALLOON PAYMENT.
Borrower may prepay this Note in whole at any time, or in part from
time to time, without penalty or premium. No prepayment shall suspend any
required payments of either principal or interest on this Note or reduce the
amount of any scheduled payment.
Failure to exercise any option provided herein shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default.
Borrower agrees that if, and as often as, this Note is given to an attorney for
collection or to defend or enforce any of Lender's rights hereunder, Borrower
will pay to the Lender Lender's reasonable attorneys' fees together with all
court costs and other expenses paid by Lender.
Borrower waives presentment, protest and demand, notice of protest,
demand and of dishonor and nonpayment of this Note and any lack of diligence or
delays in collection
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or enforcement of this Note. Borrower agrees that this Note, or any payment
hereunder, may be extended from time to time, and Borrower consents to the
release of any party liable for the obligation evidenced by this Note, the
release of any of the security for this Note, the acceptance of any other
security therefor, or any other indulgence or forbearance whatsoever, all
without notice to any party and without affecting the liability of Borrower.
THIS NOTE SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE
STATE OF SOUTH DAKOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS OR PRINCIPLES
THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO
NATIONAL BANKS. WHENEVER POSSIBLE, EACH PROVISION OF THIS NOTE AND ANY OTHER
STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO,
SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER SUCH
APPLICABLE LAW, BUT, IF ANY PROVISION OF THIS NOTE OR ANY OTHER STATEMENT,
INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO SHALL BE HELD
TO BE PROHIBITED OR INVALID UNDER SUCH APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
NOTE OR ANY OTHER STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR
RELATING HERETO.
AT THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY FEDERAL COURT
OR SOUTH DAKOTA CIRCUIT COURT SITTING IN SIOUX FALLS OR BROOKINGS, SOUTH DAKOTA;
AND BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES
ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT BORROWER
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
NOTE, LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Borrower and Lender each irrevocably waives any and all right to trial
by jury in any legal proceeding arising out of or relating to this Note or any
of the Loan Documents (as defined in the Loan Agreement) or the transactions
contemplated hereby or thereby.
DAKTRONICS, INC.
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By _____________________________________
Its President/Chief Executive Officer
TERM NOTE
$5,000,000.00 Brookings, South Dakota
October 14, 1998
FOR VALUE RECEIVED, Daktronics, Inc., a South Dakota corporation
("Borrower"), hereby promises to pay to the order of U.S. Bank National
Association, a national banking association, 141 North Main Avenue, Post Office
Box 5308, Sioux Falls, South Dakota 57117 ("Lender", which term shall include
any future holder hereof), at or at such other place as Lender may from time to
time designate in writing, in lawful money of the United States of America, the
principal sum of Five Million and No/100 Dollars ($5,000,000.00) or so much
thereof as may be advanced hereunder and to pay interest on the outstanding
principal balance hereof from time to time at the rate of six and 77/100 percent
(6.77%) per annum. Interest shall be computed on the basis of actual days
elapsed and year of 360 days. Accrued interest from the date hereof shall be
paid on the first day of November, 1998. Equal installments of principal and
interest shall be paid in the sum of Ninety-eight Thousand Four Hundred Seventy
and No/100 Dollars (98,470.00) commencing on the first day of December, 1998,
and continuing on the first day of each month thereafter through November 1,
2003 (the "Term Maturity Date").
Borrower acknowledges and agrees as follows: (i) Borrower has no right
to prepay the Note, except upon payment of the prepayment indemnity provided for
herein; (ii) Lender will be harmed by reason of any prepayment of the Note at a
time when interest rates have declined below the levels prevailing at the time
funds were advanced under the Note or, if earlier, the date Lender locked in the
interest rate on the Note, because any reinvestment of the prepaid funds at the
lower rates prevailing at the time of prepayment will produce a lower return to
Lender; (iii) there is no readily available index of rates payable on loans such
as that from Lender to Borrower, nor any assurance that Lender could replace the
loan with a similar loan; and (iv) changes in the yields on U.S. government
securities provide a reasonable approximation for changes in interest rates
generally.
Now, therefore, to induce Lender to agree to accept voluntary
prepayments, Borrower agrees to pay Lender a prepayment indemnity as described
in this Note upon any prepayment, whether voluntary, mandatory or upon
acceleration of the Note, and agrees to all of the other terms of prepayment
herein.
As used herein, all capitalized terms not otherwise defined herein have
the meanings assigned to them in the Note, and the following terms have the
meanings assigned to them:
-2-
"Average Initial Maturity Period" means the weighted average time to
scheduled maturity of the Note. Average Initial Maturity Period shall be
computed by multiplying the dollar amount of each installment of principal of
the Note by the number of days from the Note Date until the scheduled maturity
of that installment, adding together the resulting products and dividing the
resulting sum by the total dollar amount of principal of the Note.
"Average Remaining Maturity Period" means the weighted average time to
scheduled maturity of the amount prepaid. Average Remaining Maturity Period
shall be computed by multiplying the dollar amount of each installment of
principal prepaid by the number of days from the prepayment date until the
scheduled maturity of that installment, adding together the resulting products
and dividing the resulting sum by the total dollar amount of principal being
prepaid.
"Government Yield" means the annual yield (converted as necessary to
the equivalent semi-annual compound rate) on a U.S. Treasury security having a
maturity date closest to the date computed by adding (i) for the Government
Yield as of the Note Date, the Average Initial Maturity period to the Note Date
or (ii) for the Government Yield as of the prepayment date, the Average
Remaining Maturity Period to the date of prepayment, as published in The Wall
Street Journal (or, if not so published, as determined by Lender based on
quotations by secondary market dealers selected by Lender). "U.S. Treasury
securities" means actively traded U.S. Treasury bonds, bills and notes. If more
than one issue of U.S. Treasury securities is scheduled to mature at or about
the time of such computed date, then to the extent possible the U.S. Treasury
security trading closest to its par value will be chosen as the basis of the
Government Yield.
"Interest Differential" means the Government Yield as of the Note Date
minus the Government Yield as of the prepayment date.
"Note Date" means the date that the Note is funded or such other date
that Lender locks in the interest rate in effect on the Note as of the date of
prepayment.
Any voluntary prepayment under the Note shall be either in the full
amount of the outstanding loans under the Note or, if a partial prepayment, in
the amount of [$100,000] or an integral multiple thereof, and partial
prepayments shall be applied to installments due under the Note in inverse order
of their maturities. If, at the time of any prepayment (whether voluntary,
mandatory or upon acceleration of the Note), the Interest Differential shall
exceed zero, such prepayment shall be accompanied by payment of a prepayment
-3-
indemnity. The amount of the prepayment indemnity shall equal the present value
(determined by Lender using the Government Yield as of the date of prepayment as
the discount factor) on the prepayment date of a stream of equal monthly
payments in number equal to the number of whole months (using a thirty-day
month) in the Average Remaining Maturity Period. The amount of each such monthly
payment shall equal the quotient obtained by dividing (a) the product of the
amount prepaid, times the Interest Differential, times a fraction, the numerator
of which is the number of days in the Average Remaining Maturity Period and the
denominator of which is 360, by (b) the number of whole months (using a
thirty-day month) in the Average Remaining Maturity Period.
Failure to exercise any option provided herein shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default.
Borrower agrees that if, and as often as, this Note is given to an attorney for
collection or to defend or enforce any of Lender's rights hereunder, Borrower
will pay to the Lender Lender's reasonable attorneys' fees together with all
court costs and other expenses paid by Lender.
Borrower waives presentment, protest and demand, notice of protest,
demand and of dishonor and nonpayment of this Note and any lack of diligence or
delays in collection or enforcement of this Note. Borrower agrees that this
Note, or any payment hereunder, may be extended from time to time, and Borrower
consents to the release of any party liable for the obligation evidenced by this
Note, the release of any of the security for this Note, the acceptance of any
other security therefor, or any other indulgence or forbearance whatsoever, all
without notice to any party and without affecting the liability of Borrower.
THIS NOTE SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE
STATE OF SOUTH DAKOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS OR PRINCIPLES
THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO
NATIONAL BANKS. WHENEVER POSSIBLE, EACH PROVISION OF THIS NOTE AND ANY OTHER
STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO,
SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER SUCH
APPLICABLE LAW, BUT, IF ANY PROVISION OF THIS NOTE OR ANY OTHER STATEMENT,
INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO SHALL BE HELD
TO BE PROHIBITED OR INVALID UNDER SUCH APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER
-4-
OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS NOTE OR ANY OTHER
STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO.
AT THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY FEDERAL COURT
OR SOUTH DAKOTA CIRCUIT COURT SITTING IN SIOUX FALLS OR BROOKINGS, SOUTH DAKOTA;
AND BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES
ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT BORROWER
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
NOTE, LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Borrower and Lender each irrevocably waives any and all right to trial
by jury in any legal proceeding arising out of or relating to this Note or any
of the Loan Documents (as defined in the Loan Agreement) or the transactions
contemplated hereby or thereby.
DAKTRONICS, INC.
By _____________________________________
Its President/Chief Executive Officer