EXHIBIT 10.8
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NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION CREDIT AGREEMENT
This Credit Agreement (the "Agreement") is made as of April 30, 1997 (the
"Effective Date"), and is between Norwest Bank Minnesota, National Association
(the "Bank") and Daktronics, Inc. (the "Borrower").
BACKGROUND
The Bank is the holder of that certain Revolving Note dated September 30, 1996
(the "Old Revolving Note") made by the Borrower in the face amount of
$10,000,000.00. The Old Revolving Note evidences indebtedness for direct
borrowings under a revolving line of credit established by the Bank for the
benefit of the Borrower in the amount of $10,000,000.00. The Borrower has
requested the Bank (i) to renew the line of credit to September 30, 1998, (ii)
to provide for an increase of the amount of the line of credit from
$10,000,000.00 to $15,000,000.00, and (iii) to continue to issue letters of
credit upon the Borrower's request under the revolving line of credit. The Bank
is willing to grant the Borrower's requests, subject to the provisions of this
Agreement.
Accordingly, in consideration of the promises contained in this Agreement, the
Borrower and the Bank agree as follows:
1. LINE OF CREDIT
1.1 LINE OF CREDIT AMOUNT. During the availability period described below
(the "Line Availability Period"), the Bank agrees to provide a
committed revolving line of credit (the "Line") to the Borrower.
Outstandings under the Line will not, at any one time, exceed the
difference of the Borrowing Base minus the L/C Exposure (hereinafter
defined). As used herein, "Borrowing Base" shall mean an amount equal
to (i) Fifteen Million and No/100 Dollars ($15,000,000.00) during the
period June 1 through December 31 of each year, and (ii) Ten Million
and No/100 Dollars ($10,000,000.00) during the period January 1 through
May 31 of each year.
1.2 LINE AVAILABILITY PERIOD. The Line Availability Period will mean the
period from the Effective Date to September 30, 1998 (the "Line
Expiration Date").
1.3 ADVANCES. The Borrower's obligation to repay all advances made under
the Line will be evidenced by a single promissory note (the "Revolving
Note") dated as of the Effective Date and in form and content
acceptable to the Bank. Reference is made to the Revolving Note for
terms relating to interest rate, repayment and other conditions
governing the Line.
1.4 STANDBY LETTERS OF CREDIT
(a) As used herein, the term "L/C Exposure" shall mean the sum of (i) the
aggregate amount available to all beneficiaries under all outstanding
Standby L/Cs, and (ii) the aggregate amount paid by the Bank on drafts
drawn under Standby L/Cs for which the Bank has not been reimbursed by
the Borrower, plus accrued interest thereon. During the Line
Availability Period, the Bank agrees to issue standby letters of credit
for the account of the Borrower (each a "Standby L/C," collectively the
"Standby L/Cs"); provided, however, that the L/C Exposure shall not
exceed $2,000,000.00 at any one time. Each Standby L/C must expire
prior to 180 days after the Line Expiration Date. Each Standby L/C
shall be subject to the provisions of that certain Master Security
Agreement for Irrevocable Standby Letter of Credit executed by the
Borrower on July 29, 1993 (the "Master Agreement"), and to such other
documents as the Bank requires.
(b) The Borrower will pay a standby letter of credit fee of 1.50% per annum
on the face amount of each Standby L/C, subject to a minimum fee of
$250, and calculated on the basis of actual days elapsed in a 360-day
year. This fee will be paid monthly in advance, and is in addition to
all other fees or expenses provided for in the Master Agreement.
(c) The availability under the Line will be reduced dollar for dollar by
the L/C Exposure.
(d) Should a default occur under this Agreement, and such default remains
in existence beyond any cure period provided therefor, the Bank may
require the Borrower to deposit with it, in a non-interest bearing
account, immediately available funds equal to the L/C Exposure. The
Borrower hereby grants the Bank a security interest in these funds,
which will be security for all of the Borrower's obligations to the
Bank.
2. FEES AND EXPENSES
2.1 FACILITY FEE. During the Line Availability Period the Borrower will pay
the Bank a facility fee of 0.15% per annum on the average daily amount
by which the Borrowing Base exceeds outstandings under the Line. This
fee will be paid monthly in arrears, beginning May 1, 1997.
2.2 EXPENSES. The Borrower agrees to pay all expenses incurred by the Bank
in connection with the administration, amendment and enforcement of
this Agreement and related documents. Expenses to be reimbursed by the
Borrower include, but are not limited to, reimbursement for reasonable
attorneys' fees, including the cost of the Bank's in-house counsel.
3. DISBURSEMENTS AND PAYMENTS
3.1 REQUESTS FOR ADVANCES. Each advance under the Line must be requested by
telephone or in a writing delivered to the Bank by any person
reasonably believed by the Bank to be an authorized officer of the
Borrower. The Bank will not consider any request for an advance under
the Line if there is an event which is, or with notice or the lapse of
time would be, an event of default under this Agreement. Proceeds from
an advance will be deposited into the Borrower's account at the Bank or
disbursed in such other manner as the Bank and the Borrower mutually
agree.
3.2 OPTIONAL INTEREST RATES. According to the terms of the Revolving Note,
the Borrower may elect interest rates based on the LIBOR index. To
elect the LIBOR Rate Option, as defined in the Revolving Note, the
Borrower must request a quote from the Bank three days prior to
funding. This request must designate an amount (the "LIBOR Rate
Portion") and a period (the "LIBOR Interest Period"). The LIBOR Rate
Portion must be $100,000 or multiples thereof, and the LIBOR Interest
Period will be for 30, 60 or 90 days. The LIBOR Interest Period may not
extend later than the Line Expiration Date. The Bank shall not be
obligated to provide a LIBOR rate quote if it determines that no
deposits with an amount and maturity equal to those for which a
quotation has been requested are available to it in the London
interbank market. The Borrower must orally accept a quote at the time
of receipt or it will be deemed rejected. If accepted, the LIBOR Rate
Option will remain in effect for the LIBOR Interest Period specified in
the quote. At the end of each LIBOR Interest Period the principal
amount subject to the LIBOR Rate Option shall bear interest at the Base
Rate Option (as defined in the Revolving Note).
3.3 PAYMENTS. All principal, interest and fees due under this Agreement
will be paid to the Bank by the direct debit of available funds on
deposit in the Borrower's account with the Bank. The Bank will debit
the account on the dates the payments become due. If a due date does
not fall on a day on which the Bank is open for substantially all of
its business (a "Banking Day," except as otherwise provided), the Bank
will debit the account on the next Banking Day, and interest will
continue to accrue during the extended period. If there are
insufficient funds in the account on the day the Bank enters any debit
authorized by this Agreement, the debit will be reversed and the
payment will be due immediately without necessity of demand by direct
remittance of immediately available funds. For amounts bearing interest
at the LIBOR Rate (if any), a Banking Day is a day on which the Bank is
open for business and on which dealings in U.S. dollar deposits are
carried on in the London interbank market.
4. CONDITIONS PRECEDENT
Prior to the Effective Date, the Borrower must deliver to the Bank the
documents described in the attached Exhibit A, properly executed and in
form and content acceptable to the Bank. Prior to each request for an
advance, or the issuance of a Standby L/C, under this Agreement, the
Borrower must also deliver to the Bank any additional documents that
are described in Exhibit A as a condition precedent to any such advance
or issuance.
5. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the Borrower hereby
makes the representations and warranties contained in the attached
Exhibit B, which is incorporated herein by reference. Each request for
an advance, or the issuance of a Standby L/C, under this Agreement
constitutes a reaffirmation of these representations and warranties.
6. COVENANTS
During the Line Availability Period and thereafter until all amounts
due under this Agreement are paid in full, unless the Bank shall
otherwise agree in writing, the Borrower agrees to:
6.1 FINANCIAL INFORMATION
(a) Annual Financial Statements. Provide the Bank, within 90 days of the
Borrower's fiscal year end, the Borrower's consolidated, annual
financial statements. The statements must be audited with an
unqualified opinion by a certified public accountant acceptable to the
Bank.
(b) Gross Profit Margin Report and Compliance Certificate. Provide the
Bank, within 30 days of each quarter-end, (i) an estimated gross margin
report as of the end of such quarter, and (ii) a compliance certificate
in the form of Exhibit C, signed by an officer of the Borrower, which
(A) attests to the accuracy of the financial statements, and (B)
certifies and demonstrates that the Borrower remains in compliance with
the covenants contained in this Agreement.
(c) Interim Financial Statements. Provide the Bank, within 30 days of each
month-end, the Borrower's interim financial statements prepared on a
consolidated basis and certified as correct in form acceptable to the
Bank.
(d) Notices. Provide the Bank prompt written notice of (i) any event which
has or might after the passage of time or the giving of notice, or
both, constitute an event of default under this Agreement, or (ii) any
event that would cause the representations and warranties contained in
this Agreement to be untrue.
(e) Additional Information. Provide the Bank with such other information as
it may reasonably request, and permit the Bank to visit and inspect its
properties and examine its books and records.
6.2 FINANCIAL MEASUREMENTS
(a) Tangible Net Worth. Maintain its Tangible Net Worth at a level equal to
or greater than (i) $19,500,000.00 at all times from April 1, 1997
through April 30, 1998, and (ii) $21,500,000.00 at all times after
April 30, 1998 (if the Line is renewed beyond said date).
"Tangible Net Worth" means total assets less total liabilities and less
intangible assets.
(b) Total Liabilities to Tangible Net Worth Ratio. Maintain a ratio of
total liabilities to Tangible Net Worth of less than 1.0 to 1.0 at all
times.
(c) Current Ratio. Maintain a ratio of current assets to current
liabilities (determined in accordance with Generally Accepted
Accounting Principles) of at least 1.40 to 1.0 at all times.
(d) Net Profit. Achieve a net profit after taxes (determined in accordance
with Generally Accepted Accounting Principles) at a level equal to or
greater than (i) $300,000.00 for the three-month period ending July 31,
1997, (ii) $600,000.00 for the six-month period ending October 31,
1997, (iii) $900,000.00 for the nine-month period ending January 31,
1998, and (iv) $1,200,000.00 for the fiscal year ending April 30, 1998.
6.3 OTHER COVENANTS
(a) Other Liens. Refrain from allowing or suffering any security interest
or lien on property it owns now or in the future, except:
(i) Liens which secure purchase money indebtedness allowed under
this Agreement.
(ii) The pledge or sale of advertising rights or contract rights
relative to an individual scoreboard or other display for the
purpose of securing indebtedness used to finance the
construction and installation of such scoreboard or other
display. Any such pledge or sale must be disclosed to the Bank
in writing when created.
(b) Guaranties. Refrain from assuming, guaranteeing, endorsing or otherwise
becoming contingently liable for any obligations of any other person,
exceeding $5,000,000.00 in the aggregate.
(c) Insurance. Cause its properties to be adequately insured by a reputable
and solvent insurance company against loss or damage, and to carry such
other insurance (including business interruption insurance) as is
usually carried by persons engaged in the same or similar business.
(d) Nature of Business. Refrain from engaging in any line of business
materially different from that presently engaged in by the Borrower.
(e) Merger. Refrain from consolidating, merging, pooling, syndicating or
otherwise combining with any other entity.
(f) Maintenance of Properties. Make all repairs, renewals or replacements
necessary to keep its plant, properties and equipment in good working
condition.
(g) Books and Records. Maintain adequate books and records.
(h) Compliance with Laws. Comply with all laws and regulations applicable
to its business.
(i) Preservation of Rights. Maintain and preserve all rights, privileges,
charters and franchises it now has.
(j) Business Acquisition. Refrain from purchasing or otherwise acquiring
all or substantially all of the assets of any other person, firm,
corporation or other entity if, after giving effect to such
acquisition, the aggregate amount of all such acquisitions during any
fiscal year would exceed $5,000,000.00.
The covenants contained in this Section 6 were negotiated by the Bank
and Borrower based on information provided to the Bank by the Borrower.
A breach of a covenant is an indication that the risk of the
transaction has increased. In consideration for any waiver or
modification of these covenants, the Bank may require: additional
collateral, guaranties or other credit support; higher fees or interest
rates; and/or revised loan documentation or monitoring. The waiver or
modification of any covenant that has been violated by the Borrower
will be made in the sole discretion of the Bank. These options do not
limit the Bank's right to exercise its rights under Section 7 of this
Agreement.
7. EVENTS OF DEFAULT AND REMEDIES
7.1 DEFAULT
Upon the occurrence of any one or more of the following events of
default, or at any time thereafter, unless such default is cured, the
Bank may declare the Line to be terminated and/or declare the unpaid
principal, accrued interest and all other amounts payable under the
Revolving Note and the Master Agreement to be immediately due and
payable:
(a) Default in the payment when due of any principal or interest due under
the Revolving Note, and continuance for 5 days.
(b) The occurrence of any event of default under the Master Agreement, and
such event of default remains in existence beyond any notice and cure
period provided therefor.
(c) Default in the observance or performance of any covenant or agreement
contained in this Agreement (other than defaults addressed elsewhere in
this Section 7), and continuance for more than 30 days.
(d) Default by the Borrower in any agreement with the Bank or any other
lender that relates to indebtedness or contingent liabilities which
would allow the maturity of such indebtedness to be accelerated.
(e) Any representation or warranty made by the Borrower to the Bank is
untrue in any material respect when deemed to have been effective.
(f) Any litigation or governmental proceeding against the Borrower seeking
an amount in excess of $1,000,000.00 results in a judgment equal to or
in excess of that amount against the Borrower, which judgment remains
unsatisfied and in effect for a period of 30 days without a stay of
execution.
(g) Any litigation or governmental proceeding against the Borrower seeking
an amount in excess of $3,000,000.00 either (i) results in a judgment
equal to or in excess of that amount against the Borrower, or (ii)
remains unresolved on the 365th day following its inception.
(h) A garnishment summons, levy or writ of attachment is issued against or
served upon the Bank for the attachment of any property of the Borrower
in the Bank's possession, or upon indebtedness owed to the Borrower by
the Bank.
7.2 IMMEDIATE DEFAULT
If, with or without the Borrower's consent, a custodian, trustee or
receiver is appointed for any of the Borrower's properties, or if a
petition is filed by or against the Borrower under the United States
Bankruptcy Code, then the Line shall immediately terminate and the
unpaid principal,
accrued interest and all other amounts payable under the Revolving Note
and the Master Agreement will become immediately due and payable,
without notice or demand.
8. MISCELLANEOUS.
8.1 360 Day Year. All interest and fees due under this Agreement will be
calculated on the basis of actual days elapsed in a 360 day year.
8.2 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all calculations for compliance
with financial covenants will be made using Generally Accepted
Accounting Principles consistently applied ("GAAP").
8.3 No Waiver; Cumulative Remedies. No failure or delay by the Bank in
exercising any rights under this Agreement shall be deemed a waiver of
those rights. The remedies provided for in the Agreement are cumulative
and not exclusive of any remedies provided by law.
8.4 Amendments or Modifications. Any amendment or modification of this
Agreement must be in writing and signed by the Bank. Any waiver of any
provision in this Agreement must be in writing and signed by the Bank.
8.5 Binding Effect; Assignment. This Agreement and the related documents
are binding on the successors and assigns of the Borrower and Bank. The
Borrower may not assign its rights under this Agreement or the related
documents without the Bank's prior written consent. The Bank may sell
participations in or assign this Agreement and the related documents
and exchange financial information about the Borrower with actual or
potential participants or assignees. At least 30 days prior to such an
exchange of information, the Bank will provide the Borrower with
written notice identifying the prospective assignee or participant.
8.6 Minnesota Law. This Agreement will be governed by the substantive laws
of the State of Minnesota.
8.7 Severability of Provisions. If any part of this Agreement or the
related documents are unenforceable, the rest of this Agreement or the
related documents may still be enforced.
8.8 Integration. This Agreement and the related documents contain the
entire understanding between the parties, and supersede all prior
agreements (including without limitation that certain Credit Agreement
dated April 20, 1994 (as amended)) between the Bank and the Borrower
relating to the Line, whether verbal or in writing.
Address for notices to Bank: Address for notices to Borrower:
Norwest Bank Minnesota, Daktronics, Inc.
National Association 000-00xx Xxxxxx
Xxxxxxxxxxx Xxxxxx X.X. Xxx 000
7900 Xerxes Avenue South Brookings, South Dakota 57006-0128
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
NORWEST BANK MINNESOTA, DAKTRONICS, INC.
NATIONAL ASSOCIATION
BY: ___________________________ BY: ___________________________
XXXXXXX X. XXXXXXXXXXX,
VICE PRESIDENT ITS: __________________________
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NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION REVOLVING NOTE
$15,000,000.00 April ____, 1997
FOR VALUE RECEIVED, Daktronics, Inc. (the "Borrower") promises to pay to the
order of Norwest Bank Minnesota, National Association (the "Bank"), at its
Bloomington Office or such other address as the Bank or holder may designate
from time to time, the principal sum of Fifteen Million and No/100 Dollars
($15,000,000.00), or the amount shown on the Bank's records to be outstanding,
plus interest (calculated on the basis of actual days elapsed in a 360-day year)
accruing on the unpaid balance at the annual interest rates defined below.
Absent manifest error the Bank's records will be conclusive evidence of the
principal and accrued interest owing hereunder.
This Revolving Note is issued pursuant to a Credit Agreement of even date
herewith between the Bank and the Borrower (the "Agreement"). The Agreement, and
any amendments or substitutions thereto, contain additional terms and conditions
including default and acceleration provisions. The terms of the Agreement are
incorporated into this Revolving Note by reference. Capitalized terms not
expressly defined herein shall have the meanings given them in the Agreement.
INTEREST RATES.
BASE RATE OPTION. Unless the Borrower chooses the LIBOR Rate Option as defined
below, the principal balance outstanding under this Revolving Note will bear
interest at an annual rate equal to the Base Rate, floating (the "Base Rate
Option"). The Base Rate is the "base" or "prime" rate of interest established by
the Bank from time to time.
LIBOR RATE OPTION. Subject to the terms and conditions of the Agreement, the
Borrower may elect that all or portions of the principal balance of this
Revolving Note bear interest at the LIBOR Rate plus 2.0% (the "LIBOR Rate
Option"). Specific reference is made to the "Disbursements And Payments" Section
of the Agreement for terms governing the designation of interest periods and
rate portions.
The LIBOR Rate will be computed in accordance with the following formula.
LIBOR Rate = London Interbank Rate
1.00 - Reserve Percentage
Where,
(i) "London Interbank Rate" means the average rate at which U.S. Dollar
deposits with a term equal to the applicable LIBOR Interest Period and
in an amount equal to the LIBOR Rate Portion are offered to the Bank on
the London Interbank Market.
(ii) "Reserve Percentage" means the Federal Reserve System requirement
(expressed as a percentage) applicable to the dollar deposits used in
calculating the LIBOR Rate above.
REPAYMENT TERMS
INTEREST. Interest will be payable on the last day of each month, beginning
April 30, 1997, and at maturity.
PRINCIPAL. Principal will be repayable on September 30, 1998. Additionally, the
Borrower shall at all times cause the outstanding principal balance of this
Revolving Note to be equal to or less than the limits set forth in Section 1.1
of the Agreement.
PREPAYMENT. The Borrower may prepay all or any portion of principal accruing
interest under the Base Rate Option without premium or penalty. Each prepayment
of principal accruing interest under the LIBOR Rate Option, whether voluntary or
by reason of acceleration, will be accompanied by accrued interest on the
prepaid portion and a prepayment premium equal to the amount, if any, by which:
(i) the additional interest that would have been payable on the amount
prepaid if it had not been paid until the last day of the relevant
LIBOR Interest Period, exceeds
(ii) the interest that would have been recoverable by the Bank by
reinvesting the amount prepaid from the prepayment date to the last day
of the relevant LIBOR Interest Period in a like kind investment.
ADDITIONAL TERMS AND CONDITIONS. The Borrower agrees to pay all costs of
collection, including reasonable attorneys' fees and legal expenses, incurred by
the Bank in the event this Revolving Note is not duly paid. Demand, presentment,
protest and notice of nonpayment and dishonor of this Revolving Note are
expressly waived. This Revolving Note will be governed by the substantive laws
of the State of Minnesota.
DAKTRONICS, INC.
BY: ____________________________
ITS: ___________________________
EXHIBIT A
CONDITIONS PRECEDENT
NOTE: Revolving Note.
L/C APPLICATIONS
Prior to the issuance of each Standby L/C, the Borrower shall submit to the Bank
an Application and Agreement for Irrevocable Standby Letter of Credit, as
contemplated by the Master Agreement.
AUTHORIZATION
Corporate Certificate of Authority. A certificate of the Borrower's corporate
secretary as to the incumbency and signatures of the officers of the Borrower
signing the Credit Agreement and the related documents, and containing a copy of
resolutions of the Borrower's board of directors authorizing execution, delivery
and performance of the Credit Agreement and related documents.
OTHER
Evidence of Insurance. Evidence that the insurance required under the
"Covenants" Section of the Credit Agreement is in force
All of the foregoing shall be in form and content acceptable to the Bank.
EXHIBIT B
REPRESENTATIONS AND WARRANTIES
Corporate Status. The Borrower is a corporation, duly formed and in good
standing under the laws of the State of South Dakota.
Authorization. The execution, delivery and performance by the Borrower of the
Credit Agreement and the related documents is within the Borrower's powers, and
has been duly authorized, and does not conflict with any of its organizational
papers or any other agreement by which the Borrower is bound.
Financial Reports. The Borrower has provided the Bank with its annual audited
financial statement dated April 30, 1996, and its unaudited interim financial
statement dated March 31, 1997, and these statements fairly represent the
financial condition of the Borrower as of their respective dates and were
prepared in accordance with GAAP.
Litigation. There is no litigation or governmental proceeding pending or
threatened against the Borrower which could have a material adverse effect on
the Borrower's financial condition or business.
Taxes. The Borrower has paid when due all federal, state and local taxes.
No Default. There is no event which is, or with notice or the lapse of time
would be, an event of default under the Credit Agreement or under the Credit
Agreement dated April 20, 1994 (as amended).
ERISA. The Borrower is in compliance in all material respects with ERISA and has
received no notice to the contrary from the PBGC or other governmental area.
Environmental Matters. To the best knowledge of the officers of the Borrower,
(i) the Borrower is in compliance in all material respects with all applicable
environmental, health, and safety statutes and regulations, (ii) the Borrower is
not the subject of any "Superfund" evaluations, and (iii) the Borrower has not
incurred, directly or indirectly, any material contingent liability in
connection with the release of any toxic or hazardous waste or substance into
the environment.
EXHIBIT C
DAKTRONICS, INC.
OFFICER'S CERTIFICATE OF COMPLIANCE
In accordance with the Credit Agreement dated April ____, 1997 between Norwest
Bank Minnesota, National Association (the "Bank") and Daktronics, Inc. (the
"Borrower") attached are the financial statements of the Borrower for the period
ending ___________________, 199__.
I certify that the financial statements have been accurately prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with those applied in the annual financial statements. I also certify
that as of ______________________, 199___, the Borrower is in compliance with
the covenants stated in the Credit Agreement. The calculations made to determine
compliance were as follows:
ACTUAL REQUIREMENT
TANGIBLE NET WORTH
Net Worth
--------------
(-) Intangible Assets
--------------
Tangible Net Worth $ Minimum $19,500,000.00
==============
TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO
Total Liabilities
--------------
Net Worth
--------------
(-) Intangible Assets
--------------
Tangible Net Worth
--------------
Total Liabilities/Tangible Net Worth Maximum 1.0 to 1.0
==============
CURRENT RATIO
Current Assets
--------------
Current Liabilities
--------------
Current Assets/Current Liabilities Minimum 1.40 to 1.0
==============
NET PROFIT
Net Profit Minimum $_____________
==============
ACQUISITIONS
Aggregate amount of all
acquisitions during fiscal
year ending April 30, 199__ $ Maximum $5,000,000.00
==============
Furthermore, I have no knowledge of the occurrence of an Event of Default under
the Credit Agreement or of any event which with notice or lapse of time would
constitute an Event of Default pursuant to the terms of the Credit Agreement,
except those specifically stated below.
DAKTRONICS, INC.
BY: _______________________________
ITS: ______________________________
DATE: _____________________________, 199__
