SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of
December 24, 1996, and is between BEST BUY CO., INC., a Minnesota corporation
(the "Company"), the lenders party to the Credit Agreement, as hereinafter
defined (such lenders being hereinafter sometimes referred to, collectively, as
the "Banks"), and FIRST BANK NATIONAL ASSOCIATION, as agent for the Banks (in
such capacity, the "Agent").
WITNESSETH THAT:
WHEREAS, the Company, the Banks and the Agent are parties to an Amended and
Restated Credit Agreement dated as of August 25, 1995, as amended by a First
Amendment to Credit Agreement dated as of March 1, 1996 (as so amended, the
"Credit Agreement"); and
WHEREAS, the Company, the Banks and the Agent have agreed to amend the
Credit Agreement as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. CERTAIN DEFINED TERMS. Each capitalized term used herein without
being defined that is defined in the Credit Agreement shall have the meaning
given to it in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is amended as
follows:
(a) Section 1.01 is amended to add the following definitions in the
appropriate alphabetical order:
"ADDITIONAL MARGIN": as of any date of determination, the
applicable percentage based on the Interest Coverage Ratio for the
period of twelve consecutive months ending on the applicable "Margin
Measurement Date" (as defined below), as set forth below:
Applicable Letter of
- --------------------------------------------------------------------------------
Interest Coverage Ratio Applicable Margin Credit Fee Percentage
- ----------------------- ----------------- ---------------------
Greater than 1.45 : 1.00 0 0
1.401 : 1.00-1.45 : 1.00 0.25% 0.125%
1.351 : 1.00-1.40 : 1.00 0.50% 0.25%
1.35 : 1.00 or less 0.75% 0.375%
With respect to each date of determination during any period beginning
on the tenth day of any month and continuing through the ninth day of
the following month (e.g., February 10 - March 9), the Margin
Measurement Date shall be the last day of the second fiscal month
preceding the month in which such period begins (e.g., January3). To
the extent the financial statements required under Section 5.01(b) as
of, and for the period ending on, any Margin Measurement Date, and the
accompanying Compliance Certificate, are not delivered to the Agent
within thirty (30) days after such Margin Measurement
1
Date, the Interest Coverage Ratio as of such Margin Measurement Date
shall, for purposes of this definition, be deemed to be less than 1.35
: 1.00.
"BB PROPERTY": BB Property Company, a Nebraska general
partnership.
"BB PROPERTY LEASE AGREEMENT": the Lease Agreement dated as of
April 15, 1993 between BB Property and the Company, as the same may be
amended, restated, supplemented or otherwise modified and in effect
from time to time, and any other agreement between BB Property and the
Company relating to the Lease of any real property.
"BB PROPERTY LEASE DOCUMENTS": the BB Property Lease Agreement,
together with any agreement, document or instrument entered into in
connection with any credit extended to BB Property and secured by such
Lease Agreement, other agreement or the properties covered thereby,
including, without limitation, the Note Purchase Agreement dated as of
April 15, 1993 among BB Property, the Company and Teachers Insurance
and Annuity Association of America, and the "Deed of Trust" and the
"Assignment" (as defined in such Note Purchase Agreement).
"CONQUEST DOCUMENTS": the Agreement for Lease, the Master Lease
Agreement, any agreement, document or instrument executed or delivered
in connection therewith, any "Credit Agreement" (as defined in the
Master Lease Agreement), any other agreement relating to Indebtedness
of BBC or Conquest secured by or otherwise related to the Agreement to
Lease, the Master Lease Agreement or any property covered thereby, and
any agreement, document or instrument executed or delivered in
connection with any such Credit Agreement or other agreement.
"DESIGNATION PERIOD": as such term is defined in Section 2.16.
(b) Section 1.01 is further amended to restate the following
definitions as follows:
"APPLICABLE LETTER OF CREDIT FEE PERCENTAGE": as of any date of
determination, (a) with respect to Letters of Credit having a
scheduled expiration date not more than six months after the date of
issuance, the applicable percentage based on the Performance Level, as
set forth below:
PERFORMANCE LEVEL APPLICABLE PERCENTAGE
I 0.75%
II 0.75%
III 1.25%
IV 1.75%
and (b) with respect to Letters of Credit having a scheduled
expiration date more than six months after the date of issuance, the
applicable percentage based on the Performance Level, as set forth
above, plus one-quarter of one percent (0.25%), in each case PLUS the
Additional Margin.
"APPLICABLE MARGIN": as of any date of determination, the
applicable percentage based on the Performance Level, as set forth
below:
2
Performance Eurodollar Swing-Line
Reference
LEVEL RATE ADVANCES LOANSRATE ADVANCES
I 0.75% -0.75% -0.50%
II 1.00% -0.75% -0.50%
III 1.50% -0.375% 0
IV 2.00% 0 0.50%
in each case PLUS the Additional Margin. The Applicable Margin for
any Eurodollar Advance during any Interest Period applicable thereto
shall be the Applicable Margin in effect on the first day of such
Interest Period; PROVIDED, that the Applicable Margin for any such
Interest Period shall be adjusted to account for any change in the
Additional Margin on and as of the effective date of such change.
"BORROWING BASE": as of a date of determination, the 71 43/100%
of the following amount MINUS (A) the amount of any unsecured
Indebtedness incurred by the Company pursuant to Section 5.13(g) and
(B) $30,000,000:
55% of the lower of: (a) cost (as determined on a first-in,
first-out basis) of Eligible Inventory LESS (i) the amount of
Indebtedness of the Company or any Subsidiary secured by Liens on
inventory and (ii) the amount accrued for losses due to missing
inventory (shrink accrual) or (b) market value of Eligible
Inventory LESS (i) the amount of Indebtedness of the Company or
any Subsidiary secured by Liens on inventory and (ii) the amount
accrued for losses due to missing inventory (shrink accrual).
"DESIGNATED AMOUNT": with respect to any Bank for any
Designation Period, such Bank's Pro Rata Share of the amount of the
Aggregate Seasonal Commitment Amount designated by the Company as
available pursuant to Section 2.16.
(c) Section 2.06(c) is amended to delete clause (ii) thereof and
substitute the following therefor:
(ii) otherwise, at a rate per annum equal to the sum of the
Reference Rate PLUS the Applicable Margin PLUS 2.00%.
(d) Section 2.16 is restated in its entirety to read as follows:
Section 2.16 DESIGNATION OF AVAILABLE AMOUNT OF SEASONAL COMMITMENT.
Not less than five nor more than ten days prior to the first Business
Day of each month from July through December of each year, the Company
may by written notice to the Agent designate all or any portion of the
Aggregate Seasonal Commitment Amount as available for the period from
the first Business Day of the following month until the day before the
first Business Day of the second following month (each such period, a
"Designation Period"). If the Company shall fail to make such
designation as provided in the preceding sentence, the Designated
Amount of each Bank for the following Designation Period shall be the
same as the Designated Amount for the preceding Designation Period or,
in the case of the first Designation Period occurring during each
year, shall be zero, subject to adjustment
3
pursuant to the second paragraph of this Section 2.16. The Agent
shall notify each Bank in writing, within one Business Day after its
receipt of any such designation, of such designation and such Bank's
Designated Amount for the following Designation Period. The Agent
shall also notify each Bank in writing, within one Business Day after
the expiration of the time for the Company to make a designation under
this Section2.16 for any Designation Period, if no such designation
has been made.
Notwithstanding the foregoing, the Company may increase the Aggregate
Designated Amount for any particular Designation Period during such
Designation Period by requesting Loans pursuant to Section 2.02 and/or
Letters of Credit pursuant to Section 2.09 that would cause Total
Outstandings to exceed the Aggregate Available Amount, but not the
Aggregate Commitment Amount. Each Bank shall make its Loan in its Pro
Rata Share of the requested Loans in accordance with the provisions of
Section 2.02 so long as all other terms of lending under this
Agreement have been satisfied. In each such case the Company shall
specify in its request to borrow the aggregate amount by which the
requested Loans will cause the Total Outstandings to exceed the
Aggregate Available Amount (and thus the amount by which the Aggregate
Designated Amount shall be increased) for such Designation Period and
the Agent shall include such information in the notification provided
to each Bank pursuant to Section 2.02. The Company shall pay to the
Agent, for the account of the Banks, for the period from and including
the first calendar day of the Designation Period in which the
requested Loans are made through the last calendar day thereof, a fee
in an amount equal to three-eights of one percent (0.375%) per annum
of the aggregate amount by which such requested Loans will cause the
Total Outstandings to exceed the Aggregate Available Amount (and thus
the amount by which the Aggregate Designated Amount will be
increased). Such fee shall be in lieu of the Commitment Fee under
Section 2.18 otherwise applicable to such excess amount during such
Designation Period and shall be payable quarterly in arrears on the
first day of the following calendar quarter and on the Termination
Date. The Designated Amount of each Bank shall be increased by its
Pro Rata Share of the amount by which the Aggregate Designated Amount
shall be increased pursuant to this Section.
(e) Section 5.24 is restated in its entirety to read as follows:
Section 5.24 INTEREST COVERAGE RATIO. Not permit the Interest
Coverage Ratio to be less than (a) for the Measurement Periods ending
on or about February 28, 1997, May 31, 1997 and August 31, 1997, 1.30
to 1.00, and (b) for all other Measurement Periods, 1.70 to 1.00.
(f) Section 6.01 is amended to delete the period at the end of
subsection (k) thereof and substitute "; or " therefor, and to add the
following after such subsection (k):
(l) BB Property, any lender to BB Property, or any trustee, agent
or other representative of any lender to, or the holders of any
securities issued by, BB Property, shall exercise, give any
required formal written notice of intent to exercise, or
otherwise express in writing any present or unconditional intent
to exercise, any remedy it may have with respect to
4
any default occurring under any of the BB Property Lease
Documents, unless all remedies exercised, or that are the subject
of such written notice, if exercised, would not materially affect
the Company's or any Subsidiary's operations at any leased
property or require the Company or any Subsidiary to pay any
lease payment prior to its scheduled due date or make any
termination or other extraordinary payment; or
(m) the Company's independent certified public accountants shall
qualify their opinion with respect to the Company's financial
statements in any respect as a result of any default or event
that could, with the passage of time, the giving of notice or
otherwise, become a default under any Conquest Document or BB
Property Lease Document, or any such default or event asserted to
have occurred thereunder (whether or not such default or event
has actually occurred); or
(n) lessors under leases of real property with an aggregate fair
market value (determined under the most recent available
appraisals thereof) in excess of $ 10,000,000 to which the
Company or any Subsidiary is a party, any lender to any such
lessor(s), or any trustee, agent or other representatives of any
lender to, or the holders of any securities issued by, any such
lessor(s), shall exercise, give any required formal written
notice of intent to exercise, or otherwise express in writing any
present or unconditional intent to exercise, any remedy they may
have against the Company, any Subsidiary or any leased property
that involves (i) payment by the Company or any Subsidiary of an
amount in excess of $5,000,000 or (ii) any material interference
with the Company's or any Subsidiary's operations at any leased
property; or
(o) (i) Conquest, any lender to Conquest or BBC, or any trustee,
agent or other representative of any lender to, or the holders of
any securities issued by, Conquest or BBC, shall exercise, give
any required formal written notice of intent to exercise, or
otherwise express in writing any present or unconditional intent
to exercise, any remedy it may have with respect to any default
occurring under any of the Conquest Documents unless all remedies
exercised, or that are the subject of such written notice, if
exercised, would not materially affect the Company's or any
Subsidiary's operations at any leased property or require the
Company or any Subsidiary to pay any lease payment prior to its
scheduled due date or make any termination or other extraordinary
payment; (ii) any litigation shall be commenced with respect to
the question of whether the Company's failure to comply with
Section 5.24 of this Agreement for the period ending November 30,
1996 constitutes a default under any of the Conquest Documents,
or (iii) any amendment to any of the Conquest Documents shall be
entered into that has the effect, directly or indirectly, of
effectively ending the term of the "Credit Agreement" (as defined
in the Master Lease Agreement) in effect on November 30, 1996
prior to September30, 1998.
(g) Exhibits A and B to the Credit Agreement are replaced in their
entirety with Exhibits A and B hereto.
Section 3. DEFAULT WAIVER.
5
3.1 INTEREST COVERAGE ON DEFAULT. Under Section 5.24 of the Credit
Agreement as in effect prior to this Amendment, the Company agreed to maintain
an Interest Coverage Ratio for each Measurement Period of not less than 1.70 to
1.00.
3.2 WAIVER. The Banks hereby waive compliance by the Company with the
requirements described in Section 3.1 hereof for the period ending November 30,
1996. The Company agrees that the waiver set forth in this Section 3.2 shall be
limited to the precise meaning of the words as written herein and shall not be
deemed (a) to be a consent to any waiver or modification of any other term or
condition of the Credit Agreement, or of the terms or conditions described in
Section 3.1 hereof for any period ending on any date except November 30, 1996,
or (b) to prejudice any right or remedy that the Agent or the Banks may now have
or may in the future have under or in connection with the Credit Agreement. The
Company acknowledges and agrees that the waivers set forth in this Section 3.2
are provided by the Banks as an accommodation to the Company. The waivers set
forth herein shall not be deemed to be, a course of dealing with respect thereto
upon which the Company may rely in the future, and the Company hereby expressly
waives any claim to such effect.
4. EFFECTIVENESS OF AMENDMENT. This Amendment shall be deemed effective
as of the date first above written, but only upon delivery to the Agent of this
Amendment duly executed by the Company and the Majority Banks, and when each of
the following conditions precedent has been satisfied:
(a) no material action, suit or proceeding (including, without
limitation, any inquiry or investigation) shall be pending or threatened
with respect to the Company that could have a material adverse affect on
the Company;
(b) no material adverse change in the business assets, financial
condition or prospects of the Company shall have occurred since March 2,
1996;
(c) payment shall have been made to, and received by, the Agent of
(i) an amendment fee in the amount of $275,000, for the account of the
Banks in accordance with their respective Pro Rata Shares (determined under
clause (a) of the definition thereof), and (ii) all amounts payable to the
Agent under the Credit Agreement or this Amendment, including, without
limitation, all expenses of the Agent and the fees and expenses of counsel
to the Agent incurred on or prior to the effective date of this Amendment,
in the amounts requested by the Agent;
(d) the representations and warranties contained in Article IV of the
Credit Agreement, as amended hereby, are correct on and as of the effective
date of this Amendment as though made on and as of such date; and
(e) after giving effect to the waiver set forth in Section 3.2 of
this Amendment, no Event of Default or Unmatured Event of Default has
occurred and is continuing, or would result from the execution and delivery
of this Amendment or the consummation of the transactions contemplated
hereby; and
(f) except for the default under Section 18(c) of the BB Property
Lease Agreement, no default or event that could, with the passage of time,
the giving of notice or both, become a default exists under any material
agreement (whether or not relating to Indebtedness) to which the Company or
any Subsidiary is a party or by which the Company, any Subsidiary or any of
their respective properties is bound.
6
5. ACKNOWLEDGEMENT. The Banks and the Company each acknowledge that, as
amended hereby, the Credit Agreement, as amended by this Amendment, remains in
full force and effect with respect to the Company, the Banks and the Agent. The
Company confirms and acknowledges that it will continue to comply with the
covenants set out in the Credit Agreement, as amended hereby, and that its
representations and warranties set out in the Credit Agreement, as amended
hereby, are true and correct as of the date of this Amendment. The Company
further represents and warrants that (i) the execution, delivery and performance
of this Amendment by the Company is within its corporate powers and has been
duly authorized by all necessary corporate action, (ii) this Amendment has been
duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms (subject to limitations as to enforceability which might result
from bankruptcy, insolvency or other similar laws affecting creditors' rights
generally) and (iii) no Events of Default or events which, with the giving of
notice or passage of time, would be an Event of Default, exist under the Credit
Agreement.
6. COUNTERPARTS. This Amendment may be signed by the parties hereto on
different counterparts with the same effect as if the signatures hereto were on
the same instrument.
7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
BEST BUY CO., INC.
By Robert C. Fox
Its Senior Vice President - Finance
FIRST BANK NATIONAL ASSOCIATION
By
Its Senior Vice President
BANK ONE, DAYTON, NATIONAL ASSOCIATION
By John B. Middelberg
Its Vice President
THE BANK OF TOKYO-MITSUBISHI
LTD., CHICAGO BRANCH
By J.R. Arnold
Its Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By
Its
S-8
THE LONG TERM CREDIT BANK OF JAPAN, LTD.
By
Its
THE BANK OF NOVA SCOTIA
By J.H. Youssef
Its Senior Manager Finance & Administration
YASUDA TRUST AND BANKING CO., LTD.
By Joseph C. Meek
Its Deputy General Manager
THE SUMITOMO BANK, LIMITED
By John W. Howard, Jr Michael J. Phillippe
Its Vice President Vice President & Manager
MERCANTILE BANK OF ST. LOUIS NATIONAL
ASSOCIATION
By
Its
S-9
COMERICA BANK
By
Its
WELLS FARGO BANK
By
Its
BANK OF AMERICA ILLINOIS
By
Its
BANQUE NATIONALE DE PARIS
By
Its
THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH
By Seiichiro Ino
Its Vice President
THE SAKURA BANK, LIMITED
By Shunji Sakurai
Its Joint General Manager
S-10
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By Gordon P. Holtley
Its Vice President & Manager
UNITED STATES NATIONAL BANK OF OREGON
By Roger H. Weis
Its Vice President
S-11
EXHIBIT A
FORM OF
BORROWING BASE CERTIFICATE
Company: Best Buy Co., Inc. Date Report #
A. INVENTORY
1. Total Perpetual Inventory (FIFO) as of $
2. Less: Ineligible Inventory
a. Defective Center Inventory (Devo) $
b. Service Center Invetory $
c. Close-out Inventory $
3. Total (2 a + b + c) $
4. Eligible Inventory (Line 1 - Line 3) $
5. Less:
a. Secured Vendor Payables $
b. Floor Plan Liability $
c. Shrink Accrual $
6. Total (5 a + b + c) $
7. Eligible Inventory Net of Financing Obligations
and Shrink Accrual (Line 4 -Line 6) $
8. Eligible Loan Value @ 55% of Line 7 $
B. BORROWING BASE
1. Total Available Inventory
(Line A.8) $
2. Total Borrowing Base (71 43/100% of Line B.1) $
3. Unsecured Indebtedness under Section
5.13(g) $
-----
4. Conquest Reserve ($30,000,000) $30,000,000_
5. Net Borrowing Base $
- -----
C. LOAN STATUS
1. Total Outstandings (includes Letter of Credit Usage) $
2. Borrowing Base Excess (Deficiency)
(Line B.5 - Line C.1) $
D. OTHER ASSETS
1. General Ledger Cash Balance $
2. Total Accounts Receivable
(including Credit Card Receivables) $
We certify that to our best knowledge and belief the information
contained in this report is true and accurate.
BEST BUY CO., INC.
By
Its
EXHIBIT B
FORM OF
COMPLIANCE CERTIFICATE
TO: First Bank National Association, as Agent
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected chief financial officer of Best Buy Co.,
Inc. (the "Company"), a Minnesota corporation, or have been designated by such
chief financial officer to submit this Compliance Certificate on his behalf;
(2) I have reviewed the terms of the Credit Agreement dated as of
August 25, 1995, among the Company, the Banks party thereto, First Bank National
Association, as Agent and The Bank of Nova Scotia, Bank One, Dayton, National
Association, and Bank of America Illinois, as Co-Agents (as heretofore amended,
referred to herein and in the attachment hereto as the "Credit Agreement"), and
I have made, or have caused to be made under my supervision, a detailed review
of the transactions and conditions of the Company during the accounting period
covered by the attachment hereto;
(3) The examinations described in paragraph (2) did not disclose, and
I have no knowledge of, whether arising out of such examinations or otherwise,
the existence of any condition or event which constitutes an Event of Default or
Unmatured Event of Default (as such terms are defined in the Credit Agreement)
during or at the end of the accounting period covered by the attachment hereto
or as of the date of this Certificate, except as described below (or in a
separate attachment to this Certificate). The exceptions, listing in detail the
nature of the condition or event, the period during which it has existed and the
action which Company has taken, is taking or proposes to take with respect to
each such condition or event, are as follows:
The foregoing certifications, together with the computations set forth
in the attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this day of , 199_,
pursuant to Section 5.01(c) of the Credit Agreement.
BEST BUY CO., INC.
By
Its
ATTACHMENT
TO COMPLIANCE CERTIFICATE
AS OF , 19__, WHICH PERTAINS
TO THE PERIOD FROM , 19__,
TO , 19__
Terms defined in the Credit Agreement are used herein as defined
therein and Section references herein refer to the Sections of the Credit
Agreement.
1. MAXIMUM PERMISSIBLE SALE OR LEASE OF ASSETS:
(prescribed by Section 5.11(c))
(a) Maximum aggregate book value of assets
of the Company and Subsidiaries that
may be disposed of during such fiscal
year under Section 5.11(c): $
(b) Actual aggregate book value of all assets of
the Company and Subsidiaries disposed of
during the fiscal year encompassing the
period covered hereby: $
2. LIMITATION ON GENERAL CAPITAL EXPENDITURES:
(prescribed by Section 5.17)
(a) Maximum aggregate amount of General
Capital Expenditures permitted under
Section 5.17 for the fiscal year including
the period covered hereby: $150,000,000
(b) Actual General Capital Expenditures on a
year-to-date basis for the fiscal year
including the period covered
hereby: $
3. CONSOLIDATED NET WORTH:
(prescribed by Section 5.21)
(a) Minimum Tangible Net Worth
required under Section 5.21
for the period covered hereby: $
(b) Actual Tangible Net Worth: $
4. LEVERAGE RATIO:
(prescribed by Section 5.22; measured at fiscal
year-end only)
(a) (i) Indebtedness of the Company and
Subsidiaries: $
MINUS
(ii) Cash and Short-term Investments $
Total $
(b) Tangible Net Worth: $
(c) Maximum Leverage Ratio permitted
under Section 5.22: 2.00 to 1.00
(d) Actual ratio ((a) to (b)): to 1.00
---
5. INVENTORY TURNOVER RATIO:
(prescribed by Section 5.23)
(a) Minimum Inventory Turnover Ratio
required under Section 5.23 for
the Measurement Period covered hereby: 4.50 to 1.00
(b) Actual Inventory Turnover Ratio
for the Measurement Period covered
hereby:
(i) Cost of inventory sold during
Measurement Period: $
to
(ii) Average Cost of inventory held at
the end of each month during the
Measurement Period: $
Ratio of (i) to (ii): to 1.00
6. INTEREST COVERAGE RATIO:
(prescribed by Section 5.24)
(a) Minimum Interest Coverage Ratio
required under Section 5.24 for the
Measurement Period covered hereby: to 1.00/(1)
------
(b) Actual Interest Coverage Ratio for the
Measurement Period covered hereby:
Ratio of:
- ---------------------------
(1) 1.30 to 1.00 for Measurement Periods ending February, May and in August,
1997; 1.70 to 1.00 for all other periods
(i) Earnings Before Interest, Income
Taxes and Depreciation $
PLUS
Rental and Lease Expense $
PLUS
MIPS Distributions deducted
from Net Income but excluded
from Interest Expense $
------
Total: $
to
(ii) Rental and Lease Expense $
PLUS
Consolidated Net Interest Expense $
PLUS
MIPS Distributions excluded from
Interest Expense $
------
Total: $
Ratio of (i) to (ii): to 1.00
7. LIMITATION ON OWNED LAND AND BUILDINGS
(prescribed by Section 5.25)
(a) Maximum amount of owned land
and buildings permitted under
Section 5.25: $150,000,000
(b) Actual amount of owned land and
buildings as of measurement date: $