<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended August 26, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from _______________ to_________________
Commission File Number: 1-9595
BEST BUY CO., INC.
(Exact Name of Registrant as Specified in Charter)
Minnesota 41-0907483
(State of Incorporation) (IRS Employer Identification Number)
7075 Flying Cloud Drive 55344
Eden Prairie, Minnesota (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: 612/947-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
--- ---
At August 26, 1995, there were 42,670,147 shares of common stock, $.10 par
value, outstanding.
<PAGE>
BEST BUY CO., INC.
FORM 10-Q FOR THE QUARTER ENDED AUGUST 26, 1995
INDEX
Page
Part I. Financial Information
Item 1. Consolidated Financial Statements:
a. Consolidated balance sheets as of August 26, 1995, 3-4
February 25, 1995, and August 27, 1994
b. Consolidated statements of earnings for the three 5
and six months ended August 26, 1995, and
August 27, 1994
c. Consolidated statement of changes in shareholders' 6
equity for the six months ended August 26, 1995
d. Consolidated statements of cash flows for the 7
six months ended August 26, 1995, and
August 27, 1994
e. Notes to consolidated financial statements 8
Item 2. Management's Discussion and Analysis of Financial 9-11
Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
Part I - Financial Information
Item 1. Consolidated Financial Statements
BEST BUY CO., INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
($ in 000, except per share amounts)
<TABLE>
<CAPTION>
August 26, February 25, August 27,
1995 1995 1994
(Unaudited) (Unaudited)
---------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 43,693 $ 144,700 $ 47,427
Receivables 116,474 84,440 67,202
Recoverable costs from developed
properties 147,182 86,222 83,060
Merchandise inventories 1,269,060 907,677 863,500
Deferred income taxes 18,009 15,022 14,157
Prepaid expenses 7,035 2,606 5,958
---------- ----------- -----------
Total current assets 1,601,453 1,240,667 1,081,304
PROPERTY AND EQUIPMENT, at cost:
Land and buildings 15,414 13,524 13,524
Property under capital leases 28,435 27,096 21,902
Leasehold improvements 107,177 93,889 69,079
Furniture, fixtures, and equipment 229,006 191,084 145,449
---------- ----------- -----------
380,032 325,593 249,954
Less accumulated depreciation and
amortization 111,212 88,116 77,286
---------- ----------- -----------
Total property and equipment 268,820 237,477 172,668
OTHER ASSETS:
Deferred income taxes 11,058 9,223 8,105
Other assets 20,151 19,758 8,828
---------- ----------- -----------
Total other assets 31,209 28,981 16,933
---------- ----------- -----------
TOTAL ASSETS $ 1,901,482 $1,507,125 $1,270,905
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
BEST BUY CO., INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
($ in 000, except per share amounts)
<TABLE>
<CAPTION>
August 26, February 25, August 27,
1995 1995 1994
(unaudited) (unaudited)
----------- ----------- ------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Note payable, bank $ 150,000 $ 95,000
Obligations under financing arrangements 22,851 $ 81,755 23,713
Accounts payable 662,257 406,682 481,440
Accrued salaries and related expenses 28,801 23,785 19,181
Other accrued liabilities 99,140 65,757 47,524
Deferred service plan revenue
and warranty reserve 28,645 24,942 20,774
Accrued income taxes 2,641 14,979 3,583
Current portion of long-term debt 23,124 13,718 9,144
---------- ---------- ----------
Total current liabilities 1,017,459 631,618 700,359
Deferred Service Plan Revenue and Warranty
Reserve, Long-Term 49,558 42,138 31,887
Long-Term Debt 212,143 227,247 211,013
Convertible Preferred Securities of Subsidiary 230,000 230,000
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value;
authorized 400,000 shares; none issued
Common stock, $.10 par value; authorized
120,000,000 shares; issued and
outstanding 42,670,000, 42,216,000,
and 42,067,000 shares, respectively 4,267 4,221 4,207
Additional paid-in capital 234,750 228,982 226,330
Retained earnings 153,305 142,919 97,109
---------- ---------- ----------
Total shareholders' equity 392,322 376,122 327,646
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,901,482 $1,507,125 $1,270,905
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in 000, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- -------------------------------
August 26, August 27, August 26, August 27,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $1,437,911 $ 933,172 $2,712,607 $1,782,575
Cost of goods sold 1,241,290 800,988 2,333,698 1,531,439
---------- ---------- ---------- ----------
Gross profit 196,621 132,184 378,909 251,136
Selling, general and
administrative expenses 177,418 114,525 343,343 221,791
---------- ---------- ---------- ----------
Income from operations 19,203 17,659 35,566 29,345
Interest expense, net 9,726 5,099 18,342 9,775
---------- ---------- ---------- ----------
Net earnings before income taxes 9,477 12,560 17,224 19,570
Income taxes 3,763 4,960 6,838 7,729
---------- ---------- ---------- ----------
Net earnings $ 5,714 $ 7,600 $ 10,386 $ 11,841
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings per share $ .13 $ .18 $ .24 $ .27
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares
outstanding (000) 43,623 43,208 43,622 43,226
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BEST BUY CO., INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED AUGUST 26, 1995
($ in 000)
(unaudited)
<TABLE>
<CAPTION>
Additional
paid in Retained
Common stock capital earnings
------------- ---------- ---------
<S> <C> <C> <C>
Balance, February 25, 1995 $4,211 $228,982 $142,919
Stock options exercised 56 5,768
Net earnings, six months ended
August 26, 1995 10,386
------- -------- --------
Balance, August 26, 1995 $4,267 $234,750 $153,305
------- -------- --------
------- -------- --------
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in 000)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
August 26, August 27,
1995 1994
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 10,386 $ 11,841
Charges to earnings not affecting cash:
Depreciation and amortization 25,971 16,628
-------- --------
36,357 28,469
Changes in operating assets and liabilities:
Receivables (32,034) (14,258)
Merchandise inventories (361,383) (225,550)
Prepaid income taxes and expenses (9,251) (7,298)
Accounts payable 255,575 187,380
Accrued salaries and related expenses 5,016 (138)
Other current liabilities 24,546 4,501
Deferred service plan revenue and warranty
reserve 11,123 5,305
-------- --------
Total cash used in operating activities (70,051) (21,589)
INVESTING ACTIVITIES:
Additions to property and equipment (55,682) (44,524)
Increase in recoverable costs from developed properties (60,960) (50,054)
Increase in other assets (393) (747)
-------- --------
Total cash used in investing activities (117,035) (95,325)
FINANCING ACTIVITIES:
Common stock issued 2,314 1,519
Borrowings on revolving credit line, net 150,000 95,000
Repayments of long-term debt (7,331) (4,607)
(Decrease)increase in obligations under
financing arrangements (58,904) 12,557
-------- --------
Total cash provided by financing activities 86,079 104,469
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (101,007) (12,445)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 144,700 59,872
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 43,693 $ 47,427
-------- --------
-------- --------
Amounts in this statement are presented on a cash basis and therefore may differ from those shown in other
sections of this quarterly report.
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 18,805 $ 9,423
Income taxes $ 20,165 $ 15,093
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
BEST BUY CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The consolidated balance sheets as of August 26, 1995, and August 27, 1994,
the related consolidated statements of earnings for the three and six
months ended August 26, 1995, and August 27, 1994, the consolidated
statements of cash flows for the six months ended August 26, 1995 and
August 27, 1994, and the consolidated statement of changes in shareholders'
equity for the six months ended August 26, 1995, are unaudited; in the
opinion of management, all adjustments necessary for a fair presentation of
such financial statements have been included and were normal and recurring
in nature. Interim results are not necessarily indicative of results for a
full year. The interim financial statements and notes thereto should be
read in conjunction with the financial statements and notes included in the
Company's Annual Report to Shareholders for the fiscal year ended
February 25, 1995.
2. RECLASSIFICATION:
Certain prior year amounts have been reclassified to conform to current
year presentation.
3. NOTE PAYABLE, BANK:
On August 25, 1995 the Company expanded and extended its bank line of
credit to allow for seasonal borrowings up to $550 million with a maturity
of June, 1998.
4. INCOME TAXES:
Income taxes are provided on an interim basis based upon management's
estimate of the annual effective tax rate.
8
<PAGE>
BEST BUY CO., INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Earnings for the second quarter of fiscal 1996 were $5,714,000, or $.13 per
share, compared to $7,600,000, or $.18 per share, for the same period last
year. For the six month period, earnings were $10,386,000, or $.24 per share,
compared to $11,841,000, or $.27 per share, last year. The impact of higher
revenues on earnings compared to the prior year was reduced by higher
interest expense and, in the second quarter, a lower gross profit margin.
Revenues of $1.438 billion in the second quarter represent a 54% increase
compared to the same period last year. For the year, revenues of $2.713
billion were up 52% over the prior year. The increased revenues are the
result of opening 56 stores over the last twelve months as well as a
comparable store sales increase of 7% for the quarter and the six month
period. These comparable store sales increases are on top of comparable
sales increases of 18% and 26% for the quarter and the six months,
respectively, last year. The comparable store sales percentage increases
this year are more in line with retailing in general and are the result of a
slower economy. During the second quarter, the Company opened 11 stores
including three in North Carolina, two in the Los Angeles area, and two in
Ohio. In addition, the Company also added one store in each of the following
states: South Carolina, Missouri, Michigan, and Texas. As of August 26, 1995,
the Company operated 224 stores, compared to 168 stores as of August 27,
1994. Office supplies were introduced late in the second quarter this year as
a logical extension of the home office product category although these
products are not expected to have a large impact on revenues during this
fiscal year. Retail store sales mix by major product category for the second
quarter and six month period is as follows:
<TABLE>
<CAPTION>
Second Quarter Ended Six Month Period Ended
---------------------- ----------------------
8/26/95 8/27/94 8/26/95 8/27/94
------- ------- ------- --------
<S> <C> <C> <C> <C>
Home Office 40% 33% 40% 35%
Consumer Electronics:
Audio 13% 14% 13% 14%
Video 17% 21% 18% 21%
Appliances 10% 11% 9% 10%
Entertainment Software 15% 14% 15% 14%
Other 5% 7% 5% 6%
---- ---- ---- ----
Total 100% 100% 100% 100%
---- ---- ----- ----
---- ---- ----- ----
</TABLE>
9
<PAGE>
Gross profit margins were 13.7% and 14.0% for the quarter and the six month
period, respectively, compared to 14.2% and 14.1% for the same periods,
respectively, last year. The continued pressure on margins from personal
computers, along with their increasing percent of total Company sales impacted
the overall Company margin in the second quarter and for the year. The market
for personal computers continues to be highly promotional with retailers
offering, at times, free peripheral equipment to generate sales and store
traffic to maintain market share.
Selling, general and administrative expenses remained relatively constant as a
percent of sales at 12.3% for the second quarter and 12.7% for the year,
compared to 12.3% and 12.4% for the same periods, respectively, last year. The
unchanged expense ratio in the second quarter and reduction in leverage for the
six month period were mainly the result of costs associated with the new, more
expensive markets entered and larger stores opened in the last year. Additional
stores opening in some markets not fully developed, such as Los Angeles and
Baltimore/Washington D.C., and seasonally higher revenues are expected to
improve the operating expense ratio in the second half of this year.
Extended service plan revenues represented less than 1% of revenues for all
periods presented. Profit earned on extended service plans contributed $4.3
million and $8.5 million to the Company's operating income in the second quarter
and six month period, respectively. Profit earned on extended service plans was
$3.7 million and $7.4 million for the second quarter and six month period,
respectively, last year. This profit is before the allocation of any selling,
general or administrative expenses, except for direct selling expenses.
Interest expense was $9.7 million in the second quarter compared to $5.1 million
for the second quarter last year and $18.3 million for the six month period
compared to $9.8 million for the same period last year. The increase in
interest is mainly due to interest related to $230 million of convertible
preferred securities issued in November 1994.
Income taxes for the first half of this year were 39.7% of pre-tax income
compared to 38.7% for fiscal 1995. The increased tax rate is due primarily to
the elimination of the targeted jobs tax credit, which expired December 31,
1994.
FINANCIAL CONDITION
Working capital at August 26, 1995 was $584 million compared to $609 million at
February 25, 1995. Inventory increased $361 million principally supporting
additional stores, a seasonally higher sales rate, and higher levels of
inventory in existing stores associated with the introduction of office supplies
and "Windows `95" products. Higher credit card sales resulting from promotional
activity in the last few days of the period account for the majority of the
increase in receivables.
10
<PAGE>
Recoverable costs from developed properties increased $61 million from the end
of the prior fiscal year. The increase is related to development costs for
fiscal 1996 stores and the development costs of a new distribution center in
Ohio. The Company has completed the sale/leaseback of nine stores to date
generating nearly $50 million in proceeds. In addition, the Company has
engaged an investment bank to market a multiple property sale/leaseback which
is expected to generate approximately $90 million by the end of the year. The
remainder of the recoverable store development costs are expected to be
recovered in single store sale/leaseback transactions by the end of the fiscal
year.
During the second quarter, the Company opened eleven stores bringing the
total store openings through the first half of the year to 20. In addition,
the Company relocated or remodeled five stores. The Company expects to open
another 27 stores and remodel or relocate an additional 11 stores during the
third quarter. Third quarter store openings will include additional stores
in Los Angeles and Baltimore/Washington D.C. and entry into the Cincinnati
market.
In August, the Company completed an expansion and extension of its bank
revolving credit agreement which increased the seasonally available line to $550
million and extended the maturity to June 1998. The agreement contains a "clean
down" period of 45 days during which the borrowings cannot exceed $50 million.
Management believes that the bank revolving line of credit, and inventory credit
facilities, combined with long term real estate development financing and cash
generated from operations will be sufficient to meet the Company's financing
needs for the current fiscal year.
11
<PAGE>
BEST BUY CO., INC.
PART II - Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Regular Meeting of the Shareholders of the Company was held June 21,
1995. The following individuals were elected at the meeting as Directors of the
Company to serve until the 1997 Regular Meeting of Shareholders. Shares voted
in favor of these directors and shares withheld were as follows:
Culver Davis, Jr.
Shares For 39,119,680
Shares Withheld 120,293
Elliot S. Kaplan
Shares For 39,117,915
Shares Withheld 122,058
Richard M. Schulze
Shares For 39,119,265
Shares Withheld 120,708
Other matters voted on and the results of voting were as follows:
Shareholders ratified the appointment by the Board of Directors of Ernst &
Young, LLP as the corporation's independent auditor for the fiscal year
beginning February 26, 1995, with shares voted as follows:
Shares For 37,703,676
Shares Against 14,797
Shares Abstaining 20,765
Shareholders approved an amendment to the Company's bonus program for senior
officers, with shares voted as follows:
Shares For 37,810,257
Shares Against 809,458
Shares Abstaining 583,258
12
<PAGE>
BEST BUY CO., INC.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. Exhibits: Method of Filing
----------------
4.1 Amended and Restated Credit Agreement Filed herewith
dated August 25, 1995 between
Best Buy Co., Inc. and First Bank
National Association
11.1 Computation of net earnings
per common share Filed herewith
27.1 Financial Data Schedule Filed herewith
b. Reports on Form 8-K:
No reports on Form 8-K were filed during the period.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BEST BUY CO., INC.
(Registrant)
Date: October 10, 1995 By: /s/ ALLEN U. LENZMEIER
-------------------------------------
Allen U. Lenzmeier, Executive Vice
President & Chief Financial Officer
(principal financial officer)
By: /s/ ROBERT C. FOX
-------------------------------------
Robert C. Fox, Senior Vice President-
Finance & Treasurer (principal
accounting officer)
14
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Accounting Terms and Calculations . . . . . . . . . . . . . 17
Section 1.03 Computation of Time Periods . . . . . . . . . . . . . . . . 17
Section 1.04 Principles of Construction. . . . . . . . . . . . . . . . . 17
ARTICLE II
TERMS OF THE CREDIT FACILITY
Section 2.01 Lending Facilities. . . . . . . . . . . . . . . . . . . . . 18
Section 2.02 Procedure for Loans . . . . . . . . . . . . . . . . . . . . 18
Section 2.03 Refinancing of Swing-Line Loans.. . . . . . . . . . . . . . 20
Section 2.04 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.05 Conversions and Continuations . . . . . . . . . . . . . . . 22
Section 2.06 Interest Rates, Interest Payments and Default Interest. . . 23
Section 2.07. Repayment; Mandatory Prepayments; Deposits Into
Holding Account . . . . . . . . . . . . . . . . . . . . . 23
Section 2.08 Optional Prepayments. . . . . . . . . . . . . . . . . . . . 24
Section 2.09 Letters of Credit . . . . . . . . . . . . . . . . . . . . . 25
Section 2.10 Procedures for Letters of Credit. . . . . . . . . . . . . . 25
Section 2.11 Terms of Letters of Credit. . . . . . . . . . . . . . . . . 25
Section 2.12 Agreement to Repay Letter of Credit Draws . . . . . . . . . 26
Section 2.13 Loans to Cover Unpaid Draws . . . . . . . . . . . . . . . . 26
-i-
<PAGE>
Section 2.14 Obligations Absolute. . . . . . . . . . . . . . . . . . . . 26
Section 2.15 Optional Reduction or Termination of Commitments. . . . . . 28
Section 2.16 Designation of Available Amount of Seasonal
Commitments . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.17 Agent's Fees. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.18 Facility Fees and Commitment Fees . . . . . . . . . . . . . 29
Section 2.19 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . 30
Section 2.20 Computation . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.21 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.22 Use of Loan Proceeds. . . . . . . . . . . . . . . . . . . . 31
Section 2.23 Interest Rate Not Ascertainable, Etc. . . . . . . . . . . . 31
Section 2.24 Increased Cost. . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.25 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.26 Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . 33
Section 2.27 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.28 Discretion of Banks as to Manner of Funding . . . . . . . . 34
Section 2.29 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 2.30 Early Termination of Commitments. . . . . . . . . . . . . . 34
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01 Conditions Precedent to Initial Loan. . . . . . . . . . . . 35
Section 3.02 Conditions Precedent to Each Loan . . . . . . . . . . . . . 36
-ii-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Organization, Standing, Etc . . . . . . . . . . . . . . . . 37
Section 4.02 Authorization and Validity. . . . . . . . . . . . . . . . . 37
Section 4.03 Compliance With Law and Other Agreements. . . . . . . . . . 37
Section 4.04 Governmental Consent. . . . . . . . . . . . . . . . . . . . 38
Section 4.05 Financial Statements and No Material Adverse Change . . . . 38
Section 4.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.08 Environmental, Health and Safety Laws . . . . . . . . . . . 39
Section 4.09 Federal Reserve Regulations . . . . . . . . . . . . . . . . 39
Section 4.10 Title to Property; Possession Under Leases. . . . . . . . . 39
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.12 Trademarks, Patents . . . . . . . . . . . . . . . . . . . . 40
Section 4.13 Business and Properties of Company and its Subsidiaries . . 40
Section 4.14 Securities Laws . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.15 Investment Company Act. . . . . . . . . . . . . . . . . . . 41
Section 4.16 Public Utility Holding Company Act. . . . . . . . . . . . . 41
Section 4.17 Retirement Benefits . . . . . . . . . . . . . . . . . . . . 41
Section 4.18 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.19 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.20 Senior Indebtedness . . . . . . . . . . . . . . . . . . . . 41
Section 4.21 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . 41
-iii-
<PAGE>
ARTICLE V
COVENANTS
Section 5.01 Financial Statements. . . . . . . . . . . . . . . . . . . . 42
Section 5.02 Corporate Existence . . . . . . . . . . . . . . . . . . . . 43
Section 5.03 Compliance with Laws, etc . . . . . . . . . . . . . . . . . 43
Section 5.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.05 Payment of Indebtedness, Taxes and Claims . . . . . . . . . 44
Section 5.06 Books and Records; Inspections; Audits. . . . . . . . . . . 44
Section 5.07 Maintenance of Properties . . . . . . . . . . . . . . . . . 45
Section 5.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.09 Litigation and Other Notices. . . . . . . . . . . . . . . . 45
Section 5.10 Supplemental Disclosure . . . . . . . . . . . . . . . . . . 46
Section 5.11 Restrictions on Fundamental Changes . . . . . . . . . . . . 46
Section 5.12 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.13 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.14 Investments . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.15 Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.16 Restricted Payments . . . . . . . . . . . . . . . . . . . . 50
Section 5.17 General Capital Expenditures. . . . . . . . . . . . . . . . 50
Section 5.18 Federal Reserve Regulations . . . . . . . . . . . . . . . . 50
Section 5.19 Environmental Matters . . . . . . . . . . . . . . . . . . . 51
Section 5.20 Payment of Subordinated Indebtedness. . . . . . . . . . . . 51
-iv-
<PAGE>
Section 5.21 Minimum Tangible Net Worth. . . . . . . . . . . . . . . . . 51
Section 5.22 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.23 Inventory Turnover Ratio. . . . . . . . . . . . . . . . . . 51
Section 5.24 Interest Coverage Ratio.. . . . . . . . . . . . . . . . . . 51
Section 5.25 Owned Land and Buildings. . . . . . . . . . . . . . . . . . 51
Section 5.26 Negative Pledges. . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . 52
Section 6.02 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VII
THE AGENT
Section 7.01 Appointment and Authorization . . . . . . . . . . . . . . . 56
Section 7.02 Note Holders. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.03 Consultation With Counsel . . . . . . . . . . . . . . . . . 56
Section 7.04 Loan Documents. . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.05 First Bank and Affiliates . . . . . . . . . . . . . . . . . 57
Section 7.06 Action by Agent . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.07 Credit Analysis . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.08 Notices of Event of Default, Etc. . . . . . . . . . . . . . 57
Section 7.09 Indemnification . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.10 Payments and Collections. . . . . . . . . . . . . . . . . . 58
-v-
<PAGE>
Section 7.11 Sharing of Payments . . . . . . . . . . . . . . . . . . . . 59
Section 7.12 Advice to Banks . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.13 Successor Agent . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Amendments and Waivers; No Waiver of Rights and Remedies. . 60
Section 8.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.03 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . 61
Section 8.04 Survival of Agreement . . . . . . . . . . . . . . . . . . . 61
Section 8.05 Binding Effect; Assignments and Participations. . . . . . . 62
Section 8.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 8.07 Severability of Provisions. . . . . . . . . . . . . . . . . 64
Section 8.08 Governing Law and Construction. . . . . . . . . . . . . . . 64
Section 8.09 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . 64
Section 8.10 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 8.11 Entire Agreement; No Third Party Beneficiaries. . . . . . . 65
Section 8.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 65
Section 8.13 Company Acknowledgements. . . . . . . . . . . . . . . . . . 65
Section 8.14 Highest Lawful Rate . . . . . . . . . . . . . . . . . . . . 65
Section 8.15 Exiting Banks.. . . . . . . . . . . . . . . . . . . . . . . 65
-vi-
<PAGE>
EXHIBITS
A Form of Borrowing Base Certificate
B Form of Compliance Certificate
C Form of Notice of Borrowing, Continuation or Conversion
D Form of Revolving Note
E Form of Swing-Line Note
F Matters to be Covered by Opinion of Counsel to the Company
G Form of Operating Subsidiary Guaranty
H Form of Acknowledgement of Exiting Bank
SCHEDULES
1.01(a) Commitment Amounts
1.01(b) Eligible Inventory (Product Classes)
2.09 Outstanding Letters of Credit
2.18(a) Facility Fees
4.19 Subsidiaries
5.12 Existing Liens
5.13 Existing Indebtedness
5.14(a) Existing Investments
5.14(c) Investment Objectives and Policies
-vii-
<PAGE>
DRAFT 8/23/95
AMENDED AND RESTATED
CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of August 25, 1995 by
and between BEST BUY CO., INC. (the "Company"), a Minnesota corporation, the
lenders from time to time party hereto (such lenders being hereinafter sometimes
referred to collectively as the "Banks" and individually as a "Bank"), FIRST
BANK NATIONAL ASSOCIATION, as agent for the Banks (in such capacity, the
"Agent") and THE BANK OF NOVA SCOTIA, BANK ONE, DAYTON, NATIONAL ASSOCIATION,
and BANK OF AMERICA ILLINOIS, as co-agents for the Banks (in such capacity, the
Co-Agents).
RECITALS
A. The Company, certain of the Banks (the "Existing Banks"), Credit
Lyonnais Chicago Branch and Trust Company Bank (the "Exiting Banks") and the
Agent are parties to a Credit Agreement dated as of July 29, 1994, as amended by
a First Amendment to Credit Agreement dated as of October 5, 1994, a Second
Amendment to Credit Agreement dated as of October 26, 1994, a Third Amendment to
Credit Agreement dated as of June 28, 1995 and a Fourth Amendment to Credit
Agreement dated as of July 20, 1995 (as so amended, the "Existing Credit
Agreement").
B. The Company has requested that the Banks increase the revolving
credit facility provided for in the Existing Credit Agreement to $550,000,000,
to add the Banks (other than the Existing Banks) as parties to the Existing
Credit Agreement, to delete the Exiting Banks as parties to the Credit
Agreement, and to amend and restate the Existing Credit Agreement in certain
other respects.
C. The Banks have indicated that they are prepared to increase such
revolving credit facility and amend and restate the Existing Credit Agreement on
the terms and subject to the conditions hereinafter set forth.
Accordingly, the parties hereto hereby agree that the Existing Credit
Agreement is hereby amended and restated to read in full as follows:
ARTICLE I
DEFINITIONS
Section 1.01 CERTAIN DEFINED TERMS. As used herein and, unless
otherwise defined therein, in each Exhibit and Schedule, the following terms
shall
-1-
<PAGE>
have the following respective meanings (such meanings to be equally applicable
to both the singular and plural form of the terms defined, as the context may
require):
"ADJUSTED EURODOLLAR RATE": with respect to each Interest Period
applicable to a Eurodollar Advance, the rate (rounded upward, if necessary, to
the next higher one hundredth of one percent) determined by dividing the
Eurodollar Rate for such Interest Period by 1.00 minus the Eurodollar Reserve
Percentage.
"ADVANCE": a Reference Rate Advance or a Eurodollar Advance.
"AFFILIATE": when used with respect to a specified Person, another
Person that directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with the Person specified. For
purposes hereof, "control" shall have the meaning given such term in Rule 12b-2
under the Securities Exchange Act of 1934, and "controlled" shall have a
correlative meaning.
"AGGREGATE AVAILABLE AMOUNT" as of any date of determination, the sum
of the Available Amounts of all of the Banks.
"AGGREGATE BASE COMMITMENT AMOUNT": as of any date of determination,
the sum of the Base Commitment Amounts of all of the Banks.
"AGGREGATE COMMITMENT AMOUNT": as of any date of determination, the
sum of the Commitment Amounts of all of the Banks.
"AGGREGATE DESIGNATED AMOUNT": as of any date of determination, the
sum of the Designated Amounts of all the Banks.
"AGGREGATE SEASONAL COMMITMENT AMOUNT": as of any date of
determination, the sum of the Seasonal Commitment Amounts of all of the Banks.
"AGREEMENT": this Amended and Restated Credit Agreement, as amended,
supplemented, restated or otherwise modified and in effect from time to time.
"AGREEMENT FOR LEASE": the Agreement for Lease dated as of August 25,
1994 between Conquest and BBC, as the same may be amended, supplemented,
restated or otherwise modified and in effect from time to time.
"APPLICABLE MARGIN": with respect to:
Swing Line Loans, -0.25%;
-2-
<PAGE>
Reference Rate Advances, 0%; and
Eurodollar Advances, +1.00%.
The Applicable Margin for Eurodollar Advances shall be reduced by 0.25% for all
Interest Periods beginning after the time the Company or any senior unsecured
public debt issued by the Company that is not credit-enhanced has a rating of
BBB- or better from Standard & Poor's Corporation or Baa3 or better from Moody's
Investors Services, Inc. Such reduction shall be effective for Interest Periods
beginning after the date the Agent receives evidence satisfactory to it of such
rating, and shall not apply to Interest Periods beginning after the time the
Company or its senior unsecured public debt that is not credit-enhanced no
longer has such rating.
"AVAILABLE AMOUNT": as to any Bank, the sum of its Base Commitment
Amount and its Designated Amount.
"BASE COMMITMENT AMOUNT": as to any Bank, the amount set forth
opposite such Bank's name as its "Base Commitment Amount" in Schedule 1.01(a),
as the same may be reduced from time to time pursuant to Section 2.15.
"BBC": BBC Property Co., a Minnesota corporation.
"BEST BUY CAPITAL": Best Buy Capital, L.P., a Delaware limited
partnership.
"BOARD": the Board of Governors of the Federal Reserve System of the
United States.
"BORROWING BASE": as of a date of determination, 71 43/100% of the
sum of :
(a) 85% of the amount of Eligible Receivables;
(b) 55% of the lower of: (i) cost (as determined on a first-in,
first-out basis) of Eligible Inventory LESS (A) the amount of Indebtedness
of the Company or any Subsidiary secured by Liens on inventory and (B) the
amount accrued for losses due to missing inventory (shrink accrual) or (ii)
market value of Eligible Inventory LESS (A) the amount of Indebtedness of
the Company or any Subsidiary secured by Liens on inventory and (B) the
amount accrued for losses due to missing inventory (shrink accrual); and
(c) 40% of the lower of: (i) cost (as determined on a first-in,
first-out basis) of Eligible Close-Out Inventory LESS amounts accrued for
price reduction
-3-
<PAGE>
on inventory (markdown reserve) or (ii) market value of Eligible Close-Out
Inventory LESS amounts accrued for price reduction on inventory (markdown
reserve),
MINUS (i) the amount of any unsecured Indebtedness incurred by the Company
pursuant to Section 5.13(g) and (ii) $30,000,000.
"BORROWING BASE CERTIFICATE": a certificate in the form of Exhibit A.
"BORROWING BASE DEFICIENCY": at the time of any determination, the
amount by which the Total Outstandings exceed the Borrowing Base.
"BORROWING DATE": each Business Day or Eurodollar Business Day on
which the Banks are to make Loans to the Company pursuant to Section 2.01(a), or
First Bank is to make a Swing-Line Loan to the Company pursuant to Section
2.01(b).
"BUSINESS DAY": any day (other than a Saturday, Sunday or legal
holiday) on which banks are permitted to be open for business in all of the
cities where any Bank has its principal office in the United States of America.
"CAPITAL EXPENDITURES": with respect to any Person for any specified
period, the aggregate of all gross expenditures during such period for any fixed
assets, or for improvements, replacements, substitutions or additions therefor
or thereto, which are reflected as additions to property and equipment on
statements of cash flows of such Person in accordance with GAAP.
"CODE": the Internal Revenue Code of 1986, as amended or any
successor thereto.
"COMMITMENT": as to any Bank, the obligation of such Bank to make
Loans pursuant to Sections 2.01(a) and 2.13 and, as to First Bank, its
obligation to issue Letters of Credit pursuant to Section 2.09.
"COMMITMENT AMOUNT": as to any Bank, the amount set opposite such
Bank's name as its "Total Commitment Amount" in Schedule 1.01(a), as the same
may be reduced from time to time pursuant to Section 2.15.
"COMMITMENT FEE": as such term is defined in Section 2.18(b).
"COMPLIANCE CERTIFICATE": a certificate in the form of Exhibit B.
"CONQUEST": Conquest Funding, Limited Partnership, a Delaware limited
partnership.
-4-
<PAGE>
"DESIGNATED AMOUNT": with respect to any Bank for any month from July
1 of any year to January 1 of the following year, 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.
"DOCUMENTARY LETTER OF CREDIT": a letter of credit which requires
that the drafts thereunder be accompanied by a document of title covering or
securing title to the goods acquired with the proceeds of such drafts.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE": any trade or business (whether or not
incorporated) that is a member of a group of which the Company is a member and
which is treated as a single employer under Section 414 of the Code.
"EARNINGS BEFORE INTEREST, INCOME TAXES AND DEPRECIATION: for any
period of determination, the consolidated net income of the Company and its
Subsidiaries before deductions for income taxes, net interest expense, and
provisions for depreciation and amortization of goodwill and intangibles
accounted for in calculating consolidated net income, all as determined in
accordance with GAAP, excluding therefrom (a) nonoperating gains (including,
without limitation, extraordinary or unusual gains, gains from discontinuance of
operations, gains arising from the sale of assets and other nonrecurring gains)
of the Company and its Subsidiaries during the applicable period and (b) similar
nonoperating losses (including, without limitation, losses arising from the sale
of assets and other nonrecurring losses) of the Company and its Subsidiaries
during such period.
"EFFECTIVE DATE": the date on or after the execution and delivery of
this Agreement by the Company, the Banks and the Agent on which all of the
conditions precedent set forth in Section 3.01 shall have been satisfied or
waived in writing by the Banks.
"ELIGIBLE CLOSE-OUT INVENTORY": all inventory held by the Company or
any Operating Subsidiary for retail sale in the ordinary course of business that
would constitute Eligible Inventory except for its failure to comply with the
requirements of subsection (h) of the definition of Eligible Inventory.
"ELIGIBLE INVENTORY": all inventory held by the Company or any
Operating Subsidiary for retail sale in the ordinary course of business of the
product classes listed on Schedule 1.01 (b) hereto or otherwise approved by the
Agent and which:
-5-
<PAGE>
(a) is free and clear of all Liens except such as are permitted
by Section 5.12 (f);
(b) is not so identified to a contract to sell that it is
evidenced by an account receivable;
(c) is of good and merchantable quality free from any defects
which would affect the market value thereof;
(d) is not, as reasonably determined by the Agent, nonsalable
in the ordinary course of the Company's or such Operating Subsidiary's
business;
(e) is insured against loss or damage in accordance with the
provisions of the Credit Agreement;
(f) is not subject to or covered by a negotiable document of
title, including, without limitation, negotiable warehouse receipts and
negotiable bills of lading;
(g) is not stored in a public warehouse or held by any Person
as bailee, unless the terms of such storage or bailment are satisfactory to
the Agent;
(h) is not a product that has been discontinued by the
manufacturer or by the vendor from which the Company or such Operating
Subsidiary purchased such inventory (close-out inventory); and
(i) is not being held for repair at the Company's service
center (service center inventory) or being held for return to the vendor
from which the Company or such Operating Subsidiary purchased it (defective
center inventory (Devo));
PROVIDED, that the Agent shall, notwithstanding the foregoing, have the right,
in the reasonable exercise of its discretion following consultation with the
Company, to establish reserves against the aggregate amount of Eligible
Inventory.
"ELIGIBLE RECEIVABLES": all rights of the Company or any Operating
Subsidiary to receive payment from the issuers of MasterCard, Visa, American
Express and Discover credit or charge cards, and from any bank issuing
proprietary credit or charge cards carrying the name of the Company, for goods
sold by the Company or such Operating Subsidiary in the ordinary course of its
business in the United States, net of amounts payable to or for the account of
such issuers or the
-6-
<PAGE>
holders of such cards or that may otherwise be deducted from the amount payable
to the Company or such Operating Subsidiary in respect of such rights to payment
(e.g., refunds, chargebacks, fees for merchant processing), which:
(a) are free and clear of all Liens except such as arise in
such rights to payment as proceeds of inventory subject to Liens permitted
by Section 5.12(f); and
(b) are payable on terms typical for the payments to merchants
of amounts due for bank credit card sales.
"EURODOLLAR ADVANCE": a portion of the Loans, other than Swing-Line
Loans, with respect to which the interest rate is determined by reference to the
Adjusted Eurodollar Rate.
"EURODOLLAR BUSINESS DAY": a Business Day which is also a day for
trading by and between banks in United States dollar deposits in the interbank
eurodollar market and a day on which banks are open for business in New York,
New York.
"EURODOLLAR RATE": with respect to each Interest Period applicable to
a Eurodollar Advance, the rate per annum at which United States dollar deposits
are offered to the Agent in the interbank Eurodollar market two Eurodollar
Business Days prior to the first day of such Interest Period for delivery in
Immediately Available Funds on the first day of such Interest Period in an
amount approximately equal to the Advance made by the Agent to which such
Interest Period is to apply and for a period equal to such Interest Period, as
determined by the Agent; PROVIDED, that in lieu of determining the rate in the
foregoing manner, the Agent may substitute the per annum rate for United States
dollars displayed on the Reuters screen, LIBO page, at 10:00 A.M. (Minneapolis
time) on such Eurodollar Business Day.
"EURODOLLAR RESERVE PERCENTAGE": as of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System, with deposits comparable in amount to those held by the Agent,
in respect of "Eurocurrency Liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate of
Eurodollar Advances is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of a Bank to
United States residents). The rate of interest applicable to any outstanding
Eurodollar Advances shall be adjusted automatically on and as of the effective
date of any change in the Eurodollar Reserve Percentage.
-7-
<PAGE>
"EVENT OF DEFAULT": any event described in Section 6.01.
"FEDERAL FUNDS RATE": for any date of determination, the effective
rate charged to the Agent for overnight Federal funds transactions with member
banks of the Federal Reserve System.
"FIRST BANK": First Bank National Association, a national banking
association, in its individual capacity.
"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 the Signing Date.
"GENERAL CAPITAL EXPENDITURES": Capital Expenditures of the Company
or any Subsidiary other than Real Estate Capital Expenditures.
"GOVERNMENTAL AUTHORITY": any federal, state, local or foreign court
or governmental agency, authority, department, board, instrumentality or
regulatory body.
"GUARANTEE": with respect to any Person at the time of any
determination, without duplication, any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or otherwise: (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor, (b)
to purchase property, securities, or services for the purpose of assuring the
owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain
working capital, equity capital, or other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or
otherwise to protect the owner thereof against loss in respect thereof, or (d)
entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner against
loss in respect thereof; PROVIDED, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"HOLDING ACCOUNT": an interest-bearing account established by the
Agent, which shall be under the Agent's sole dominion and control, for the
benefit of First Bank, as the issuer of the Letters of Credit, and the Banks,
into which the Company shall, as required hereunder, deposit funds, and from
which the Agent
-8-
<PAGE>
may disburse funds, to pay the obligations of the Company under Section 2.12 or
Section 6.02 to reimburse First Bank for any amount drawn on any Letter of
Credit, and to pay any other obligation of the Company to the Banks arising in
connection with any Letter of Credit.
"IMMEDIATELY AVAILABLE FUNDS": funds with good value on the day and
in the city in which payment is received.
"INDEBTEDNESS": with respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in conformity with GAAP should be classified upon the balance
sheet of such Person as liabilities, but in any event shall include: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, (f) all obligations of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all capitalized lease obligations of such
Person, (h) all obligations of such Person in respect of interest rate
protection agreements, (i) all obligations of such Person, actual or contingent,
as an account party in respect of letters of credit or bankers' acceptances, (j)
all obligations of any partnership or joint venture as to which such Person is
or may become personally liable, and (k) all Guarantees by such Person of
Indebtedness of others.
"INTEREST COVERAGE RATIO": for any period of determination, the ratio
of (i) the sum of (A) Earnings Before Interest, Income Taxes and Depreciation,
(B) Rental and Lease Expense, and (C) the amount, if any, by which distributions
scheduled to be made (whether or not actually made) by Best Buy Capital in
respect of the MIPS are deducted in determining the consolidated net income of
the Company and are not reflected in the consolidated net interest expense of
the Company, as set forth in the financial statements of the Company delivered
hereunder, to (ii) the sum of (x) Rental and Lease Expense, (y) consolidated net
interest expense of the Company and its Subsidiaries, as included in the
Company's financial statements referred to in Section 4.05 and 5.01, and (z) the
amount, if any, by which distributions scheduled to be made (whether or not
actually made) by Best Buy Capital in respect of the MIPS are not reflected in
the consolidated net interest expense of the Company, as set forth in the
financial statements delivered hereunder.
"INTEREST PERIOD": with respect to each Eurodollar Advance, the
period commencing on the date of such Advance and ending seven, fourteen or
twenty-one days or one, two, three or six months thereafter, as the Company may
elect in the
-9-
<PAGE>
applicable Notice of Borrowing, Continuation or Conversion; PROVIDED, that:
(1) Any Interest Period which would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day unless such Interest Period is one month
or longer and such Eurodollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Eurodollar Business Day;
(2) Any Interest Period of one month or longer which begins on
the last Eurodollar Business Day of a calendar month (or a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Eurodollar Business Day of a
calendar month;
(3) No Interest Period may end after January 1 of any year
unless, after giving effect to the selection of such Interest Period, the
sum of the unpaid principal amount of all Eurodollar Advances ending after
such date and the outstanding face amount of all Letters of Credit having
an expiration date after such date will be less than or equal to the
Aggregate Base Commitment Amount; and
(4) No Interest Period may end after the date set forth in
clause (a) of the definition of Termination Date.
"INVENTORY TURNOVER RATIO": for any period of determination, the
ratio of (a) the cost of inventory sold by the Company and its Subsidiaries in
the ordinary course of business during such period to (b) the average cost of
the inventory held by the Company and its Subsidiaries as at the end of each
calendar month during such period.
"INVESTMENTS": as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of, or a beneficial interest in,
stock or other securities of any other Person, or any direct or indirect loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by such Person to any other Person, including all
Indebtedness and accounts receivable from that other Person which did not arise
from sales to such other Person in the ordinary course of business. The amount
of any Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
-10-
<PAGE>
"LETTER OF CREDIT": an irrevocable letter of credit issued by First
Bank for the account of the Company pursuant to Section 2.09, which shall not be
a Documentary Letter of Credit and shall not include letters of credit issued by
First Bank pursuant to that certain Letter of Credit Agreement dated as of
February 1, 1989, as amended, and that certain Covenant Rider dated as of
October 30, 1992, as amended, between First Bank and the Company.
"LETTER OF CREDIT FEE": as defined in Section 2.19.
"LETTER OF CREDIT LOAN": a loan made by a Bank to or for the account
of the Company pursuant to Section 2.13.
"LETTER OF CREDIT USAGE": as of any date, the amount equal to the sum
of (a) the amount of all Unpaid Draws PLUS (b) the amount available to be drawn
under all outstanding Letters of Credit.
"LEVERAGE RATIO": at any date of determination, the ratio of (a) the
Indebtedness of the Company and its Subsidiaries, excluding the Indebtedness
evidenced by the MIPS Debenture, MINUS the sum of cash and Investments with a
maturity of less than one year of the type permitted pursuant to Section 5.14(c)
of the Company and its Subsidiaries, as set forth in the Borrower's consolidated
balance sheet under the item "Cash and Cash Equivalents," to (b) Tangible Net
Worth, in all cases as set forth in the Company's financial statements
referenced to in Section 4.05 and 5.01.
"LIEN": with respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including but not limited to the interest of each lessor
under any capitalized lease), in, of or on any assets or properties of such
Person, now owned or hereafter acquired, whether arising by agreement or
operation of law.
"LOAN": a loan made by a Bank to or for the account of the Company
pursuant to Section 2.01, a Letter of Credit Loan or a Swing-Line Loan.
"LOAN DOCUMENTS": this Agreement, the Notes, the Letters of Credit
and all other agreements, documents, certificates and instruments delivered
pursuant hereto or in connection herewith, in each case as amended,
supplemented, restated or otherwise modified and in effect from time to time.
"MAJORITY BANKS": at any time, Banks whose Pro Rata Shares
(determined under clause (b) of the definition thereof if any Loans are
outstanding, and otherwise under clause (a) of such definition) aggregate at
least 66-2/3%.
-11-
<PAGE>
"MASTER LEASE AGREEMENT": the Lease Agreement dated as of August 25,
1994 between Conquest and BBC, as the same may be amended, supplemented,
restated or otherwise modified and in effect from time to time.
"MATERIAL ADVERSE EFFECT": with respect to any Person, (a) a
materially adverse effect on the business, assets, operations, or financial
condition of such Person and its Subsidiaries taken as a whole, (b) material
impairment of the ability of such Person to perform any material obligation
under any Loan Document to which such Person is or becomes a party or (c)
material impairment of any of the material rights of, or benefits available to,
the Agent or the Banks under any Loan Document.
"MEASUREMENT PERIOD": each period of four fiscal quarters ending on
the last day of a fiscal quarter of the Company.
"MIPS": the Monthly Income Preferred Securities of Best Buy Capital,
containing substantially the terms described in the Company's Form S-3
Registration Statement filed with the Securities Exchange Commission on
September 30, 1994, provided there are no material changes to the terms of the
MIPS or the MIPS Debenture unless such changes are approved by the Majority
Banks.
"MIPS DEBENTURE": the debenture issued by Best Buy to Best Buy
Capital to evidence Best Buy's obligations to Best Buy Capital in respect of a
loan from Best Buy Capital to Best Buy in an amount equal to the net proceeds of
the issuance and sale of MIPS.
"MULTIEMPLOYER PLAN": as such term is defined in Section 4001(a)(3)
of ERISA, which is maintained (on the Signing Date, within the five years
preceding the Signing Date, or at any time after the Signing Date) for employees
of Company or any ERISA Affiliate.
"NOTES": the Revolving Notes and the Swing-Line Note.
"NOTICE OF BORROWING, CONTINUATION OR CONVERSION": the written
notice, substantially in the form of Exhibit C, delivered in accordance with,
and within the period specified in, Section 2.02 or 2.05, as applicable.
"OBLIGATIONS": (a) the Company's obligations in respect of the due
and punctual payment of principal and interest on the Loans when and as due,
whether at maturity, by acceleration, or otherwise, (b) the Company's
obligations to reimburse First Bank in the amount of each draw under a Letter of
Credit on the date of such draw, and to make deposits into the Holding Account
in respect of Letters of Credit pursuant to Sections 2.07(a), (c) or (d), 2.15
or 6.02, and (c) all fees, expenses, indemnities, reimbursements and other
obligations, monetary or otherwise, owed to
-12-
<PAGE>
the Agent and the Banks under this Agreement or any other Loan Document.
"OPERATING SUBSIDIARY": any Subsidiary of the Company that owns
inventory or operates retail stores.
"PBGC": the Pension Benefit Guaranty Corporation created by Section
4002(a) of ERISA or any Governmental Authority succeeding to the functions
thereof.
"PERSON": any natural person, corporation, 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.
"PLAN": each employee benefit plan (whether in existence on the
Signing Date or thereafter instituted), as such term is defined in Section 3 of
ERISA, maintained for the benefit of employees, officers or directors of Company
or of any ERISA Affiliate.
"PROHIBITED TRANSACTION": as such term is defined in Section 4975 of
the Code or Section 406 of ERISA.
"PRO RATA SHARE": with respect to each Bank, in each case expressed
as a percentage:
(a) as such term pertains to such Bank's obligation to make
Loans, right to receive Commitment Fees and Letter of Credit Fees,
obligation to reimburse the Agent pursuant to Section 7.09, and the
calculation of such Bank's Designated Amount, the percentage set forth
opposite such Bank's name as its "Commitment Percentage" in Schedule 1.01,
and
(b) as such term pertains to such Bank's right to receive
payment of interest on and principal of its outstanding Loans and for all
other purposes, the fraction which the amount of the unpaid principal
balance of its outstanding Loans is to the aggregate unpaid principal
balance of all outstanding Loans (excluding, for purposes of this
calculation, Swing-Line Loans).
"REAL ESTATE CAPITAL EXPENDITURES": Capital Expenditures of the
Company or any Subsidiary for land and buildings PLUS the amount of any
receivable incurred by the Company as a result of advances by the Company to
fund the acquisition or construction by Conquest of land and buildings.
"REAL ESTATE SUBSIDIARY": any Subsidiary of the Company that is not
an
-13-
<PAGE>
Operating Subsidiary and the only assets of which are ownership or leasehold
interests in real property held for lease or sublease to the Company or
Operating Subsidiaries.
"REFERENCE RATE": the greater of (a) rate of interest from time to
time publicly announced by First Bank as its "reference rate" MINUS 0.5% or (b)
the Federal Funds Rate plus 0.5%. First Bank may lend to its customers at rates
that are at, above or below the Reference Rate. For purposes of determining any
interest rate hereunder or under the Notes which is based on the Reference Rate,
such interest rate shall change as and when the Reference Rate shall change.
"REFERENCE RATE ADVANCE": a portion of the Loans, other than
Swing-Line Loans, with respect to which the interest rate is determined by
reference to the Reference Rate.
"REGULATION D": Regulation D of the Board as from time to time in
effect and all official rulings and interpretations thereunder and thereof.
"REGULATION G": Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder and thereof.
"REGULATION U": Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder and thereof.
"REGULATION X": Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder and thereof.
"REGULATORY CHANGE": with respect to any Bank, any change after the
Signing Date in federal, state or foreign laws or regulations or the adoption or
making after such date of any interpretations, directives or requests, in either
case applying to a class of banks including such Bank under any federal, state
or foreign laws or regulations (whether or not having the force of law) by any
court or Governmental Authority charged with the interpretation or
administration thereof.
"RENTAL AND LEASE EXPENSE": for any period of determination, all
amounts paid by the Company or any Subsidiary under all capital leases and other
leases of real or personal property, other than any portion thereof included in
calculating consolidated net interest expense of the Company for such period.
"REPORTABLE EVENT": as such term is defined in Section 4043 of ERISA
and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the
-14-
<PAGE>
occurrence of such event, PROVIDED, that a failure to meet the minimum funding
standard of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.
"RESTRICTED PAYMENTS": with respect to any Person, collectively, all
dividends or other distributions of any nature (cash, securities (other than
common stock of such Person), assets or otherwise) declared or paid, and all
payments made, by such Person on any class of equity securities (including,
without limitation, warrants, options or rights therefor) issued by such Person
or any of its Subsidiaries, whether such securities are authorized or
outstanding on the Signing Date or at any time thereafter, including, with
respect to the Company, any payments made by the Company (other than scheduled
or deferred payments of principal and interest under the MIPS Debenture) in
respect of the MIPS.
"REVOLVING NOTES": as defined in Section 2.04.
"SEASONAL COMMITMENT AMOUNT": as to any Bank, the amount set forth
opposite such Bank's name as its "Seasonal Commitment Amount" in Schedule
1.01(a), as the same may be reduced from time to time pursuant to Section 2.15.
"SIGNING DATE": the Business Day on which counterparts of this
Agreement, duly executed by the Company, the Banks and the Agent, have been
delivered to the Agent.
"SUBORDINATED INDEBTEDNESS": (a) the Company's 9% Subordinated
Extendible Notes due 1997, (b) the Company's 9.95% Subordinated Notes due 1999,
(c) the Company's 8 5/8% Senior Subordinated Notes due 2000, (d) the
Indebtedness evidenced by the MIPS Debenture and (e) any other Indebtedness of
the Company incurred after the Signing Date which is subordinated to the
obligations of the Company to the Banks hereunder and under the Notes in a
manner and to an extent which the Banks have reasonably determined to be
satisfactory by a writing sent to the Company.
"SUBSIDIARY": with respect to any Person, any corporation,
partnership, trust or other Person of which more than 50% of the outstanding
capital stock (or similar property right in the case of partnerships and trusts)
having ordinary voting power to elect a majority of the board of directors of
such corporation (or similar governing body or Person with respect to
partnerships and trusts) (irrespective of whether or not at the time capital
stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned by such Person, by such Person and one or more other
Subsidiaries of such Person, or by one or more other
-15-
<PAGE>
Subsidiaries of such Person.
"SWING-LINE FACILITY": the discretionary revolving credit facility
provided by First Bank to the Company described in Section 2.01(b).
"SWING-LINE FACILITY AMOUNT": $25,000,000.
"SWING-LINE LOAN": a loan made by First Bank to the Company pursuant
to the Swing-Line Facility.
"SWING-LINE NOTE": as defined in Section 2.04.
"TANGIBLE NET WORTH": as of any date of determination, the sum of the
amounts set forth on the consolidated balance sheet of the Company as the sum of
the common stock, preferred stock, additional paid-in capital and retained
earnings of the Company (excluding treasury stock), less the book value of all
assets of the Company and its Subsidiaries that would be treated as intangibles
under GAAP, including, without limitation, all such items as goodwill,
trademarks, trade names, service marks, copyrights, patents, licenses,
unamortized debt discount and expenses and the excess of the purchase price of
the assets of any business acquired by the Company or any Subsidiary over the
book value of such assets, and PLUS the book value of the interests of the
holders of the MIPS to the extent otherwise excluded in calculating the sum of
common stock, preferred stock, additional paid-in capital and retained earnings.
"TERMINATION DATE": the earliest to occur of (a) June 30, 1998, (b)
the date the Commitments terminate pursuant to Section 2.30, (c) the date on
which the Commitments are terminated pursuant to Section 2.15 or (d) the date on
which the Commitments are terminated pursuant to Section 6.02.
"TOTAL OUTSTANDINGS": as of any date of determination, the sum of (a)
the aggregate unpaid principal balance of Loans outstanding on such date, PLUS
(b) the Letter of Credit Usage.
"UNFUNDED LIABILITIES": (a) in the case of Plans subject to Title IV
of ERISA (other than Multiemployer Plans), the amount (if any) by which the
present value of all vested nonforfeitable benefits under such Plan exceeds the
fair market value of all Plan assets allocable to such benefits, all determined
as of the then most recent valuation report prepared by the actuary for such
Plan, and (b) in the case of Multiemployer Plans, the withdrawal liability of
the Company and the ERISA Affiliates.
"UNMATURED EVENT OF DEFAULT": any event which, with the giving of
-16-
<PAGE>
notice (whether such notice is required under Section 6.01, or under some other
provision of this Agreement, or otherwise) or lapse of time, or both, would
constitute an Event of Default.
"UNPAID DRAW": the obligation of the Company to reimburse First Bank
for a draw under a Letter of Credit, to the extent not reimbursed by the Company
in accordance with Section 2.12.
"UNUSED BASE COMMITMENT AMOUNT": at the time of any determination,
the Aggregate Base Commitment Amount less the Used Amount.
"UNUSED DESIGNATED AMOUNT": at any time of determination from July 1
of any year to January 1 of the following year, the Aggregate Available Amount
less the greater of (a) the Used Amount and (b) the Aggregate Base Commitment
Amount.
"UNUSED SEASONAL COMMITMENT AMOUNT": at any time of determination
from July 1 of any year to January 1 of the following year, the Aggregate
Seasonal Commitment Amount MINUS the Aggregate Designated Amount, and at any
other time of determination, the Aggregate Seasonal Commitment Amount.
"USED AMOUNT": at any time of determination, Total Outstandings minus
the aggregate unpaid principal balance of Swing-Line Loans outstanding on such
date.
Section 1.02 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 conformity with GAAP. To the extent any change in GAAP after the Signing
Date affects any computation or determination required to be made pursuant to
this Agreement, such computation or determination shall be made as if such
change in GAAP had not occurred unless the Company and the Banks agree in
writing on an adjustment to such computation or determination to account for
such change in GAAP.
Section 1.03 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".
Section 1.04 PRINCIPLES OF CONSTRUCTION. In this Agreement, the
singular includes the plural and the plural the singular; words imparting any
gender include the other genders; references to "Section", "Exhibit", "Schedule"
and like references shall be to sections of, and exhibits and schedules to, this
Agreement unless
-17-
<PAGE>
otherwise specifically provided; 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 "writing" include printing, typing, lithography and other means of
reproducing words in a visible form; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments
thereto or changes therein entered into in accordance with their respective
terms; and references to Persons include their permitted successors and assigns.
Unless the context in which used herein otherwise clearly requires, "or" has the
inclusive meaning represented by the phrase "and/or."
ARTICLE II
TERMS OF THE CREDIT FACILITY
PART A -- TERMS OF LENDING
Section 2.01 LENDING FACILITIES.
(a) THE COMMITMENTS. On the terms and subject to the
conditions hereof, each Bank severally agrees to make Loans to the Company
on a revolving basis at any time and from time to time from the Effective
Date to the Termination Date, during which period the Company may borrow,
repay and reborrow in accordance with the provisions hereof, PROVIDED, that
no Loan will be made (i) in any amount which after giving effect thereto,
would cause the Total Outstandings to exceed the Aggregate Available
Amount, or (ii) if, after giving effect to such Loan, a Borrowing Base
Deficiency would exist; and PROVIDED, FURTHER, that no Bank shall be
required to make any Loan if, after giving effect thereto, the sum of the
outstanding principal balance of such Bank's Revolving Note plus such
Bank's Pro Rata Share of the sum of the Letter of Credit Usage and the
outstanding principal balance of the Swing-Line Note would exceed such
Bank's Available Amount. Revolving Loans (other than Swing-Line Loans)
hereunder shall be made by the Banks ratably based on their respective Pro
Rata Shares. Loans (other than Swing-Line Loans) may be obtained and
maintained, at the election of the Company but subject to the limitations
hereof, as Reference Rate Advances or Eurodollar Advances.
(b) DISCRETIONARY SWING-LINE FACILITY. On the terms and
subject to the conditions hereof, during the period from the Effective Date
to the Termination Date, First Bank, in its sole discretion, may make loans
to the Company at such times and in such amounts as the Company shall
request, up to an aggregate principal amount at any time outstanding equal
to the
-18-
<PAGE>
Swing-Line Facility Amount, during which period the Company may borrow,
repay and reborrow in accordance with the provisions hereof; PROVIDED, that
First Bank will not make a Swing-Line Loan if either of the limitations set
forth in Section 2.01(a)(i) or 2.01(a)(ii) would be exceeded. Swing-Line
Loans shall be obtained and maintained as Reference Rate Advances.
Section 2.02 PROCEDURE FOR LOANS. Any request by the Company to
borrow hereunder shall be made to the Agent by telephone, promptly confirmed by
giving the Agent a Notice of Borrowing, Continuation or Conversion, and must be
received by the Agent not later than 12:00 noon (Minneapolis time) three
Eurodollar Business Days prior to the requested Borrowing Date if the Loans are
requested as Eurodollar Advances and not later than 12:00 noon (Minneapolis
time) on the requested Borrowing Date if the Loans are requested as Reference
Rate Advances. Each request to borrow hereunder shall be irrevocable and shall
be deemed a representation by the Company that on the requested Borrowing Date
and after giving effect to the requested Loans the applicable conditions
specified in Section 2.01(a) and Article III have been and will be satisfied.
Each request to borrow hereunder shall specify (a) the requested Borrowing Date,
(b) the aggregate amount of Loans to be made on such date, which shall be in a
minimum amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, to the extent such Loans are to be funded as Eurodollar Advances, or
$2,000,000 or an integral multiple of $500,000 in excess thereof, to the extent
such Loans are to be funded as Reference Rate Advances, (c) whether or not such
Loans are to be made as Swing-Line Loans, (d) whether such Loans are to be
funded as Reference Rate Advances or Eurodollar Advances, and (e) in the case of
Eurodollar Advances, the duration of the initial Interest Period applicable
thereto. Without in any way limiting the Company's obligation to confirm in
writing any telephone request to borrow hereunder, the Agent may rely on any
such request which it believes in good faith to be genuine; and the Company
hereby waives any claim against the Agent or the Banks based on a dispute with
the Agent's record of the terms of such telephone request. Except in the case
of requests for Swing-Line Loans, the Agent shall promptly notify each other
Bank of the receipt of such request not later than 2:00 P.M. (Minneapolis time)
on the date it receives such request, the matters specified therein, and of such
Bank's Pro Rata Share of the requested Loans. On the requested Borrowing Date,
each Bank shall provide its Pro Rata Share of the requested Loans or, in the
case of Swing-Line Loans, First Bank shall provide the amount of the requested
Swing-Line Loan, to the Agent in Immediately Available Funds not later than 4:00
P.M. (Minneapolis time). Unless the Agent determines that any applicable
condition specified in Article III has not been satisfied, the Agent will make
available to the Company at the Agent's principal office in Minneapolis,
Minnesota in Immediately Available Funds not later than 4:00 P.M. (Minneapolis
time) on the requested Borrowing Date the amount of the requested Loans. If the
Agent has made a Loan on behalf of a Bank but has not received the amount of
such Loan (or a Federal Reserve Bank reference number for
-19-
<PAGE>
the wire transfer of the amount of such Loan) from such Bank by 4:00 P.M.
(Minneapolis time) on the requested Borrowing Date, such Bank shall pay interest
to the Agent on the amount so advanced at the Federal Funds Rate from the date
of such Loan to the date funds are received by the Agent from such Bank, such
interest to be payable with such remittance from such Bank of the principal
amount of such Loan (PROVIDED, HOWEVER, that the Agent shall not make any Loans
on behalf of a Bank if the Agent has received prior notice from such Bank that
it will not make such Loan). If the Agent does not receive payment from such
Bank by the next Business Day after the date of any Loan, the Agent shall be
entitled to recover such Loan, with interest thereon at the rate then applicable
to the such Loan, on demand, from the Company, without prejudice to the Agent's
and the Company's rights against such Bank. If such Bank pays the Agent the
amount herein required with interest at the Federal Funds Rate before the Agent
has recovered from the Company, such Bank shall be entitled to the interest
payable by the Company with respect to the Loan in question accruing from the
date the Agent made such Loan.
Section 2.03 REFINANCING OF SWING-LINE LOANS.
(a) PERMISSIVE FINANCINGS OF SWING-LINE LOANS. First Bank, at
any time in its sole and absolute discretion, may notify the Agent, not
later than 12:00 noon (Minneapolis time) on any Business Day, that it
desires to have any portion of the outstanding Swing-Line Loans refunded
with Loans (which shall not be considered Swing-Line Loans) made by the
Banks under Section 2.01(a), whereupon the Agent shall, not later than 2:00
p.m. (Minneapolis time) on such Business Day, request that each Bank
(including First Bank) make a Loan in an amount equal to its Pro Rata Share
of the Loans to be made to repay to First Bank the portion of the aggregate
unpaid principal amount of the Swing-Line Loans specified in such notice.
The Agent shall promptly notify the Company of its receipt of any such
notice from First Bank.
(b) MANDATORY REFINANCINGS OF SWING-LINE LOANS. Not later than
2:00 p.m. (Minneapolis time) on Thursday of each week (or, if such day is
not a Business Day, on the next Business Day), the Agent shall notify each
Bank of the aggregate amount of Swing-Line Loans outstanding as of the end
of the previous day and the amount of Loans (which shall not be considered
Swing-Line Loans) required to be made by each Bank to refinance such
outstanding Swing-Line Loans (which shall be in the amount of each Lender's
Pro Rata Share of such outstanding Swing-Line Loans).
(c) LENDERS' OBLIGATION TO FUND REFINANCINGS OF SWING-LINE
LOANS. Upon its receipt of a request from the Agent under Section 2.03(a)
or 2.03(b), each Bank (including First Bank) shall make a Loan (which shall
not be
-20-
<PAGE>
considered a Swing-Line Loan) in an amount equal to its Pro Rata Share of
the aggregate principal amount of Swing-Line Loans to be refinanced, and
make the proceeds of such Loans available to First Bank, in Immediately
Available Funds, at the main office of the Agent in Minneapolis not later
than 3:00 p.m. (Minneapolis time) on the date such notice was received;
PROVIDED, HOWEVER, that a Bank shall not be obligated to make any such Loan
unless (A) First Bank believed in good faith that all conditions to making
the subject Swing-Line Loan were satisfied at the time such Swing-Line Loan
was made, or (B) such Bank had actual knowledge, by receipt of the
statements furnished to it pursuant to Section 5.01 or otherwise, that any
such condition had not been satisfied and failed to notify First Bank in a
writing received by First Bank prior to the time it made such Swing-Line
Loan that First Bank was not authorized to make a Swing-Line Loan until
such condition has been satisfied, or (C) the satisfaction of any such
condition that was not satisfied had been waived in a writing by the
requisite Banks in accordance with the provisions of this Agreement. The
proceeds of Loans made pursuant to the preceding sentence shall be
delivered to First Bank (and not to the Company) and applied to the
outstanding Swing-Line Loans, and the Company authorizes the Agent to
charge any account maintained by it with the Agent in order to immediately
pay First Bank the amount of such Swing-Line Loans to the extent amounts
received from the other Banks are not sufficient to repay in full the
outstanding Swing-Line Loans requested or required to be refinanced. Upon
the making of a Loan by a Bank pursuant to this Section 2.03(c), the amount
so funded shall become an Obligation evidenced by such Lender's Note and
shall no longer be an Obligation evidenced by the Swing-Line Note. If any
portion of any such amount paid to First Bank should be recovered by or on
behalf of the Company from First Bank in bankruptcy or otherwise, the loss
of the amount so recovered shall be ratably shared among all the Banks in
accordance with their respective Pro Rata Shares. Each Bank's obligation
to make Loans referred to in this Section 2.03(c) shall, subject to the
proviso to the first sentence of this Section 2.03(c), be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any setoff, counterclaim, recoupment, defense or
other right which such Bank may have against First Bank, the Company or
anyone else for any reason whatsoever; (ii) the occurrence or continuance
of an Event of Default or Unmatured Event of Default; (iii) any adverse
change in the condition (financial or otherwise) of the Company; (iv) any
breach of this Agreement by the Company, the Agent or any Bank; or (v) any
other circumstance, happening or event whatsoever, whether or not similar
to any of the foregoing; PROVIDED, that in no event shall a Bank be
obligated to make a Loan if, after giving effect thereto, the outstanding
principal amount of such Bank's Note plus such Bank's Pro Rata Share of the
sum of the Letter of Credit Usage and the outstanding principal balance of
the Swing-Line Note (after giving effect to
-21-
<PAGE>
the repayment thereof to be funded with such Loan and Loans made the same
day by the other Banks) would exceed such Bank's Available Amount.
(d) FUNDING OF LOANS. Each Loan made to refund Swing-Line
Loans pursuant to Section 2.03(c) shall be funded as a Reference Rate
Advance, but the Company may elect to convert such Reference Rate Advances
to Eurodollar Advances on the date made pursuant to Section 2.05.
Section 2.04 NOTES. The Loans made by each Bank (other than the
Swing-Line Loans made by First Bank) shall be evidenced by a single promissory
note of the Company payable to the order of such Bank in the form of Exhibit D,
in a principal amount equal to the amount of such Bank's Commitment originally
in effect (each, together with any such promissory note hereafter executed and
delivered to a Bank to evidence the Loans, a "Revolving Note" and, collectively,
the "Revolving Notes"). The Swing-Line Loans shall be evidenced by a single
promissory note of the Company payable to the order of First Bank in the form of
Exhibit E, in a principal amount equal to the Swing-Line Facility Amount
(together with any such promissory note hereafter executed and delivered to
First Bank to evidence the Swing-Line Loans, the "Swing-Line Note"). Each Bank
shall enter in its ledgers and records the amount of each Loan, the various
Advances made, converted or continued and the payments made thereon, and each
Bank is authorized by the Company to enter on a schedule attached to its Note(s)
a record of such Loans, Advances and payments; PROVIDED, HOWEVER that the
failure by any Bank to make any such entry or any error in making such entry
shall not limit or otherwise affect the obligation of the Company hereunder and
on the Notes, and, in all events, the principal amount owing by the Company in
respect of each Revolving Note shall be the aggregate amount of all Loans made
by the Bank to which such Note is payable (other than Swing-Line Loans made by
First Bank) less all payments of principal thereof made by the Company, and the
principal amount owing by the Company in respect of the Swing-Line Note shall be
the aggregate amount of all Swing-Line Loans less all payments of principal
thereof made by the Company or pursuant to Section 2.03.
Section 2.05 CONVERSIONS AND CONTINUATIONS. On the terms and subject
to the limitations hereof, the Company shall have the option at any time and
from time to time to convert all or any portion of the Loans (other than
Swing-Line Loans) into Reference Rate Advances or Eurodollar Advances, or to
continue a Eurodollar Advance as such (in a minimum amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, with respect to any
conversion into or continuation as Eurodollar Advances, or $2,000,000 or an
integral multiple of $500,000 in excess thereof, with respect to any conversion
into Reference Rate Advances); PROVIDED, HOWEVER that (i) a Eurodollar Advance
may be converted or continued only on the last day of the Interest Period
applicable thereto, and (ii) no Advance may be converted into or continued as a
Eurodollar Advance if an Unmatured Event of
-22-
<PAGE>
Default or Event of Default has occurred and is continuing on the proposed date
of continuation or conversion. The Company shall give the Agent a Notice of
Borrowing, Continuation or Conversion with respect to the continuation or
conversion of any Advance so as to be received by the Agent not later than 12:00
noon (Minneapolis time) three Eurodollar Business Days prior to requested date
of conversion or continuation in the case of the continuation of, or conversion
to, Eurodollar Advances and not later than 12:00 noon (Minneapolis time) on the
date of any requested conversion to Reference Rate Advances. Each such notice
shall specify (a) the amount to be continued or converted, (b) the date for the
continuation or conversion (which must be (i) the last day of the preceding
Interest Period and a Eurodollar Business Day in the case of conversions to or
continuations of Eurodollar Advances, and (ii) a Business Day in the case of
conversions to Reference Rate Advances), and (c) in the case of conversions to
or continuations of Eurodollar Advances, the Interest Period applicable thereto.
Any notice given by the Company under this Section 2.05 shall be irrevocable.
If the Company shall fail to notify the Agent of the continuation of any
Eurodollar Advances or of the conversion of Eurodollar Advances within the time
required by this Section 2.05, such Advances shall, on the last day of the
Interest Period applicable thereto, automatically be converted into Reference
Rate Advances of the same principal amount. All conversions to and
continuations of Advances shall be made uniformly and ratably among the Banks.
Section 2.06 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable as follows:
(a) Each Eurodollar Advance shall bear interest on the unpaid
principal amount thereof during the Interest Period applicable thereto at a
rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate for
such Interest Period PLUS (ii) the Applicable Margin.
(b) Each Reference Rate Advance and each Swing-Line Loan shall
bear interest on the unpaid principal amount thereof at a floating rate per
annum equal to the sum of (i) the Reference Rate PLUS (ii) the Applicable
Margin.
(c) Any Advance not paid when due, whether at the date
scheduled therefor or earlier upon acceleration, shall bear interest until
paid in full (i) during the balance of any Interest Period applicable to
such Advance, at a rate per annum equal to the sum of the rate applicable
to such Advance during such Interest Period PLUS 2.0%, and (ii) otherwise,
at a rate per annum equal to the sum of the Reference Rate PLUS 2.00%.
(d) Interest accrued through each date of payment shall be
-23-
<PAGE>
payable (i) with respect to each Eurodollar Advance having an Interest
Period of three months or less, on the last day of the Interest Period
applicable thereto; (ii) with respect to any Eurodollar Advance having an
Interest Period greater than three months, on the last day of the Interest
Period applicable thereto and on each day that would have been the last day
of the Interest Period for such Advance had successive Interest Periods of
three months duration been applicable to such Advance; (iii) with respect
to any Reference Rate Advance, on the first day of each month; and (iv)
with respect to all Advances, on the Termination Date; PROVIDED that
interest under Section 2.06(c) shall also be payable on demand.
(e) Interest payments received by the Agent shall be applied
first, to accrued, unpaid interest on the Swing-Line Note then due and
payable, and second, to accrued, unpaid interest on the Revolving Notes
then due and payable.
Section 2.07. REPAYMENT; MANDATORY PREPAYMENTS; DEPOSITS INTO HOLDING
ACCOUNT.
(a) Principal of all Loans, together with all accrued, unpaid
interest thereon, shall be due and payable on the Termination Date. If any
Letters of Credit are outstanding on the Termination Date, the Company
shall deposit into the Holding Account an amount sufficient to cause the
amount deposited in the Holding Account to equal the aggregate undrawn face
amount of all outstanding Letters of Credit. At any time after such
deposit is made and all outstanding Obligations, other than Obligations
with respect to outstanding Letters of Credit, have been paid in full, if
an outstanding Letter of Credit expires or is reduced without the full
amount thereof having been drawn, the Agent shall withdraw from the Holding
Account and deliver to the Company an amount equal to the amount by which
the amount on deposit in the Holding Account exceeds the aggregate undrawn
face amount of outstanding Letters of Credit (after giving effect to such
expiration or reduction).
(b) On or after December 1 of each year and on or before
February 15 of the following year, the Company shall reduce the outstanding
principal balance of the Loans to not more than $50,000,000 and, for a
period of not less than 45 consecutive days thereafter, shall not have
Loans in a principal amount exceeding $50,000,000 outstanding.
(c) If at any time a Borrowing Base Deficiency shall exist, the
Company will immediately prepay the outstanding Loans in the amount of such
Borrowing Base Deficiency and, if such Borrowing Base Deficiency
-24-
<PAGE>
exceeds the amount of outstanding Loans, deposit into the Holding Account,
in Immediately Available Funds, an aggregate amount equal to such excess.
To the extent that, prior to the occurrence of any Event of Default, the
Borrowing Base increases, the Agent shall, at the request of the Company,
deliver to the Company an amount equal to the amount by which the deposits
held in the Holding Account pursuant to this Section 2.07(c) exceed the
Borrowing Base Deficiency.
(d) If at any time the Total Outstandings exceed the Aggregate
Available Amount, the Company shall prepay the Loans in the amount of such
excess and, if such excess exceeds the amount of outstanding Loans, deposit
into the Holding Account an amount equal to the amount by which such excess
exceeds the amount of outstanding Loans.
Section 2.08 OPTIONAL PREPAYMENTS. The Company may prepay Reference
Rate Advances, in whole or in part, at any time, without premium or penalty.
Each partial prepayment shall be in an aggregate amount for all the Banks of
$2,000,000 or an integral multiple of $500,000 in excess thereof, and shall be
distributed to the Banks in accordance with their respective Pro Rata Shares.
Except upon an acceleration following an Event of Default, upon termination of
the Commitments in whole under Section 2.15, upon a reduction of the Aggregate
Available Amount or upon the occurrence of a Borrowing Base Deficiency, the
Company may pay Eurodollar Advances only on the last day of the Interest Period
applicable thereto. Amounts paid (unless following an acceleration or upon
termination of the Commitments in whole) or prepaid under this Section 2.08 may
be reborrowed upon the terms and subject to the conditions and limitations of
this Agreement. All principal paid or prepaid under Section 2.07, this Section
2.08 or Section 2.15 shall be applied first, to the outstanding principal
balance of the Swing-Line Note and thereafter, to the outstanding principal
balance of each Bank's Revolving Note (in accordance with such Bank's Pro Rata
Share).
PART B -- TERMS OF THE LETTER OF CREDIT FACILITY
Section 2.09 LETTERS OF CREDIT. The letters of credit issued by
First Bank for the account of the Company and described on Schedule 2.09 shall
be "Letters of Credit" hereunder from and after the Effective Date, and the
rights and obligations of First Bank, the Agent, the Banks and the Company with
respect to such letters of credit shall be those set forth therein and, to the
extent not inconsistent therewith, those set forth herein with respect to
Letters of Credit. Upon the terms and subject to the conditions of this
Agreement, First Bank agrees to issue Letters of Credit for the account of the
Company from time to time between the Effective Date and the Termination Date in
such amounts as the Company shall request; PROVIDED that no Letter of Credit
will be issued in any amount which, after giving effect to such
-25-
<PAGE>
issuance, would cause (i) Total Outstandings to exceed the Aggregate Available
Amount, (ii) a Borrowing Base Deficiency to exist or increase, (iii) the sum of
the unpaid amount of all Eurodollar Advances ending after December 31 of any
year and the outstanding face amount of all Letters of Credit having an
expiration date after such date to exceed the Aggregate Base Commitment Amount
or (iv) the Letter of Credit Usage to exceed $100,000,000.
Section 2.10 PROCEDURES FOR LETTERS OF CREDIT. Each request for a
Letter of Credit shall be made by the Company in writing and received by First
Bank by 12:00 noon (Minneapolis time) not later than one Business Day preceding
the requested date of issuance (which shall also be a Business Day). Each
request for a Letter of Credit shall be deemed a representation by the Company
that on the date of issuance of such Letter of Credit and after giving effect
thereto the conditions specified in Article III have been and will be satisfied.
First Bank may require that such request be made on such letter of credit
application and reimbursement agreement form as First Bank may from time to time
specify. First Bank shall promptly notify the Agent, and the Agent shall notify
the other Banks by 1:00 P.M (Minneapolis time) on the date First Bank issues any
Letter of Credit, of the issuance of each Letter of Credit, and each Bank's Pro
Rata Share thereof, and First Bank will promptly provide to the Agent, and the
Agent will promptly provide to the other Banks, a copy of each Letter of Credit
issued hereunder.
Section 2.11 TERMS OF LETTERS OF CREDIT. Letters of Credit shall be
issued in support of obligations of the Company incurred in the ordinary course
of its business. No Letter of Credit may have an expiration date more than two
years after the date of its issuance.
Section 2.12 AGREEMENT TO REPAY LETTER OF CREDIT DRAWS. If First
Bank has decided that it will a pay a draw made on any Letter of Credit, it will
notify the Agent and the Company of that fact. The Company shall reimburse
First Bank in an amount equal to the amount of such draw by 11:00 A.M.
(Minneapolis time) on the day on which such draw is to be paid in Immediately
Available Funds. To the extent funds are available in the Holding Account,
First Bank may, in its discretion, withdraw the amount of such draw from the
Holding Account and apply such amount to the Company's reimbursement obligations
in respect of such draw. To the extent the amount of funds available in the
Holding Account equals or exceeds the Letter of Credit Usage as of the date of
such draw, First Bank shall withdraw the amount of such draw from the Holding
Account and apply such amount to the Company's reimbursement obligations in
respect of such draw. If First Bank is not reimbursed for the amount of such
draw as provided in the three preceding sentences, First Bank shall notify the
Agent thereof by 1:00 P.M. (Minneapolis time) on the date such draw is to be
paid.
-26-
<PAGE>
Section 2.13 LOANS TO COVER UNPAID DRAWS. Whenever the Agent
receives notice from First Bank of an Unpaid Draw pursuant to Section 2.12, the
Agent shall give the other Banks notice to that effect, by 2:00 P.M.
(Minneapolis time) on the date it receives notice of such Unpaid Draw from First
Bank, specifying the amount thereof, in which event each Bank is authorized (and
the Company does here so authorize each Bank) to, and shall, make a Loan (as a
Reference Rate Advance) to the Company in an amount equal to such Bank's Pro
Rata Share of the amount of the Unpaid Draw. Each Bank shall make such Loan,
regardless of noncompliance with the applicable conditions precedent specified
in Article III hereof and regardless of whether an Event of Default then exists
or the Commitments have been terminated, and provide First Bank with the
proceeds of such Loan in Immediately Available Funds, at the office of First
Bank, not later than 4:00 P.M. (Minneapolis time) on the day on which such Bank
received such notice. First Bank shall apply the proceeds of such Loans
directly to reimburse itself for such Unpaid Draw. If any portion of any such
amount paid to First Bank should be recovered by or on behalf of the Company
from First Bank in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared between
and among the Banks in the manner contemplated by Section 7.10. If at the time
the Banks make funds available to First Bank pursuant to the provisions of this
Section 2.13 the applicable conditions precedent specified in Article III shall
not have been satisfied, the Company shall pay to the Agent for the account of
the Banks interest on the funds so advanced at a floating rate per annum equal
to the Reference Rate plus two percent (2.00%).
Section 2.14 OBLIGATIONS ABSOLUTE. The obligations of the Company to
repay First Bank for the amount of any draw on a Letter of Credit pursuant to
Section 2.12 and to repay any Letter of Credit Loans shall be absolute,
unconditional and irrevocable, shall continue for so long as any Letter of
Credit is outstanding notwithstanding any termination of this Agreement, and
shall be paid strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including without limitation the following
circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit;
(b) the existence of any claim, setoff, defense or other right
which the Company may have or claim at any time against any beneficiary,
transferee or holder of any Letter of Credit (or any Person for whom any
such beneficiary, transferee or holder may be acting), the Agent, First
Bank or any Bank or any other Person, whether in connection with a Letter
of Credit, this Agreement, the transactions contemplated hereby, or any
unrelated transaction; or
-27-
<PAGE>
(c) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect whatsoever.
Neither the Agent, First Bank, any other Bank nor the officers, directors,
agents or employees of any thereof shall be liable or responsible for, and the
obligations of the Company to First Bank and the Banks shall not be impaired by:
(i) the use which may be made of any Letter of Credit or for
any acts or omissions of any beneficiary, transferee or holder thereof in
connection therewith;
(ii) the validity, sufficiency or genuineness of documents, or
of any endorsements thereon, even if such documents or endorsements should,
in fact, prove to be in any or all respects invalid, insufficient,
fraudulent or forged;
(iii) the acceptance by First Bank of documents that appear on
their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary; or
(iv) any other circumstances whatsoever in making or failing to
make payment under any Letter of Credit.
Notwithstanding the foregoing, the Company shall have a claim against First
Bank, and First Bank shall be liable to the Company, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Company which the Company proves were caused by First Bank's willful misconduct
or gross negligence in determining whether documents presented under any Letter
of Credit comply with the terms thereof.
PART C -- GENERAL
Section 2.15 OPTIONAL REDUCTION OR TERMINATION OF COMMITMENTS. The
Company may, at any time, upon not less than ten Business Days' prior written
notice to the Agent, reduce the Commitments, ratably, with any such reduction in
a minimum aggregate amount for all the Banks of $10,000,000, or an integral
multiple thereof, or terminate the Commitments in their entirety; PROVIDED,
HOWEVER, that (a) the Company may not at any time reduce the Aggregate Base
Commitment Amount below the Letter of Credit Usage as of the date of such
reduction unless the Company reduces the Aggregate Commitment Amount to zero and
deposits with First Bank in the Holding Account an amount equal to the Letter of
Credit Usage as
-28-
<PAGE>
of such date; (b) the Company may not reduce the Commitments if the payment
required by the next sentence as a result of such reduction would result in any
outstanding Eurodollar Advances being repaid, in whole or in part, prior to the
last day of the Interest Period applicable to such Advances; and (c) the Company
shall designate which portion of such reduction shall reduce the Base Commitment
Amounts and which portion of such reduction shall reduce the Seasonal Commitment
Amounts. Upon any reduction in the Commitments pursuant to this Section 2.15,
the Company shall pay to the Agent for the account of the Banks the amount, if
any, by which the Total Outstandings exceed the Aggregate Available Amount after
giving effect to such reduction. Upon termination of the Commitments pursuant
to this Section, the Company shall pay to the Agent for the account of the Banks
the full amount of all outstanding Loans, all accrued and unpaid interest
thereon, all unpaid Commitment Fees accrued to the date of such termination, any
indemnities payable pursuant to Section 2.27 and all other unpaid obligations of
the Company to the Banks and the Agent hereunder, and shall deposit with First
Bank in the Holding Account an amount equal to the Letter of Credit Usage as of
such date.
Section 2.16 DESIGNATION OF AVAILABLE AMOUNT OF SEASONAL COMMITMENTS.
Not less than five nor more than ten days prior to the beginning 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 following month. If the Company shall fail to make
such designation as provided in the preceding sentence, the Designated Amount of
each Bank for the following month shall be the same as the Designated Amount for
the preceding month, as adjusted pursuant to the second paragraph of this
Section 2.16. Until such time that the Company makes an initial designation for
any period in which the Seasonal Commitment Amount is available for designation,
the Designated Amount of each Bank shall be zero. 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 month. 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 Section 2.16 for any month, if no such designation has
been made.
Notwithstanding the foregoing, the Company may increase the Aggregate Designated
Amount for any particular month during such month 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
-29-
<PAGE>
Aggregate Available Amount (and thus the amount by which the Aggregate
Designated Amount shall be increased) for such month 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 month 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 month 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.
Section 2.17 AGENT'S FEES. The Company shall pay to the Agent fees
in accordance with the terms of a letter agreement of even date herewith.
Section 2.18 FACILITY FEES AND COMMITMENT FEES.
(a) The Company shall pay to each Bank on the Effective Date,
in consideration of its Commitment, a facility fee in the amount set forth
opposite such Bank's name on Schedule 2.18(a).
(b) The Company shall pay to the Agent, for the account of the
Banks, for the period from the Effective Date until the Termination Date,
fees (the "Commitment Fees") in an amount equal to (a) one-quarter of one
percent (0.25%) per annum of the average daily Unused Base Commitment
Amount, (b) one-eighth of one percent (0.125%) per annum of the average
daily Unused Seasonal Commitment Amount and (c) one-quarter of one percent
(0.25%) per annum of the Unused Designated Amount. Such Commitment Fees
are payable quarterly in arrears on the first day of the following calendar
quarter and on the Termination Date.
Section 2.19 LETTER OF CREDIT FEES. For each Letter of Credit
issued, the Company shall pay to the Agent for the account of the Banks, in
advance on the date of issuance, a fee (a "Letter of Credit Fee") in an amount
equal to (a) with respect to Letters of Credit having a scheduled expiration
date not more than six months after the date of issuance, 0.75% per annum, and
(b) with respect to Letters of Credit having a scheduled expiration date more
than six months after the date of issuance, 1.00% per annum, of the original
face amount of the Letter of Credit for the period from the date of issuance to
the scheduled expiration date of such Letter of Credit.
-30-
<PAGE>
The Company shall also pay to First Bank, for its own account, on demand, all
issuance, amendment, drawing and other fees regularly charged by First Bank to
its letter of credit customers and all out-of-pocket expenses incurred by First
Bank in connection with the issuance, amendment, administration or payment of
any Letter of Credit.
Section 2.20 COMPUTATION. Commitment Fees, Letter of Credit Fees and
interest on Advances shall be computed on the basis of actual days elapsed (or,
in the case of Letter of Credit Fees which are paid in advance, actual days to
elapse) and a year of 360 days.
Section 2.21 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under this
Agreement payable to the Agent or the Banks shall be made without setoff or
counterclaim in Immediately Available Funds not later than 12:00 noon
(Minneapolis time) (except as otherwise provided herein) on the dates called for
under this Agreement to the Agent at its main office in Minneapolis, Minnesota.
Payments payable to First Bank for its own account in respect of Letters of
Credit and the Swing-Line Note under this Agreement shall be made without setoff
or counterclaim in Immediately Available Funds not later than 12:00 noon
(Minneapolis time) (except as otherwise provided herein) on the dates called for
in this Agreement to First Bank at its main office in Minneapolis, Minnesota.
Funds received after such time shall be deemed to have been received on the next
Business Day. The Agent will promptly distribute in like funds to each Bank its
Pro Rata Share of each payment of principal or interest applied to the Revolving
Notes, and each payment of Commitment Fees, Letter of Credit Fees or other
amounts received by the Agent for the account of the Banks. If the Agent does
not make any such distribution (or provide Federal Reserve Bank reference
numbers for the wire transfer of the amount thereof) by 3:00 P.M. (Minneapolis
time) on the date such payment of principal, interest or other amounts is
received or deemed received under this Section 2.21, the Agent will pay interest
to each Bank entitled to receive a portion of such distribution on the amount
distributable to it at the Federal Funds Rate from the date such payment was
received or deemed received until the date such distribution is made, such
interest to be payable with such distribution. Whenever any payment to be made
hereunder or on the Notes shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time, in the case of a payment of principal, shall be included
in the computation of any interest on such principal.
Section 2.22 USE OF LOAN PROCEEDS. The proceeds of the Loans shall
be used for the general corporate purposes of the Company and its Subsidiaries
in a manner not in conflict with any of the covenants in this Agreement.
-31-
<PAGE>
Section 2.23 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior
to the date for determining the Adjusted Eurodollar Rate in respect of the
Interest Period, any Bank reasonably determines (which determination shall be
conclusive and binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not
being made available to such Bank in the relevant market for such Interest
Period, or
(b) the Adjusted Eurodollar Rate will not adequately and fairly
reflect the cost to such Bank of funding or maintaining Eurodollar Advances
for such Interest Period,
such Bank shall forthwith give notice to the Agent and the Company and the other
Banks of such determination, whereupon the obligation of such Bank to make or
continue, or to convert any Advances to, Eurodollar Advances shall be suspended
until such Bank notifies the Company and the Agent that the circumstances giving
rise to such suspension no longer exist. While any such suspension continues,
all further Advances by such Bank shall be made as Reference Rate Advances. No
such suspension shall affect the interest rate then in effect during the
applicable Interest Period for any Eurodollar Advance outstanding at the time
such suspension is imposed.
Section 2.24 INCREASED COST. If, after the date hereof, any
Regulatory Change:
(a) shall subject any Bank (or its applicable lending office)
to any tax, duty or other charge with respect to its Eurodollar Advances,
its Note(s), its obligation to make Eurodollar Advances, its issuance of
Letters of Credit or its obligation to make Letter of Credit Loans, or
shall change the basis of taxation of payment to any Bank (or its
applicable lending office) of the principal of or interest on its
Eurodollar Advances, or any other amounts due under this Agreement in
respect of its Eurodollar Advances, its obligation to make Eurodollar
Advances, its obligation to issue Letters of Credit or its obligation to
make Letter of Credit Loans (except for changes in the rate of tax on the
overall net income of such Bank or its applicable lending office imposed by
the jurisdiction in which such Bank's principal office or applicable
lending office is located); or
(b) shall impose, modify or deem applicable any reserve,
special deposit, capital requirement or similar requirement (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding with respect to any Eurodollar
Advance any such requirement to the extent included in calculating the
applicable
-32-
<PAGE>
Adjusted Eurodollar Rate) against assets of, deposits with or for the
account of, or credit extended by, any Bank's applicable lending office or
shall impose on any Bank (or its applicable lending office) or on the
interbank eurodollar market any other condition affecting its Eurodollar
Advances, its Note(s), its obligation to make Eurodollar Advances, its
obligation to issue Letters of Credit or its obligations to make Letter of
Credit Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its applicable lending office) of making or maintaining any Eurodollar Advance,
issuing or maintaining Letters of Credit or making Letter of Credit Loans, or to
reduce the amount of any sum received or receivable by such Bank (or its
applicable lending office) under this Agreement or under its Note(s), then,
within 30 days after demand by such Bank (with a copy to the Agent), the Company
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction. Each Bank will promptly notify the
Company and the Agent of any Regulatory Change of which it has knowledge,
occurring after the date hereof, which will entitle such Bank to compensation
pursuant to this Section 2.24 and will designate a different applicable lending
office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank claiming compensation
under this Section 2.24, setting forth the additional amount or amounts to be
paid to it hereunder and stating in reasonable detail the basis for the charge
and the method of computation, shall be conclusive in the absence of error. In
determining such amount, any Bank may use any reasonable averaging and
attribution methods. The Company shall not be obligated to pay any such amount
that is attributable to the period ending 91 days prior to the date of the first
notice delivered by any Bank under the third preceding sentence with respect to
any Regulatory Change (the "Excluded Period"), except to the extent any amount
is attributable to the Excluded Period as a result of the retroactive
application of the applicable Regulatory Change. Failure on the part of any
Bank to demand compensation for any increased costs or reduction in amounts
received or receivable with respect to any Interest Period or other applicable
period shall not constitute a waiver of such Bank's rights to demand
compensation for any increased costs or reduction in amounts received or
receivable in any subsequent Interest Period or other applicable period.
Section 2.25 ILLEGALITY. If, after the date of this Agreement, any
Regulatory Change shall make it unlawful or impossible for such Bank to make,
maintain or fund any Eurodollar Advances, such Bank shall notify the Company and
the Agent, whereupon the obligation of such Bank to make or continue, or to
convert any Advances to, Eurodollar Advances shall be suspended until such Bank
notifies the Company and the Agent that the circumstances giving rise to such
suspension no longer exist. Before giving any such notice, such Bank shall
designate a different
-33-
<PAGE>
applicable lending office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank determines that it may not lawfully
continue to maintain any Eurodollar Advances to the end of the applicable
Interest Periods, all of the affected Advances shall be automatically converted
to Reference Rate Advances as of the date of such Bank's notice, and upon such
conversion the Company shall indemnify such Bank in accordance with Section
2.27.
Section 2.26 CAPITAL ADEQUACY. In the event that any Bank shall have
reasonably determined that any Regulatory Change has or shall have the effect of
reducing the rate of return on such Bank's capital or the capital of its parent
corporation as a consequence of its Commitment, the Advances and/or the Letters
of Credit or its obligations to make Loans to cover Unpaid Draws to a level
below that which such Bank or its parent corporation could have achieved but for
such Regulatory Change (taking into account such Bank's policies and the
policies of its parent corporation with respect to capital adequacy), then the
Company shall, within ten days after written notice and demand from such Bank
(with a copy to the Agent), pay to such Bank additional amounts sufficient to
compensate such Bank or its parent corporation for such reduction; PROVIDED,
that the Company shall not be obligated to pay any such additional amount (i)
unless such Bank shall first have notified the Company in writing that it
intends to seek such compensation pursuant to this Section 2.26 and (ii) that is
attributable to the period ending 91 days prior to the date of such notice with
respect to any Regulatory Change (the "Excluded Period"), except to the extent
any amount is attributable to the Excluded Period as a result of the retroactive
application of the applicable Regulatory Change. Any determination by such Bank
under this Section and any certificate as to the amount of such reduction given
to the Company by such Bank shall be final, conclusive and binding for all
purposes, absent error.
Section 2.27 FUNDING LOSSES. The Company shall compensate each Bank,
upon its written request, for all losses, expenses and liabilities (including,
without limitation, any interest paid by such Bank to lenders of funds borrowed
by it to make or carry Eurodollar Advances to the extent not recovered by such
Bank in connection with the re-employment of such funds and including loss of
anticipated profits) which such Bank may sustain: (a) if for any reason, other
than a default by such Bank, a funding of a Eurodollar Advance does not occur on
the date specified therefor in the Company's request or notice as to such
Advance under Section 2.02 or 2.05, or (b) if, for whatever reason (including,
but not limited to, acceleration of the maturity of Advances following an Event
of Default), any repayment or prepayment of a Eurodollar Advance, or a
conversion pursuant to Section 2.25, occurs on any day other than the last day
of the Interest Period applicable thereto. A Bank's request for compensation
shall set forth the basis for the amount requested and shall be final,
conclusive and binding, absent error.
-34-
<PAGE>
Section 2.28 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Each Bank
shall be entitled to fund and maintain its funding of Eurodollar Advances in any
manner it may elect, it being understood, however, that for the purposes of this
Agreement all determinations hereunder (including, but not limited to,
determinations under Section 2.27, but excluding determinations of the
Eurodollar Rate that the Agent may elect to make from the Reuters screen) shall
be made as if such Bank had actually funded and maintained each Eurodollar
Advance during the Interest Period for such Advance through the purchase of
deposits having a maturity corresponding to the last day of the applicable
Interest Period and an interest rate equal to the Eurodollar Rate.
Section 2.29 SETOFF. Whenever an Event of Default shall have
occurred and be continuing, the Company hereby irrevocably authorizes each Bank
to set off the Obligations owed to it (including, without limitation, any
participation in the Obligations of other Banks purchased pursuant to Section
7.10 or 7.11) against all deposits and credits of the Company with, and any and
all claims of the Company against, such Bank. Such right shall exist whether or
not the Agent shall have made any demand hereunder or under any other Loan
Document, whether or not such indebtedness, or any part thereof, or deposits and
credits held for the account of the Company is or are matured or unmatured, and
regardless of the existence or adequacy of any collateral, guaranty or any other
security, right or remedy available to the Banks. Each Bank agrees that, as
promptly as is reasonably possible after the exercise of any such setoff right,
it shall notify the Agent and the Company of its exercise of such setoff right;
PROVIDED, HOWEVER, that the failure of any Bank to provide such notice shall not
effect the validity of the exercise of such setoff rights. Nothing in this
Agreement shall be deemed a waiver or prohibition of or restriction on any
rights of banker's lien, setoff and counterclaim available to any Bank pursuant
to law.
Section 2.30 EARLY TERMINATION OF COMMITMENTS. Unless the Company
shall provide to the Agent, on or before March 1, 1997, evidence satisfactory to
the Agent that either (a) Conquest has entered into a "Credit Agreement" (as
defined in the Master Lease Agreement) with a commitment termination date and a
maturity date no earlier than September 30, 1998, and with terms such that
(unless an event of default shall occur thereunder) Conquest will not be
entitled to exercise its rights under Section 14 of the Master Lease Agreement
with respect to any "Property" or "Equipment" (as such terms are defined in the
Master Lease Agreement) prior to September 30, 1998, or (b) the Company or a
Subsidiary has entered into an agreement to lease the properties subject to the
Agreement for Lease and the Master Lease Agreement as of the Signing Date with a
termination date no earlier than September 30, 1998 and on terms in all other
respects reasonably satisfactory to the Majority Banks, the Commitments shall
terminate on June 30, 1997.
-35-
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01 CONDITIONS PRECEDENT TO INITIAL LOAN. The obligation of
the Banks to make the initial Loans hereunder, and the obligation of First Bank
to issue the initial Letter of Credit hereunder, shall be subject to the prior
or simultaneous fulfillment of each of the following conditions:
(a) the Agent shall have received the following:
(i) Revolving Notes payable to the Banks and a
Swing-Line Note payable to First Bank, duly executed by the Company,
complying with the requirements of Section 2.04;
(ii) a copy of the articles or certificate of
incorporation, including all amendments thereto, of the Company,
certified as of a recent date prior to the Effective Date by the
appropriate governmental official of the jurisdiction of its
incorporation;
(iii) a long-form certificate of good standing of the
Company, as of a recent date, from such governmental official;
(iv) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Effective Date, certifying (A) that
attached thereto is a true and complete copy of the by-laws of the
Company as in effect on such date, (B) that attached thereto is a true
and complete copy of resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of the Loan Documents and the borrowings thereunder, and
that such resolutions have not been modified, rescinded or amended and
are in full force and effect, (C) that the articles of incorporation
of the Company have not been amended since the date of the last
amendment thereto shown on the certificate of good standing furnished
pursuant to Section 3.01(a)(iii), and (D) as to the incumbency and
specimen signature of each officer executing any Loan Document or any
other document delivered in connection herewith or therewith on behalf
of the Company;
(v) the favorable written opinion of Robins, Kaplan,
Miller & Ciresi, counsel for the Company, addressed to the Banks, as
to the matters and to the effect set forth in Exhibit F;
(vi) a copy of a letter from the Company to the
-36-
<PAGE>
accounting firm that audited the financial statements referred to in
Section 4.05, informing such accounting firm that the Banks are
extending credit in reliance on such statements;
(vii) an initial Borrowing Base Certificate; and
(viii) an Acknowledgement substantially in the form of
Exhibit H hereto from each of the Exiting Banks, executed by such
Exiting Bank.
(b) the Agent and the Banks shall have received all fees and
other amounts due and payable by the Company to the Agent and the Banks
under, or as contemplated by, this Agreement or any other Loan Document on
or prior to the Effective Date, including, but not limited to, the
reasonable fees and expenses of counsel to the Agent payable pursuant to
Section 8.03(a); and
(c) the Company shall have performed and complied with all
agreements, terms and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or simultaneously with
the Effective Date.
Section 3.02 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of
the Banks to make all Loans (including the initial Loan) other than Letter of
Credit Loans, to continue any Eurodollar Advances as such or to convert any
outstanding Advances to Eurodollar Advances, and the obligation of First Bank to
issue Letters of Credit, shall be subject to the fulfillment of the following
conditions:
(a) the representations and warranties contained in Article IV
shall be true and correct on and as of the date on which each Loan is
requested to be made, on which each Advance is requested to be continued or
converted or on which each Letter of Credit is requested to be issued, with
the same force and effect as if made on and as of such date, and the giving
of the relevant Notice of Borrowing, Continuation or Conversion or the
making of the relevant request for the issuance of a Letter of Credit shall
constitute a representation and warranty to such effect;
(b) no Event of Default or Unmatured Event of Default shall have
occurred and be continuing on the Borrowing Date or would exist after
giving effect to the making of the requested Loan, the requested
continuation or conversion of an Advance or the issuance of the requested
Letter of Credit; and
(c) the Agent shall have received a timely and properly
-37-
<PAGE>
completed Notice of Borrowing, Continuation or Conversion, as required
under Section 2.02 or Section 2.05, or First Bank shall have received a
timely and properly completed written request for the issuance of a Letter
of Credit, as required under Section 2.09.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement, to grant their
respective Commitments and to make Loans thereunder, and to induce First Bank to
issue Letters of Credit and Swing-Line Loans hereunder, the Company hereby
represents and warrants to the Banks that:
Section 4.01 ORGANIZATION, STANDING, ETC. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now conducted, to enter into
this Agreement and to perform its obligations under each Loan Document to which
it is a party. Each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all requisite power and authority to carry on its business as now
conducted. The Company and each Subsidiary (a) holds all certificates of
authority, licenses and permits necessary to carry on its business as presently
conducted in each jurisdiction in which it is carrying on such business, except
where the failure to hold such certificates, licenses or permits would not have
a Material Adverse Effect, and (b) is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character of the
properties owned, leased or operated by it or the business conducted by it makes
such qualification necessary and the failure so to qualify would permanently
preclude it from enforcing its rights with respect to any assets or expose it to
any liability, which in either case would be material to it.
Section 4.02 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of each Loan Document have been duly authorized by
all necessary corporate action, and this Agreement and each other Loan Document
constitutes the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its respective terms, subject to
limitations as to enforceability which might result from bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally and
general principles of equity.
Section 4.03 COMPLIANCE WITH LAW AND OTHER AGREEMENTS. The
execution, delivery and performance by the Company of each Loan Document to
-38-
<PAGE>
which it is a party will not (a) violate any provision of any law, statute, rule
or regulation or any order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority applicable to the Company, (b) violate or
contravene any provision of the Articles or Certificate of Incorporation or
bylaws of the Company, or (c) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which the Company or any Subsidiary is a party or by which the
Company, any Subsidiary or any of their properties may be bound, or result in
the creation of any Lien thereunder. Neither the Company nor any Subsidiary is
in default under or in violation of any law, statute, rule or regulation, order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority applicable to it or any indenture, loan or credit agreement or other
agreement, lease or instrument to which it is a party or by which it or any of
its properties may be bound in any case in which the consequences of such
default or violation would have a Material Adverse Effect.
Section 4.04 GOVERNMENTAL CONSENT. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any Governmental Authority is required on the part of the
Company to authorize, or is required in connection with, the execution, delivery
and performance of, or the legality, validity, binding effect or enforceability
of, the Loan Documents.
Section 4.05 FINANCIAL STATEMENTS AND NO MATERIAL ADVERSE CHANGE.
The Company's audited financial statements as of February 25, 1995, and its
consolidated unaudited financial statements as of May 27, 1995, as heretofore
furnished to the Banks, have been prepared in conformity with GAAP on a
consistent basis (except for year-end audit adjustments as to the unaudited
statements) and fairly present the consolidated financial condition of the
Company as at such dates and the results of its operations and cash flow for the
respective periods then ended. As of the dates of such financial statements,
neither the Company nor any Subsidiary had any material obligation, contingent
liability, liability for taxes or long-term lease obligations or unusual forward
or long-term commitment which is not either reflected in such financial
statements or in the notes thereto. Since the date of the Company's audited
financial statements referred to above, there has been no material adverse
change in the business, operations, property, assets or condition, financial or
otherwise, of the Company or any Subsidiary.
Section 4.06 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their properties before any arbitrator or any
Governmental Authority which has had, or, if determined adversely to the Company
or such Subsidiary, would likely have, a Material Adverse Effect.
-39-
<PAGE>
Section 4.07 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event has occurred and is continuing with
respect to any Plan. All of the minimum funding standards applicable to such
Plans have been satisfied and there exists no event or condition which would
permit the institution of proceedings to terminate any Plan under Section 4042
of ERISA. The current value of the Plans' benefits guaranteed under Title IV of
ERISA does not exceed the current value of the Plans' assets allocable to such
benefits. As of the Signing Date, neither the Company nor any ERISA Affiliate
is a party to or has any liability to any Multiemployer Plan.
Section 4.08 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not
exist any violation by the Company or any Subsidiary of any applicable federal,
state or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental,
pollution, health or safety matters which will or threatens to impose a material
liability on the Company or a Subsidiary or which would require a material
expenditure by the Company or such Subsidiary to cure. Neither the Company nor
any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to have a Material Adverse Effect on the Company.
Section 4.09 FEDERAL RESERVE REGULATIONS. The Company 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 and no part of the
proceeds of any Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, (a) to purchase or carry margin stock
or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund indebtedness originally incurred for such purpose or (b) for
any purpose which entails a violation of, or which is inconsistent with, the
provisions of Regulations G, U or X. The value of all margin stock owned by the
Company does not constitute more than 25% of the value of the assets of the
Company.
Section 4.10 TITLE TO PROPERTY; POSSESSION UNDER LEASES. Each of the
Company and its Subsidiaries has good title, free of all Liens other than those
permitted by Section 5.12 hereof, to all of the properties and assets reflected
in the most recent financial statements referred to in Section 4.05 or Section
5.01 hereof as being owned by it and all assets acquired subsequent to the date
of such financial
-40-
<PAGE>
statements, except for assets disposed of in the ordinary course of business.
To the knowledge of the Company, there are no actual, threatened or alleged
material defaults with respect to any leases of any real or personal property
under which the Company or any of its Subsidiaries is lessor.
Section 4.11 TAXES. The Company and its Subsidiaries have filed all
federal, state, local and foreign tax returns required to be filed by them and
have paid or made provision for the payment of all taxes due and payable
pursuant to such returns and pursuant to any assessments made against them or
any of their property and all other taxes, fees and other charges imposed on
them or any of their property by any Governmental Authority (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 adequate
reserves have been set aside on the books of the Company or such Subsidiary in
conformity with GAAP). No tax Liens have been filed and no material claims are
being asserted with respect to any such taxes, fees or charges. The charges,
accruals and reserves on the books of the Company and each Subsidiary in respect
of taxes and other governmental charges are adequate and the Company knows of no
proposed material tax assessment against it or any Subsidiary or any basis
therefor. The United States income tax returns of the Company and its
Subsidiaries have been audited by the Internal Revenue Service, or the period
for audit thereof has expired, for all fiscal years of the Company ending on or
before March 31, 1992.
Section 4.12 TRADEMARKS, PATENTS. Each of the Company and its
Subsidiaries possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others
except conflicts that would not be likely to have a Material Adverse Effect on
the Company.
Section 4.13 BUSINESS AND PROPERTIES OF COMPANY AND ITS SUBSIDIARIES.
Since the date of the most recent financial statements referred to in Section
4.05 or Section 5.01, the business, properties and other assets of the Company
and its Subsidiaries have not been materially and adversely affected in any way
as the result of any fire or other casualty, strike, lockout, or other labor
trouble, embargo, sabotage, confiscation, condemnation, riot, civil disturbance,
activity of armed forces or act of God.
Section 4.14 SECURITIES LAWS. Neither the Company nor any Subsidiary
has issued any unregistered securities in violation of the registration
requirements of Section 5 of the Securities Act of 1933, as amended, or any
other federal, state or foreign law, nor is the Company or any Subsidiary
violating any rule, regulation or requirement under the Securities Act of 1933,
as amended, or the Securities Exchange
-41-
<PAGE>
Act of 1934, as amended, or other federal, state or foreign law in any material
respect.
Section 4.15 INVESTMENT COMPANY ACT. The Company is not an
"investment company" or a company "controlled" by an investment company within
the meaning of the Investment Company Act of 1940, as amended.
Section 4.16 PUBLIC UTILITY HOLDING COMPANY ACT. The Company is not
a "holding company" or a "subsidiary company" of a holding company or an
"affiliate" of a holding company or of a subsidiary company of a holding company
within the meaning of the Public Utility Holding Company Act of 1940, as
amended.
Section 4.17 RETIREMENT BENEFITS. Except as required under Section
4980B of the Code, Section 601 of ERISA or applicable state law, neither the
Company nor any Subsidiary is obligated to provide post-retirement medical or
insurance benefits with respect to employees or former employees.
Section 4.18 INDEBTEDNESS. The Company and its Subsidiaries have no
outstanding Indebtedness except Indebtedness permitted pursuant to Section 5.13.
Section 4.19 SUBSIDIARIES. Schedule 4.19 sets forth the name of each
of the Company's Subsidiaries as of the Signing Date and, as to each
Subsidiary, the jurisdiction of its incorporation, the authorized and
outstanding capital stock thereof by class and number, the name of each Person
owning such capital stock and a description (by type and amount) of each
Investment by the Company therein other than the ownership of its capital stock.
There are no warrants, options or other rights to purchase any such capital
stock.
Section 4.20 SENIOR INDEBTEDNESS. All of the Obligations (including,
without limitation, all contingent Obligations in respect of outstanding Letters
of Credit) are entitled to the benefit of all of the subordination provisions
applicable to all Subordinated Indebtedness.
Section 4.21 FULL DISCLOSURE. Subject to the following sentence,
neither the financial statements referred to in Section 4.05 or Section 5.01 nor
any other certificate, written statement, exhibit or report furnished by or on
behalf of the Company in connection with or pursuant to this Agreement contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
Certificates or statements furnished by or on behalf of the Company to the Agent
or any Bank consisting of projections or forecasts of future results or events
have been prepared in good faith and are based on good faith estimates and
assumptions of the management of the Company, and the Company has no reason to
believe that such projections or forecasts are not reasonable.
-42-
<PAGE>
ARTICLE V
COVENANTS
Until the Commitments shall have expired or been terminated and all of
the Obligations shall have been paid in full, unless the Majority Banks shall
otherwise consent in writing, the Company will:
Section 5.01 FINANCIAL STATEMENTS. Furnish to the Agent, with a copy
for each Bank:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, a copy of the consolidated and
consolidating financial statements of the Company consisting of at least
statements of income, a reconciliation of changes in equity accounts and
cash flow statements for such fiscal year and balance sheets as at the end
of such fiscal year, setting forth in each case in comparative form
corresponding figures from the preceding year audit, certified without
qualification by Ernst & Young or other independent certified public
accountants of recognized national standing selected by the Company and
acceptable to the Agent, together with (i) to the extent not previously
delivered to such accounting firm under the terms hereof, a letter from the
Company to such accounting firm advising such accounting firm that the
Banks are extending credit in reliance on such financial statements and
(ii) a statement of the accounting firm performing such audit to the effect
that in the course of performing its examination nothing came to its
attention that caused it to believe that the Company was not in compliance
with Sections 5.21, 5.22, 5.23 or 5.24;
(b) as soon as available and in any event within (i) in the case
of the last fiscal month of each year, 60 days and (ii) in all other cases,
30 days after the end of each month, a copy of the unaudited consolidated
and consolidating financial statements of the Company consisting of at
least statements of income for said month and for the period from the
beginning of the fiscal year to the end of such month, cash flow statements
for such month and for the period from the beginning of the fiscal year to
the end of such month and balance sheets as at the end of such month,
setting forth, in each case, comparative figures for the corresponding
period of the preceding fiscal year and forecasted figures for such period,
certified by the chief financial officer of the Company or his designee as
being true and prepared in accordance with GAAP, except for year-end audit
adjustments and the absence of footnotes;
-43-
<PAGE>
(c) as soon as available and in any event within (i) in the case
of the last fiscal quarter of each year, 60 days and (ii) in all other
cases, 30 days after the end of each fiscal quarter, and together with the
financial statements required pursuant to Section 5.01(a), a properly
completed Compliance Certificate, signed by the Senior Vice President and
Treasurer of the Company or his designee;
(d) as soon as available and in any event within ten days after
the end of each week during which any Loans or Letters of Credit are
outstanding, and in all events prior to the making of any Loans or the
issuance of any Letters of Credit for the second week prior to the week in
which the Company requested the making of such Loans or the issuance of
such Letters of Credit, a properly completed Borrowing Base Certificate as
of the end of such week, signed by the chief financial officer of the
Company or his designee;
(e) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which the Company or any Subsidiary
shall file with the Securities and Exchange Commission or any national
securities exchange;
(f) as soon as practicable and in any event on or before the
last Business Day of the second month of each fiscal year of the Company,
projections, in reasonable detail, on a monthly basis for such fiscal year,
including projected earnings statements and cash flow statements for each
month during such fiscal year and the period from the beginning of such
fiscal year through the end of such month, and accompanying balance sheets
as of the end of such month, signed by the chief financial officer of the
Company or his designee; and
(g) such other information respecting the financial condition
and results of operations of the Company as the Agent or any Bank may from
time to time reasonably request.
Section 5.02 CORPORATE EXISTENCE. Except as permitted by Section
5.11(b), maintain, and cause each Subsidiary to maintain, its corporate
existence in good standing under the laws of its jurisdiction of incorporation
and its qualification to transact business in each jurisdiction where failure so
to qualify would permanently preclude the Company or such Subsidiary from
enforcing its rights with respect to any material asset or would expose the
Company or such Subsidiary to any material liability, and do or cause to be
done, and cause each Subsidiary to do or cause to be done, all things necessary
to obtain, preserve, renew, extend and keep in full force and effect the rights,
licenses, permits, franchises and authorizations
-44-
<PAGE>
material to the conduct of its business.
Section 5.03 COMPLIANCE WITH LAWS, ETC. Comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws, rules,
regulations and orders of any Governmental Authority applicable to the Company
or such Subsidiary, whether now in effect or hereafter enacted, the failure to
comply with which has had or would likely have a Material Adverse Effect on the
Company.
Section 5.04 INSURANCE. Keep, and cause each Subsidiary to keep, its
insurable properties adequately insured at all times by financially sound and
reputable insurers; maintain, and cause each Subsidiary to maintain, such other
insurance, in such amounts and against such risks, as is customary with
companies in the same or similar businesses, including (i) public liability
insurance against such tort claims which may be asserted against it, and (ii)
fire and other risks insured against by extended coverage; and maintain, and
cause each Subsidiary to maintain, such other insurance as may be required by
law or agreement.
Section 5.05 PAYMENT OF INDEBTEDNESS, TAXES AND CLAIMS. Pay, and
cause each of its Subsidiaries to pay, its Indebtedness and other obligations
promptly and in accordance with their terms; file, and cause each of its
Subsidiaries to file, all tax returns and reports which are required by law to
be filed by it; pay, and cause each of its Subsidiaries to 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
but not limited to 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; PROVIDED that the foregoing items need not be paid
if they are being contested in good faith by appropriate proceedings, and as
long as the Company's or such Subsidiary's title to its property is not
materially adversely affected, its use of such property in the ordinary course
of its business is not materially interfered with and adequate reserves with
respect thereto have been set aside on the Company's or such Subsidiary's books
in conformity with GAAP.
Section 5.06 BOOKS AND RECORDS; INSPECTIONS; AUDITS. Keep, and cause
each Subsidiary to keep, proper books and records of account in which full, true
and correct entries will be made of all its dealings, business and affairs in
accordance with GAAP consistently applied and consistent with the principles
applied in the preparation of the financial statements referred to in Section
4.05; permit, and cause each Subsidiary to permit, any Person designated by any
Bank to visit and inspect any of its properties, corporate books and financial
records and to copy and make extracts therefrom and to discuss its affairs and
finances with its officers and independent certified public accountants, all at
such times as such Bank shall reasonably request; and permit the Agent or its
designee to conduct regular annual
-45-
<PAGE>
audits of the Company's inventory. The Agent shall provide to each of the Banks
a copy of the report prepared by or for the Agent concerning such regular annual
audits. The Company shall reimburse the Agent for its costs and expenses of
conducting the regular annual audits of the Company's inventory described in the
second preceding sentence.
Section 5.07 MAINTENANCE OF PROPERTIES. Maintain, and cause each
Subsidiary to maintain, its properties used or useful in the conduct of its
business 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.
Section 5.08 ERISA. Establish, maintain and operate each Plan in
compliance with all material applicable requirements of ERISA and of the Code
and with all material applicable rulings and regulations issued under the
provisions of ERISA and of the Code, and will not, and will not permit any ERISA
Affiliate to, (a) engage in any transaction in connection with which the Company
or any ERISA Affiliate would be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code, in either case in an amount exceeding $10,000, (b) fail to make full
payment when due of all amounts which, under the provisions of any Plan, the
Company or any ERISA Affiliate is required to pay as contributions thereto, or
permit to exist any accumulated funding deficiency (as such term is defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, with
respect to any Plan in an aggregate amount exceeding $100,000 or (c) fail to
make any payments in an aggregate amount exceeding $100,000 to any Multiemployer
Plan that the Company or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.09 LITIGATION AND OTHER NOTICES. Furnish to the Agent,
with a copy for each Bank, written notice of the following promptly after any
officer of the Company or any Subsidiary becomes aware of the same:
(a) any Event of Default or Unmatured Event of Default,
specifying the nature and extent thereof and the corrective action (if any)
proposed to be taken with respect thereto;
(b) the filing or commencement of, or receipt of notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Company or any Subsidiary which has had or would
likely have a Material Adverse Effect on the Company;
-46-
<PAGE>
(c) any development affecting or relating to the Company or any
Subsidiary, including without limitation any development in litigation,
that in the reasonable judgment of the Company has had, or would likely
have, a Material Adverse Effect on the Company;
(d) the issuance by any Governmental Authority of any
injunction, order, decision or other restraint prohibiting, or having the
effect of prohibiting, the Loans or Letters of Credit, or the initiation of
any litigation or similar proceeding seeking any such injunction, order or
other restraint;
(e) the occurrence of any Reportable Event with respect to any
Plan and the action which is proposed to be taken with respect thereto,
together with a copy of the notice of such Reportable Event to the PBGC;
(f) any violation as to any environmental matter by the Company
or any Subsidiary or the commencement of any judicial or administrative
proceeding relating to health, safety or environmental matters (i) in which
an adverse determination or result could result in the revocation of or
have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other permits
held by the Company or any Subsidiary which are material to the operations
of the Company or such Subsidiary, or (ii) which will or threatens to
impose a material liability on the Company or such Subsidiary to any Person
or which will require a material expenditure by the Company or such
Subsidiary to cure any alleged problem or violation; or
(g) the issuance by any Governmental Authority of any
injunction, order or decision, or the entry by the Company or any
Subsidiary into an agreement with any Governmental Agency, materially
restricting the business of the Company or any Subsidiary or concerning any
material business practice of the Company or any Subsidiary.
Section 5.10 SUPPLEMENTAL DISCLOSURE. From time to time as may be
necessary (in the event that such information is not otherwise delivered by the
Company to the Banks pursuant to this Agreement), as promptly as is reasonable
under the circumstances after any executive officer of the Company or any
Subsidiary has knowledge with respect thereto, and at least quarterly,
supplement or amend and deliver to the Agent, with a copy for each Bank, each
Schedule or representation herein with respect to any matter hereafter arising
which, if existing or occurring at the Signing Date, would have been required to
be set forth or described in such Schedule or as an exception to such
representation or which is necessary to correct any information in such Schedule
or representation which has been rendered inaccurate thereby.
-47-
<PAGE>
Section 5.11 RESTRICTIONS ON FUNDAMENTAL CHANGES. Not, and not
permit any Subsidiary to:
(a) engage in any business activities or operations
substantially different from or unrelated to those in which it is engaged
on the Signing Date;
(b) enter into any transaction of merger or consolidation or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), except for the merger of any Subsidiary with and into the
Company or any other Subsidiary;
(c) convey, sell, lease, transfer or otherwise dispose of (or
enter into any commitment to convey, sell, lease, transfer or otherwise
dispose of), in one or more transactions, all or any part of its business
or assets, whether now owned or hereafter acquired, other than the sale of
inventory and private label credit card receivables in the ordinary course
of business, except (i) the Company may sell the store properties (but not
any equipment other than building fixtures), provided that such store
properties are leased back to the Company and that no Event of Default or
Unmatured Event of Default exists or would exist as a result of such sale
and lease back and (ii) in addition, the Company and its Subsidiaries may
dispose of any of their respective assets if, after giving effect to any
such disposal, the aggregate book value of all assets disposed of by the
Company and its Subsidiaries during the period from the Signing Date to the
Termination Date (other than inventory sold in the ordinary course of
business) does not exceed, on a cumulative basis at the time of any such
disposition, ten percent of the Company's Tangible Net Worth as of the end
of the preceding fiscal year;
(d) acquire by purchase or otherwise all or substantially all
the business or property of, or stock or other evidence of beneficial
ownership of, any Person; or
(e) create, acquire or own any Subsidiary other than (i) the
Subsidiaries listed on Schedule 4.19, (ii) Operating Subsidiaries created
or acquired after the Signing Date, provided that (A) all of the issued and
outstanding shares of each class of capital stock of each such Operating
Subsidiary is owned, directly or indirectly, by the Company and (B) each
such Operating Subsidiary shall have executed and delivered to the Agent a
guaranty of the Obligations in the form of Exhibit G hereto, together with
such certificates and opinions as the Agent may reasonably request in
connection therewith, and (iii) Real Estate Subsidiaries created after the
Signing Date.
-48-
<PAGE>
Section 5.12 LIENS. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to be created, incurred or exist any Lien, or enter into
or make any commitment to enter into any arrangement for the acquisition of any
property through conditional sale, lease-purchase, or other title retention
agreements with respect to property now owned or hereafter acquired by the
Company or any Subsidiary, except:
(a) Liens existing on the Signing Date and described in Schedule
5.12, and Liens on the same property securing any Indebtedness the proceeds
of which are used solely to refinance the Indebtedness secured by such
existing Liens;
(b) deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, incurred in the ordinary course of business of the
Company;
(c) Liens for taxes, fees, assessments and governmental charges
not delinquent or which are being contested in good faith by appropriate
proceedings and for which whatever reserves required by GAAP have been
established;
(d) Liens consisting of easements, rights-of-way, zoning
restrictions, restrictions on the use of real property, and defects and
irregularities in the title thereto, landlords' liens and other similar
liens and encumbrances none of which interfere materially with the use of
the property covered thereby in the ordinary course of the business of the
Company or such Subsidiary and which do not materially detract from the
value of such properties;
(e) subject to the requirements of Section 5.17 and 5.25, Liens
created or assumed in connection with the acquisition of real or personal
property by the Company or any Subsidiary, provided that such Liens attach
only to the property acquired and secure only Indebtedness incurred solely
to finance the acquisition of such property, and Liens on the same property
securing any Indebtedness the proceeds of which are used solely to
refinance such Indebtedness;
(f) subject to the limitation set forth in Section 5.13(e),
Liens on inventory of the Company or any Subsidiary and proceeds thereof
pursuant to agreements with the suppliers of inventory or inventory lenders
to the Company or such Subsidiary, provided that such Liens secure only
Indebtedness incurred solely to finance the acquisition of Inventory by the
-49-
<PAGE>
Company or such Subsidiary; and
(g) subject to the requirements of Sections 5.17 and 5.25, Liens
on real property (but not any equipment other than building fixtures),
provided that such Liens secure only Indebtedness incurred solely to
finance, or reimburse the Company for the cost of, Capital Expenditures for
the acquisition or construction of such real property.
Section 5.13 INDEBTEDNESS. Not, and not permit any Subsidiary to,
incur, create, issue, assume or remain liable for any Indebtedness, except:
(a) the Obligations;
(b) other Indebtedness existing on the Signing Date and
described in Schedule 5.13, and Indebtedness the proceeds of which are used
solely to refinance such Indebtedness;
(c) Subordinated Indebtedness;
(d) Indebtedness secured by Liens permitted under Section
5.12(e) or Section 5.12(g);
(e) Indebtedness secured by Liens permitted under Section
5.12(f), provided the amount of such Indebtedness at any time outstanding
does not exceed thirty percent of the lower of cost (as determined on a
first-in, first-out basis) or market value of the Company's inventory;
(f) Indebtedness in respect of Documentary Letters of Credit
incurred in the ordinary course of business;
(g) from January 1 of any year until June 30 of such year,
unsecured Indebtedness of the Company in an amount not to exceed
$50,000,000; and
(h) current liabilities, other than for borrowed money, incurred
in the ordinary course of business.
Section 5.14 INVESTMENTS. Not, and not permit any Subsidiary to,
make or maintain any Investment, except:
(a) Investments existing on the Signing Date as described in
Schedule 5.14(a);
-50-
<PAGE>
(b) Investments in Operating Subsidiaries and Real Estate
Subsidiaries created or acquired after the Signing Date and permitted
pursuant to Section 5.11(e);
(c) Investments made in accordance with the Best Buy Co., Inc.
Investment Objectives and Policies set forth on Schedule 5.14(c);
(d) travel advances in the ordinary course of business to
officers and employees;
(e) other loans and advances made in connection with the hiring
or transfer of employees which, when added to loans and advances permitted
solely by this Section 5.14(e), do not exceed $2,000,000 in the aggregate
at any time outstanding;
(f) Investments, valued at cost, made in connection with the
acquisition of new store locations, subject to the requirements of Section
5.25;
(g) Investments in BBC in an amount not to exceed $2,000,000;
(h) Investments in Best Buy Capital, provided that Best Buy
Capital engages in no activities other than the issuance of MIPS and the
lending of the proceeds thereof, together with all or any part of such
Investments, to the Company; and
(i) Investments by Best Buy Capital in the MIPS Debenture.
Section 5.15 GUARANTEES. Not, and not permit any Subsidiary to, be
or become liable on any Guarantee, except (a) Guarantees of the Indebtedness of
BBC to Conquest under the Master Lease Agreement and the Agreement for Lease,
PROVIDED that the requirements of clause (b)(iii) of Section 5.26 are satisfied,
(b) Guarantees of the Indebtedness of Operating Subsidiaries and Real Estate
Subsidiaries created or acquired after the Signing Date as permitted pursuant to
Section 5.11(e), (c) Guarantees of the Obligations by Operating Subsidiaries as
contemplated by Section 5.11(e)(ii)(B), and (d) a subordinated Guaranty by the
Company of certain obligations of Best Buy Capital in respect of the MIPS;
PROVIDED, that the Company may not amend or cancel the subordination provisions
thereof.
Section 5.16 RESTRICTED PAYMENTS. Not make Restricted Payments if,
either before or after giving effect thereto, an Event of Default or Unmatured
Event of Default would have occurred or be continuing.
Section 5.17 GENERAL CAPITAL EXPENDITURES. Not, and not permit its
-51-
<PAGE>
Subsidiaries to, make General Capital Expenditures in an aggregate amount
exceeding $150,000,000 in any fiscal year of the Company.
Section 5.18 FEDERAL RESERVE REGULATIONS. Not use any part of the
proceeds of any Loan directly or indirectly (a) to purchase or carry margin
stock or to extend credit to others for the purpose of purchasing or carrying
margin stock or to refund Indebtedness originally incurred for such purpose or
(b) for any purpose which entails a violation of, or which is inconsistent with,
the provisions of Regulations G, U or X.
Section 5.19 ENVIRONMENTAL MATTERS. Observe and comply with, and
cause each Subsidiary to observe and comply with, all laws, rules, regulations
and orders of any government or government agency relating to health, safety,
pollution, hazardous materials or other environmental matters to the extent
non-compliance could result in a Material Adverse Effect on the Company.
Section 5.20 PAYMENT OF SUBORDINATED INDEBTEDNESS. Not, and not
permit any Subsidiary to: make any prepayment of principal of, or acquire,
redeem or otherwise retire (except, in the case of the MIPS Debenture,
retirement upon the conversion or exchange of all or any part of the MIPS
Debenture for common or preferred stock of the Company, and retirement of up to
five percent (5%) of the original principal balance of the MIPS Debenture for
cash after the conversion or exchange of the remaining balance thereof for
common or preferred stock of the Company after November, 1997), any Subordinated
Indebtedness; make any payment of principal or interest on any Subordinated
Indebtedness if an Event of Default or Unmatured Event of Default exists; amend
or cancel the subordination provisions thereof; take or omit to take any action
whereby the subordination of such indebtedness or any part thereof to the Notes
might be terminated, impaired or adversely affected; or omit to give the Banks
prompt written notice of any notice received from any holder of Subordinated
Indebtedness of any default under any agreement or instrument relating to any
Subordinated Indebtedness by reason whereof such Subordinated Indebtedness might
become or be declared to be due or payable.
Section 5.21 MINIMUM TANGIBLE NET WORTH. Not at any time permit
Tangible Net Worth to be less than the sum of (i) $550,000,000 PLUS (ii) for
each fiscal year of the Company ending after February 25, 1995, fifty percent of
the Company's consolidated net income for such fiscal year, if positive, PLUS
(iii) one hundred percent of the amount added to the net worth of the Company as
a result of the issuance and sale by the Company of additional shares of its
capital stock after the Signing Date.
Section 5.22 LEVERAGE RATIO. Not permit the Leverage Ratio at the
end
-52-
<PAGE>
of any fiscal year of the Company to exceed 2.00 to 1.00.
Section 5.23 INVENTORY TURNOVER RATIO. Not permit the Inventory
Turnover Ratio for any Measurement Period to be less than 4.50 to 1.00.
Section 5.24 INTEREST COVERAGE RATIO. Not permit the Interest
Coverage Ratio for any Measurement Period to be less than (a) in the case of the
Measurement Periods ending in August and November, 1995, 1.80 to 1.00, and (b)
in the case of any other Measurement Period, 2.00 to 1.00.
Section 5.25 OWNED LAND AND BUILDINGS. Not permit the sum of (a) the
aggregate amount of owned land and buildings of the Company and its Subsidiaries
PLUS (b) the amount owed by Conquest to the Company in respect of advances by
the Company to fund the acquisition or construction by Conquest of land and
buildings PLUS (c) without duplication, the amount of any Investments of the
type described in Section 5.14(f), to exceed the following amounts at the end of
the following fiscal quarters:
FISCAL QUARTERS ENDING AMOUNT
---------------------- ------
August and November, 1995 $200,000,000
Thereafter $150,000,000
Section 5.26 NEGATIVE PLEDGES. Not, and not permit any Subsidiary
to, enter into any agreement, bond, note or other instrument for the benefit of
any Person other than the Agent and the Banks that would (a) prohibit the
Company or such Subsidiary from granting, or otherwise limit the ability of the
Company or such Subsidiary to grant, any Lien on any of its property to the
Agent, for the benefit of the Banks, or to lenders providing credit facilities
to replace the Commitments or refinance the Obligations, except limitations
created in agreements creating Liens on, and applicable only to, property on
which a Lien is granted by the Company as permitted in Sections 5.12(e), (f) or
(g), or (b) require the Company or such Subsidiary to grant a Lien to any other
Person if the Borrower or such Subsidiary grants Liens to the Agent, for the
benefit of the Banks, or to lenders providing credit facilities to replace the
Commitments or refinance the Obligations, except for any such requirement for
the benefit of Conquest, provided (i) such requirement is for the grant of an
equal and ratable or junior Lien for the benefit of Conquest on the property
subject to a Lien in favor of the Agent or such replacement lenders, (ii) such
Lien will secure only the amount by which the liability of BBC to Conquest under
the Master Lease Agreement and the Agreement for Lease exceeds the amount
realized by Conquest from the disposition of real property owned by Conquest and
leased to BBC pursuant to the Master Lease Agreement, or eligible to be so
leased pursuant to
-53-
<PAGE>
the Agreement for Lease, and (iii) the sum of (A) the amount of Conquest's
Indebtedness and (B) all capital contributions to Conquest does not at any time
exceed $155,000,000.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.01 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default:
(a) the Company shall fail to make when due, whether by
acceleration of maturity, required prepayment or otherwise, any payment of
principal of or interest on the Notes, any reimbursement obligation in
respect of a draw under a Letter of Credit or any other Obligation required
to be paid to the Agent or any Bank pursuant to this Agreement or any other
Loan Document, or fails to make, when due, any deposit into the Holding
Account required hereunder; or
(b) any representation or warranty made by or on behalf of the
Company or any Subsidiary in this Agreement or any other Loan Document or
in any certificate, statement, report or document herewith or hereafter
furnished to the Agent or any Bank pursuant to this Agreement or any other
Loan Document 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; or
(c) the Company shall fail to preserve its corporate existence
under the laws of the jurisdiction of its incorporation or shall fail to
comply with any term, covenant or agreement contained in Sections 5.11,
5.12, 5.13, 5.14, 5.15, 5.16, 5.17, 5.18, 5.20, 5.21, 5.22, 5.23, 5.24,
5.25 or 5.26; or
(d) the Company shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement (other
than those hereinabove set forth in this Section 6.01) or any other Loan
Document and such failure to comply shall continue for 30 days after
whichever of the following dates is the earliest: (i) the date the Company
gives notice of such failure to the Agent, (ii) the date the Company should
have given notice of such failure to the Agent pursuant to Section 5.09, or
(iii) the date the Agent gives notice of such failure to the Company; or
(e) the Company or any Subsidiary shall become insolvent or
shall generally not pay its debts as they mature or shall apply for, shall
-54-
<PAGE>
consent to, or shall acquiesce in the appointment of a custodian, trustee
or receiver of the Company or any Subsidiary or for a substantial part of
the property of any of them or, in the absence of such application, consent
or acquiescence, a custodian, trustee or receiver shall be appointed for
the Company or any Subsidiary or for a substantial part of the property of
any of them or the Company or any Subsidiary shall make an assignment for
the benefit of creditors; or
(f) any bankruptcy, receivership, custodianship, reorganization,
debt arrangement or other proceedings under any bankruptcy or insolvency
law shall be instituted by or against the Company or any Subsidiary, and,
if instituted against the Company or any Subsidiary, shall have been
consented to or acquiesced in by the Company or such Subsidiary, as
applicable, or shall not have been dismissed within 60 days, or an order
for relief shall have been entered against the Company or such Subsidiary,
as applicable; or
(g) any dissolution or liquidation proceeding shall be
instituted by or against the Company or any Subsidiary and, if instituted
against the Company or any Subsidiary, shall be consented to or acquiesced
in by the Company or such Subsidiary or shall not have been dismissed
within 60 days; or
(h) one or more judgments for the payment of money in an
aggregate amount in excess of $5,000,000 shall be rendered against the
Company or any Subsidiary (unless such judgment is covered by insurance and
the insurer has offered to defend such judgment or acknowledged, in
writing, its liability with respect thereto) and the same shall remain
undischarged for a period of 60 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Company or any
Subsidiary to enforce any such judgment; or
(i) the Company or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of Indebtedness
in a principal amount aggregating in excess of $5,000,000, when and as the
same shall become due and payable (after giving effect to any applicable
grace period specified in the instrument evidencing or governing such
Indebtedness) or (ii) fail to observe or perform any other term, covenant
or instrument evidencing or governing such Indebtedness in a principal
amount aggregating in excess of $5,000,000 (after giving effect to any
applicable grace period specified in the instrument evidencing or governing
such Indebtedness) if the effect of any such failure is to cause, or to
permit the holder or holders of such
-55-
<PAGE>
Indebtedness or a trustee or other Person acting on behalf of such holder
or holders to cause, such Indebtedness to become due prior to its stated
maturity or to realize on any collateral given as security for such
Indebtedness; PROVIDED, HOWEVER, that any of the foregoing occurrences with
respect to any Indebtedness arising from the purchase of goods or services
by the Company that is being contested in good faith by appropriate
proceedings shall not constitute an Event of Default as long as the
Company's or such Subsidiary's title to any substantial part of its
property is not materially adversely affected, its use of such property in
the ordinary course of its business is not materially interfered with and
adequate reserves with respect thereto have been set aside on its books in
conformity with GAAP; or
(j) any execution or attachment shall be issued whereby any
substantial part of the property of the Company or any Subsidiary shall be
taken or attempted to be taken and the same shall not have been vacated or
stayed within 60 days after the issuance thereof; or
(k) (i) a Reportable Event as defined in Section 4043(b),
subdivision (5), of ERISA shall have occurred with respect to any Plan
subject to Title IV of ERISA (other than any Multiemployer Plan)
unless a waiver of the failure to meet minimum funding standards under
Section 412 of the Code shall have been timely applied for and shall
not have been denied; or
(ii) a Reportable Event as defined in Section 4043(b),
subdivision (6), of ERISA shall have occurred with respect to any Plan
subject to Title IV of ERISA (other than any Multiemployer Plan); or
(iii) the Company or any ERISA Affiliate shall have
engaged in any Prohibited Transaction and either (1) the Prohibited
Transaction shall not have been corrected within the correction period
applicable to it under Section 502(i) of ERISA or Section 4975(b) of
the Code, or (2) an exemption shall not be applicable or have been
obtained under Section 408 of ERISA or Section 4975 of the Code; or
(iv) the PBGC shall have terminated any Plan other than
any Multiemployer Plan under Title IV of ERISA or the Company or any
ERISA Affiliate shall have received notice from the PBGC of the
intention of the PBGC to terminate any such Plan or to appoint a
Trustee to administer any such Plan, which notice shall not have been
withdrawn within 14 days of the date thereof; or
(v) the Company or any ERISA Affiliate shall have
-56-
<PAGE>
voluntarily terminated any Plan subject to Title IV of ERISA (other
than a Multiemployer Plan), pursuant to a distress termination under
Title IV of ERISA; or
(vi) the Company or any ERISA Affiliate, as an employer
under a Multiemployer Plan, shall have made a complete or partial
withdrawal from such Multiemployer Plan;
and, upon the occurrence of any of the foregoing, the aggregate amount of
the Unfunded Liabilities of all Plans subject to Title IV of ERISA shall
exceed in the aggregate $2,000,000 or the Company shall incur liability in
excess of $2,000,000 in the aggregate.
Section 6.02 REMEDIES. If (x) any Event of Default described in
Section 6.01(e) or (f) shall occur, the Commitments shall automatically
terminate, the Obligations shall automatically become immediately due and
payable, the Company shall automatically become obligated to pay to First Bank,
for deposit in the Holding Account, an amount equal to the outstanding Letter of
Credit Usage as of such date and the Agent, at the direction of the Majority
Banks, may enforce all rights and exercise all remedies of the Agent or the
Banks under the Loan Documents and under applicable law, or (y) any other Event
of Default shall occur and be continuing, then, the Agent, at the direction of
the Majority Banks, may at any time and from time to time do any or all of the
following: (i) declare the Commitments terminated, whereupon the Commitments
shall be terminated, (ii) declare the Obligations to be forthwith due and
payable, whereupon the Obligations 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 the other
Loan Documents to the contrary notwithstanding, (iii) demand that the Company
pay to First Bank for deposit in the Holding Account an amount equal to the
outstanding Letter of Credit Usage as of the date of such demand, whereupon the
Company shall pay such amount to First Bank, and (iv) enforce all rights and
exercise all remedies of the Agent or the Banks under the Loan Documents and
under applicable law.
ARTICLE VII
THE AGENT
The following provisions shall govern the relationship of the Agent
with the Banks.
Section 7.01 APPOINTMENT AND AUTHORIZATION. Each Bank appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such
-57-
<PAGE>
respective powers under the Loan Documents as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably incidental thereto.
Neither the Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted to be taken by it under or in connection
with the Loan Documents, except for its own gross negligence or willful
misconduct. The Agent shall act as an independent contractor in performing its
obligations as Agent hereunder and nothing herein contained shall be deemed to
create any fiduciary relationship among or between the Agent, the Company or the
Banks.
Section 7.02 NOTE HOLDERS. The Agent may treat the payee of any Note
as the holder of the Obligations evidenced thereby until written notice of
transfer shall have been filed with it, signed by such payee and in form
satisfactory to the Agent.
Section 7.03 CONSULTATION WITH COUNSEL. The Agent may consult with
legal counsel selected by it and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
Section 7.04 LOAN DOCUMENTS. The Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, genuineness or value of any of
the Loan Documents or any other instrument or document furnished pursuant
thereto, and the Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be.
Section 7.05 FIRST BANK AND AFFILIATES. With respect to its
Commitment and the Loans made by it, First Bank shall have the same rights and
powers under the Loan Documents as any other Bank and may exercise the same as
though it were not the Agent consistent with the terms thereof, and First Bank
and its affiliates may accept deposits from, lend money to, issue Documentary
Letters of Credit for the account of and generally engage in any kind of
business with the Company as if it were not the Agent.
Section 7.06 ACTION BY AGENT. Except as may otherwise be expressly
stated in this Agreement, the Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, the Loan
Documents. The Agent shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such instructions shall be binding upon
all holders of Notes; PROVIDED, HOWEVER, that the Agent shall not be required to
take any action which exposes the Agent to personal liability or which is
contrary to the Loan Documents or applicable law. The Agent shall incur no
liability under or in respect of any of the Loan Documents by acting upon any
notice,
-58-
<PAGE>
consent, certificate, warranty or other paper or instrument believed by it to be
genuine or authentic or to be signed by the proper party or parties and to be
consistent with the terms of this Agreement.
Section 7.07 CREDIT ANALYSIS. Each Bank has made, and shall continue
to make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Company in
connection with entering into this Agreement and has made its own appraisal of
the creditworthiness of the Company. Except as explicitly provided herein, the
Agent has no duty or responsibility, either initially or on a continuing basis,
to provide any Bank with any credit or other information with respect to such
operations, business, property, condition or creditworthiness, whether such
information comes into its possession on or before the first Event of Default or
at any time thereafter.
Section 7.08 NOTICES OF EVENT OF DEFAULT, ETC. In the event that any
Bank shall have acquired actual knowledge of any Event of Default or Unmatured
Event of Default, other than as a result of its receipt of financial statements
delivered to it pursuant to Section 5.01, such Bank shall promptly give notice
thereof to the Agent. The Agent shall, promptly upon receipt of any such notice
provide a copy thereof to the other Banks. Upon receipt from any Bank of a
request that the Agent give notice to the Company of the occurrence of an Event
of Default or Unmatured Event of Default, the Agent shall promptly forward such
request to the other Banks and will take such action and assert such rights
under this Agreement and the other Loan Documents as the Majority Banks shall
direct in writing.
Section 7.09 INDEMNIFICATION. Each Bank agrees to indemnify the
Agent, as Agent (to the extent not reimbursed by the Company), according to such
Bank's Pro Rata Share, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on or
incurred by the Agent in any way relating to or arising out of the Loan
Documents or any action taken or omitted by the Agent under the Loan Documents,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct. No payment by any Bank under this Section 7.09 shall relieve the
Company of any of its obligations under this Agreement.
Section 7.10 PAYMENTS AND COLLECTIONS. All funds received by the
Agent in respect of any payments made by the Company on the Revolving Notes,
Commitment Fees or Letter of Credit Fees shall be distributed by the Agent among
the Banks on the date received or deemed received pursuant to Section 2.21, in
like currency and funds as received, ratably according to each Bank's Pro Rata
Share. If the Agent does not make any distribution on the date any such payment
is received
-59-
<PAGE>
or deemed received pursuant to Section 2.21, the Agent will pay interest to each
Bank entitled to receive a portion of such distribution on the amount
distributable to it at the Federal Funds Rate from such date until the date
distribution is made, such interest to be payable with such distribution. After
any Event of Default has occurred, all funds received by the Agent, whether as
payments by the Company or as realization on collateral or on any guaranties,
shall (except as may otherwise be required by law) be distributed by the Agent
in the following order: (a) first to the Agent or any Bank who has incurred
unreimbursed costs of collection with respect to any Indebtedness of the Company
hereunder, ratably to the Agent and each Bank in the proportion that the costs
incurred by the Agent or such Bank bear to the total of all such costs incurred
by the Agent and all Banks; (b) next to First Bank in payment of any Unpaid
Draws outstanding, to satisfy any requirement that the Company make payments to
First Bank for deposit in the Holding Account to cover any outstanding Letters
of Credit and for application on the Swing-Line Note; (c) next to the Banks (in
accordance with their respective Pro Rata Shares) for application on the
Revolving Notes; and (d) last to the Banks (in accordance with their respective
Pro Rata Shares) for any unpaid Commitment Fees or Letter of Credit Fees owing
by the Company hereunder. To the extent the Agent or any Bank receives any
payment on the Obligations, whether from the Company or otherwise, that is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such recovery, the Obligations originally intended to be satisfied
by such payment shall be revived and continued in full force and effect as if
such payment had not been received, and each Bank shall purchase from the Agent
or such Bank, for cash, at face value and without recourse, such participations
in the revived Obligations as shall be necessary to cause such revived
Obligations to be shared ratably among all of the Banks. The Agent or such
Bank, as the case may be, shall promptly notify the other Banks and, if
applicable, the Agent, of any such recovery.
Section 7.11 SHARING OF PAYMENTS. If any Bank shall receive and
retain any payment, voluntary or involuntary, whether by setoff, application of
deposit balance or security, or otherwise, in respect of Indebtedness under this
Agreement or the Notes in excess of such Bank's share thereof as determined
under this Agreement, then such Bank shall purchase from the other Banks for
cash and at face value and without recourse, such participation in the Notes
held by such other Banks as shall be necessary to cause such excess payment to
be shared ratably as aforesaid with such other Banks; PROVIDED, that if such
excess payment or part thereof is thereafter recovered from such purchasing
Bank, the related purchases from the other Banks shall be rescinded ratably and
the purchase price restored as to the portion of such excess payment so
recovered, but without interest.
Section 7.12 ADVICE TO BANKS. The Agent shall forward to the Banks
-60-
<PAGE>
copies of all notices, financial reports and other communications received
hereunder from the Company by it as Agent, excluding, however, notices, reports
and communications which by the terms hereof are to be furnished by the Company
directly to each Bank.
Section 7.13 SUCCESSOR AGENT. The Agent may resign at any time by
giving ten days written notice thereof to the Banks and the Company. The
Majority Banks may remove the Agent at any time with or without cause by giving
the Agent and the Company ten days written notice thereof. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Agent, which successor Agent shall (unless an Event of Default has
occurred and is continuing) be reasonably acceptable to the Company. If no
successor Agent shall have been so appointed and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of its
resignation or the removal of the retiring Agent, then the retiring Agent may,
on behalf of the Banks, appoint an Agent which shall be a Bank or a commercial
bank organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $100,000,000,
which successor Agent shall (unless an Event of Default has occurred and is
continuing) be reasonably acceptable to the Company. Any such resignation or
removal shall be effective upon the appointment of a successor Agent. Upon the
acceptance of any appointment as the Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations, under this Agreement and
the other Loan Documents. After the retiring Agent's resignation or removal
hereunder as the Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was acting
as the Agent under this Agreement and any other Loan Document.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 AMENDMENTS AND WAIVERS; NO WAIVER OF RIGHTS AND
REMEDIES.
(a) None of this Agreement, any Loan Document or any provision
hereof or thereof may be amended, modified or waived unless the same shall
be in writing signed by the Company and the Majority Banks; PROVIDED, that
no amendment, waiver or consent shall, unless in writing and signed by all
the Banks, do any of the following: (i) reduce the amount of the principal
of, or the amount of or rate of interest on, any Note or any Loan or any
fees or other amount payable hereunder, (ii) postpone any date fixed for
-61-
<PAGE>
any payment of principal of, or interest on, the Loans or any fees or other
amounts payable hereunder, (iii) amend the definition of "Pro Rata Share"
or "Majority Banks", (iv) amend Section 3.01 or Section 3.02, or (v) amend
this Section 8.01(a); PROVIDED, FURTHER, that, in addition to the foregoing
requirements, (A) no amendment, waiver or consent shall, unless in writing
and signed by the Agent in addition to the requisite Banks indicated above
to take such action, affect the rights or duties of the Agent under this
Agreement, (B) no amendment may increase any Bank's Commitment Amount
unless it is in writing and signed by such Bank, and (C) no amendment,
waiver or consent shall reduce the amount payable with respect to, or
postpone any date fixed for any payment with respect to, any draw under any
Letter of Credit or any Swing-Line Loan, or amend or modify Section
2.01(b), 2.02 (with respect to Swing-Line Loans), 2.03, 2.04 (with respect
to Swing-Line Loans), 2.05 (with respect to Swing-Line Loans), 2.09, 2.10,
2.11, 2.12, 2.13 or 2.14, unless it is in writing and signed by First Bank.
Any such amendment, modification or waiver or any other consent to any
departure from any such provision by the Company shall in any event be
effective only in the specific instance or for the specific purpose for
which given. No notice to, or demand on, the Company in any case shall
entitle the Company to any other or further notice or demand in similar or
other circumstances.
(b) No failure or delay on the part of the Agent or any Bank in
exercising, and no course of dealing with respect to, any right, power or
privilege hereunder or under any other Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or privilege, or any abandonment or discontinuance of the enforcement
thereof, preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies of the Agent
and the Banks hereunder and under any other Loan Document are cumulative
and not exclusive of any right or remedy which the Agent or any Bank
otherwise has.
Section 8.02 NOTICES. Except as otherwise specifically provided for
herein, all notices, requests, demands, instructions, consents, directions and
other communications provided for herein shall be in writing (including
teletransmission communication) and (unless otherwise required by applicable
law) shall be teletransmitted, mailed or delivered to the intended recipient at
the "Address for Notices" specified below its name on the signature pages
hereof; or at such other address as shall be designated by such party in a
notice to the other parties. All notices and other communications shall be
effective when transmitted by telecopier, delivered to the telegraph or cable
office or personally delivered or, in the case of a mailed notice or notice sent
by overnight courier, upon receipt thereof as conclusively evidenced by the
signed receipt therefor, in each case given or addressed as aforesaid, except
that notices to the Agent, First Bank or any Bank under the
-62-
<PAGE>
provisions of Article II shall not be effective until received by the Agent,
First Bank or such Bank.
Section 8.03 COSTS AND EXPENSES. The Company agrees to pay on
demand: (a) all out-of-pocket costs, expenses and fees incurred by the Agent in
connection with the negotiation, preparation, approval and execution and
delivery of the Loan Documents, including, without limitation, the reasonable
fees and expenses of Dorsey & Whitney, special counsel to the Agent, in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Loan Documents, the commitments relating thereto, the
transactions contemplated hereby and thereby and the satisfaction and attempted
satisfaction of conditions precedent hereunder, (b) the reasonable fees and
expenses of counsel for the Agent in connection with any amendment, modification
or waiver of any of the terms of this Agreement or any of the other Loan
Documents and (c) all reasonable costs and expenses of the Agent and the Banks
(including reasonable counsels' fees) in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Agreement
and the other Loan Documents.
Section 8.04 SURVIVAL OF AGREEMENT. All representations, warranties,
covenants and agreements made by the Company or any of its Subsidiaries herein,
in the other Loan Documents or in any certificates or other instruments prepared
or delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Banks and shall survive
the making of the Loans by the Banks and the execution and delivery to the Banks
by the Company of the Notes, regardless of any investigation made by or on
behalf of the Banks, and shall continue in full force and effect as long as any
Letter of Credit or Obligation is outstanding and undrawn or unpaid and so long
as the Commitments have not expired or been terminated; PROVIDED, that the
obligations and agreements of the Company under Sections 2.12, 2.14, 2.24, 2.26,
2.27, 8.03, 8.06 and 8.09 shall survive payment in full of the Obligations, the
expiration of or other discharge of First Bank's liability with respect to the
Letters of Credit and the expiration or termination of the Commitments. The
obligations of the Banks under Section 2.13 shall remain in effect,
notwithstanding the termination of the Commitments and the payment in full of
the Obligations (other than contingent Obligations with respect to outstanding
Letters of Credit), until the Letters of Credit have expired or First Bank's
liability with respect thereto has otherwise been discharged; PROVIDED, that if
the amount on deposit in the Holding Account at any time equals the aggregate
undrawn face amount of all outstanding Letters of Credit, the obligations of the
Banks under Section 2.13 shall terminate; PROVIDED, FURTHER, that the
obligations of the Banks under Section 2.13 shall be reinstated if, and to the
extent, First Bank is required to return or repay any payment received by it in
respect of any draw under a Letter of Credit, or First Bank's Lien on or right
of setoff with respect to any amount on deposit into the Holding Account is
avoided or enjoined,
-63-
<PAGE>
by reason of (i) any judgment, decree or order of any court or administrative
body or (ii) any settlement or compromise of any claim for such return,
avoidance or injunction effected by First Bank.
Section 8.05 BINDING EFFECT; ASSIGNMENTS AND PARTICIPATIONS.
(a) Whenever in this Agreement or any other Loan Agreement any
of the parties hereto or thereto is referred to, such reference shall be
deemed to refer to the successors and any permitted assigns of such party
and this Agreement and the other Loan Documents shall be binding upon and
inure to the benefit of each party hereto and the respective successors and
assigns of each of them, except that the Company may not assign its rights
or delegate its obligations hereunder or under any other Loan Document
without the prior written consent of the Majority Banks.
(b) Any Bank may (i) with the prior written consent (except in
the case of an assignment by any Bank to an Affiliate of such Bank or to
another Bank) of the Agent and, prior to the occurrence of an Event of
Default, the Company, which consent shall not, from and after October 15,
1995, be unreasonably withheld, assign its rights and delegate its
obligations under this Agreement and any other Loan Document, including,
without limitation, all or any portion of its Commitment, its Revolving
Note, its Loans and any other Obligation owned by it, to one or more banks,
financial institutions, corporate lenders or other sophisticated investors,
PROVIDED, that the aggregate amount of the Commitment which is the subject
of the assignment shall be $10,000,000 or an integral multiple of
$1,000,000 in excess thereof, except in the case of an assignment by one
Bank to another Bank, in which case the aggregate amount of the Commitment
which is the subject of the assignment shall be $1,000,000 or an integral
multiple of $1,000,000 in excess thereof, and PROVIDED, that following any
such assignment, the transferring Bank shall continue to hold a Commitment
in an aggregate amount greater than fifty percent (50%) of the amount of
its Commitment as of the date it became a party to this Agreement, unless
it has assigned its Commitment in full, and (ii) sell participations
therein to one or more banks, financial institutions, corporate lenders or
other sophisticated investors. Any such assignee under clause (i) of the
preceding sentence, to the extent of such assignment (unless otherwise
provided therein), shall have all the rights and obligations of a Bank
hereunder and the assigning Bank shall be released from its duties and
obligations under this Agreement to the extent of such assignment. Upon
any assignment and delegation as contemplated in clause (i) of the second
preceding sentence, (A) the Agent shall revise Schedule 1.01 to reflect
such assignment and delegation and distribute such revised Schedule 1.01 to
the Company and the Banks, (B) the Company shall, at the request of either
the assignor or assignee Bank, execute
-64-
<PAGE>
and deliver new Revolving Notes to the assignor Bank (if it retains a
Commitment following such assignment) and the assignee Bank, in the
principal amount of their respective Commitments, and (C) the assignor Bank
shall pay to the Agent an assignment fee in the amount of $5,000. Upon the
delivery of such new Revolving Notes, the assignor Bank shall return to the
Company its Revolving Note in effect prior to such assignment and
delegation. No assignment under clause (i) of the fourth preceding
sentence may assign to the assignee Bank a percentage of the Aggregate Base
Commitment Amount that is greater or less than the percentage of the
Aggregate Seasonal Commitment so assigned. Notwithstanding the sale of any
such participation under clause (ii) of the fifth preceding sentence, (x)
no such participant shall be deemed to be or have the rights and
obligations of a Bank hereunder except that any such participant shall have
a right of setoff under Section 2.29 as if it were a Bank and the amount of
its participation were owing directly to such participant by the Company
obligated thereon and (y) each Bank, in connection with selling any such
participation, shall not condition its rights in connection with consenting
to amendments or granting waivers concerning any matter under any Loan
Document upon obtaining the consent of such participant other than on
matters relating to (1) any reduction in the amount of any principal of, or
the amount of or rate of interest or fee in connection with, its Commitment
or any Obligation, or (2) any extension of the termination of its
Commitment or the maturity of any principal of or interest on any
Obligation.
Section 8.06 TAXES. The Company agrees to pay, and save the Agent
and the Banks harmless from all liability for, any stamp or other taxes which
may be payable with respect to the execution or delivery of this Agreement or
the issuance of the Notes.
Section 8.07 SEVERABILITY OF PROVISIONS. Whenever possible, each
provision of this Agreement and the other Loan Documents and any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto shall be interpreted in such manner as to be effective and
valid under applicable law, but, if any provision of this Agreement or any other
Loan Document or any other statement, instrument or transaction contemplated
hereby or thereby or relating hereto or thereto shall be held to be prohibited
or invalid in any jurisdiction 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 the other Loan Documents and any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto and
shall not be effective to affect the enforceability of such provision in any
other jurisdiction.
-65-
<PAGE>
Section 8.08 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING
EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS
OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
Section 8.09 CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY MINNESOTA STATE OR FEDERAL COURT SITTING IN
MINNEAPOLIS, MINNESOTA OR ST. PAUL, MINNESOTA OVER ANY ACTION OR PROCEEDING
COMMENCED BY THE AGENT OR ANY BANK ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH MINNESOTA STATE OR FEDERAL COURT. THE COMPANY HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. THE COMPANY AGREES THAT
A JUDGMENT, FINAL BY APPEAL OR EXPIRATION OF TIME TO APPEAL WITHOUT AN APPEAL
BEING TAKEN, IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS SECTION 8.09 SHALL AFFECT THE RIGHT OF THE
AGENT OR ANY BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTIONS.
Section 8.10 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 8.11 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and the other Loan Documents embody the entire agreement and
understanding between the Company, the Agent and the Banks with respect to the
subject matter hereof and thereof. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof. Nothing
contained in this Agreement or in any other Loan Document, expressed or implied
is intended to confer upon any Person other than the parties hereto and thereto
any rights, remedies, obligations or liabilities hereunder or thereunder.
Section 8.12 COUNTERPARTS. This Agreement may be executed in any
-66-
<PAGE>
number of counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract which shall become
effective when the Agent shall have received counterparts hereof signed on
behalf of the Company, the Agent and each Bank.
Section 8.13 COMPANY ACKNOWLEDGEMENTS. The Company hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents, (b)
neither the Agent nor any Bank has any fiduciary relationship to the Company,
the relationship being solely that of borrower and lender, (c) no joint venture
exists among or between the Company and the Agent or any Bank, and (d) the Agent
and the Banks undertake no responsibility to the Company to review or inform the
Company of any matter in connection with any phase of the business or operations
of the Company and the Company shall rely entirely upon its own judgment with
respect to its business, and any review, inspection or supervision of, or
information supplied to the Company by the Agent or any Bank is for the
protection of the Agent and the Banks and neither the Company nor any third
party is entitled to rely thereon.
Section 8.14 HIGHEST LAWFUL RATE. Anything herein to the contrary
notwithstanding, the Obligations shall be subject to the limitation that
payments of interest thereon shall not be required, for any period for which
interest is computed hereunder, to the extent that contracting for or receipt
thereof would be contrary to provisions of any law applicable to any Bank
limiting the highest rate of interest which may be lawfully contracted for,
charged or received by such Bank.
Section 8.15 EXITING BANKS. On the Effective Date, the aggregate
unpaid principal amount of the outstanding Loans made by each Exiting Bank under
the Existing Credit Agreement and related Promissory Note issued to such Exiting
Bank thereunder together with all interest, Commitment Fees and other amounts,
if any (less the unused portion of any Letter of Credit Fees previously paid to
such Exiting Bank), payable to such Exiting Bank thereunder as of the Effective
Date (as to either Exiting Bank, its "Payoff Amount"), shall be repaid in full
from the proceeds of Loans made by the Banks, and the Commitments of the Exiting
Banks under the Existing Credit Agreement shall terminate. The Company shall
give the Agent notice pursuant to Section 2.02 with respect to such Loans. The
Agent shall distribute to each Exiting Bank by not later than 3:00 P.M.
(Minneapolis time) on the Effective Date out of the proceeds of Loans made for
such purpose, the amount required to pay such Exiting Bank's Payoff Amount in
full, whereupon: (a) such Exiting Bank shall no longer be a party to the
Existing Credit Agreement (except to the extent provided in Section 8.04 thereof
with respect to the survival of certain provisions, which shall remain in effect
as to the Exiting Banks); and (b) such Exiting Bank shall not be deemed to be a
"Bank" for any purpose hereunder.
-67-
<PAGE>
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-68-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed as of the date first above written.
BEST BUY CO., INC.
By /s/ ROBERT C. FOX
-------------------------------------
Print Name
--------------------------
Title Sr. Vice President
-------------------------------
Address for Notices:
P.O. Box 9312
Minneapolis, Minnesota 55440-9312
Attention: Robert C. Fox
Telecopy: 612/947-2706
with a copy to:
Elliot S. Kaplan
Robins, Kaplan, Miller & Ciresi
800 LaSalle Avenue
Minneapolis, Minnesota 55402
Telecopy: 612/339-4181
FIRST BANK NATIONAL ASSOCIATION
By /s/ JOHN D. GATZLAFF
-------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402
Attention: John D. Gatzlaff
Telecopy: 612/973-0821
S-69
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
BANK ONE, DAYTON, NATIONAL ASSOCIATION
By /s/ JOHN B. MIDDLEBERG
-------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
40 North Main Street
Kettering Tower - 3rd Floor
Dayton, Ohio 45402
Attention: John Middelberg
Telecopy: 513/449-4885
THE MITSUBISHI BANK, LIMITED
(CHICAGO BRANCH)
By /s/ JEFFREY R. ARNOLD
-------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
5100 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Jeffrey R. Arnold
Telecopy: 612/333-3735
S-70
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By /s/ MARK M. HARDEN
-------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
301 South College Street
Charlotte, NC 28288
Attention: Doug Sleeper
Telecopy: 704/374-2802
THE LONG TERM CREDIT BANK OF JAPAN, LTD.
By /s/ ARMUND J. SCHOEN, JR.
-------------------------------------
Print Name
--------------------------
Title Vice President and
Deputy General Manager
-------------------------------
Address for Notices:
190 South LaSalle Street, Suite 800
Chicago, IL 60603
Attention: Armund Schoen
Telecopy: 312/704-8505
S-71
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
THE BANK OF NOVA SCOTIA
By /s/ AMANDA NORSWORTHY
-------------------------------------
Print Name
--------------------------
Title Assistant Agent
-------------------------------
Address for Notices:
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308
Attention: Shannon Law
Telecopy: 404/888-8998
YASUDA TRUST AND BANKING CO., LTD.
By /s/ KOICHIRO INOUE
-------------------------------------
Print Name
--------------------------
Title Joint General Manager
-------------------------------
Address for Notices:
181 West Madison, Suite 4500
Chicago, IL 60602
Attention: Doug Warren
Telecopy: 312/683-3899
S-72
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
THE BANK OF TOKYO, LTD.
CHICAGO BRANCH
By /s/ J. P. HOWARD
-------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
69 West Washington Street - 9th Floor
Chicago, IL 60602
Attention: Joseph P. Howard
Telecopy: 312/236-8268
THE DAIWA BANK, LIMITED
By /s/ MICHAEL J. PHILLIPPE
-------------------------------------
Print Name
--------------------------
Title Vice President & Manager
-------------------------------
And /s/ KEVIN L. KRAUSE
------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
233 South Wacker Drive
Suite 5400
Chicago, IL 60606
Attn:R. Michael Shehorn,
Sr. Vice President
Telecopy: 312/876-1983
With a Copy to:
4135 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402
Attention: John W. Howard
S-73
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By /s/ JOHN A. HOLLAND
-------------------------------------
Print Name
-----------------------------
Title Vice President
----------------------------------
Address for Notices:
One Mercantile Center
Eighth and Locust
St. Louis, Missouri 63166
Attention: John Holland
Telecopy: 314/425-2162
COMERICA BANK
By /S/ DAVID A. WOODS
-------------------------------------
Print Name
--------------------------
Title Assistant Vice President
-------------------------------
Address for Notices:
One Detroit Center - 9th Floor
500 Woodward Avenue
Detroit, Michigan 48226
Attention: David A. Woods
Telefax: 313/222-3330
S-74
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
WELLS FARGO BANK
By /s/ MATHEW HARVEY
-------------------------------------
Print Name
--------------------------
Title Assistant Vice President
-------------------------------
Address for Notices:
420 Montgomery Street
9th Floor
San Francisco, California 94163
Attention: Laila S. Partridge
Telecopy: 415/421-1352
BANK OF AMERICA ILLINOIS
By /s/ PATRICIA DELGRANDE
-------------------------------------
Print Name
--------------------------
Title Managing Director
-------------------------------
Address for Notices:
231 South LaSalle St.
Chicago, Illinois 60697
Attention: R. Guy Stapleton
Telecopy: 312/
S-75
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
BANQUE NATIONALE DE PARIS
By /s/ ARNAUD COLLIN DU BOCAGE
-------------------------------------
Print Name
--------------------------
Title Executive Vice President and
General Manager
-------------------------------
Address for Notices:
209 South LaSalle St.
5th Floor
Chicago, Illinois 60604
Attention: JoEllen Bender
Telecopy: 312/977-1380
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By /s/ TAKESHI HEMMI
-------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
10 South Wacker Drive
26th Floor
Chicago, Illinois 60606
Attention: Brian Cushing
Telecopy: 312/876-2011
S-76
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
THE SAKURA BANK, LIMITED
By /s/ Hajime Miyagi
-------------------------------------
Print Name
--------------------------
Title Deputy General Manager
-------------------------------
Address for Notices:
227 West Monroe St.
Suite 4700
Chicago, Illinois 60606
Attention: Teresita Ladd
Telecopy: 312/332-5342
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By /s/ JOSE A. MORENO
-------------------------------------
Print Name
--------------------------
Title Vice President and Manager
-------------------------------
Address for Notices:
10 South Wacker Drive
31st Floor
Chicago, Illinois 60606
Attention: Jose A. Moreno
Telecopy: 312/346-6677
S-77
<PAGE>
[Signature Page to Amended and Restated Credit Agreement]
UNITED STATES NATIONAL BANK
OF OREGON
By /s/ JEFFERY C. SWIFT
-------------------------------------
Print Name
--------------------------
Title Vice President
-------------------------------
Address for Notices:
555 S.W. Oak Street, PL-4
Portland, Oregon 97204
Attention: Jeffrey C. Swift
Telecopy: 503/275-5428
S-78
<PAGE>
EXHIBIT 11.1
BEST BUY CO., INC.
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(Amounts in 000, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- ----------------------
August 26, August 27, August 26, August 27,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings:
Net earnings available to common shares $ 5,714 $ 7,600 $ 10,386 $ 11,841
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Shares:
Weighted average common shares
outstanding 42,639 41,946 42,509 41,864
Adjustments:
Assumed issuance of shares purchased
under stock option plans 984 1,262 1,113 1,362
---------- ---------- ---------- ----------
Total common equivalent shares 43,623 43,208 43,622 43,226
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings per common share $ .13 $ .18 $ .24 $ .27
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Note: The computation of earnings per common share assuming full
dilution results in anti-dilution.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements for the periods indicated and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> AUG-26-1995
<CASH> 43,693
<SECURITIES> 0
<RECEIVABLES> 116,474
<ALLOWANCES> 0
<INVENTORY> 1,269,060
<CURRENT-ASSETS> 1,601,453
<PP&E> 380,032
<DEPRECIATION> 111,212
<TOTAL-ASSETS> 1,901,482
<CURRENT-LIABILITIES> 1,017,459
<BONDS> 212,143
<COMMON> 4,267
0
0
<OTHER-SE> 388,055
<TOTAL-LIABILITY-AND-EQUITY> 1,901,482
<SALES> 2,712,607
<TOTAL-REVENUES> 2,712,607
<CGS> 2,333,698
<TOTAL-COSTS> 2,333,698
<OTHER-EXPENSES> 343,343
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,342
<INCOME-PRETAX> 17,224
<INCOME-TAX> 6,838
<INCOME-CONTINUING> 10,386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,386
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
