Exhibit 10.1

 

 

 

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

Dated as of November 29, 2016

 

 

ARCTIC CAT INC.

AND CERTAIN OF ITS SUBSIDIARIES,

as Borrowers

 

 

BANK OF AMERICA, N.A.,

as Agent

 

 

BANK OF AMERICA, N.A.,

as Joint Lead Arranger and Bookrunner

 

 

 

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TABLE OF CONTENTS

 

          Page   SECTION 1.            DEFINITIONS; RULES OF CONSTRUCTION      1
               1.1    Definitions      1                1.2    Accounting Terms
     28                1.3    Uniform Commercial Code      28                1.4
   Certain Matters of Construction      28                1.5    Currency
Equivalents      29    SECTION 2.            CREDIT FACILITIES      29   
            2.1    Revolver Commitment      29                2.2    Letter of
Credit Facility      31                2.3    Effect of Amendment and
Restatement      33    SECTION 3.            INTEREST, FEES AND CHARGES      34
               3.1    Interest      34                3.2    Fees      36   
            3.3    Computation of Interest, Fees, Yield Protection      36   
            3.4    Reimbursement Obligations      36                3.5   
Illegality      37                3.6    Inability to Determine Rates      37   
            3.7    Increased Costs; Capital Adequacy      38                3.8
   Mitigation      38                3.9    Funding Losses      39   
            3.10    Maximum Interest      39    SECTION 4.            LOAN
ADMINISTRATION      39                4.1    Manner of Borrowing and Funding
Revolver Loans      39                4.2    Defaulting Lender      40   
            4.3    Number and Amount of LIBOR Loans; Determination of Rate     
41                4.4    Borrower Agent      41                4.5    One
Obligation      41                4.6    Effect of Termination      41   
SECTION 5.            PAYMENTS      41                5.1    General Payment
Provisions      41                5.2    Repayment of Revolver Loans      42   
            5.3    Payment of Other Obligations      42   

 

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TABLE OF CONTENTS

(continued)

 

          Page               5.4    Marshaling; Payments Set Aside      42   
            5.5    Application and Allocation of Payments      42   
            5.6    Dominion Account      43                5.7    Account Stated
     43                5.8    Taxes      44                5.9    Lender Tax
Information      45                5.10    Nature and Extent of Each Borrower’s
Liability      47    SECTION 6.            CONDITIONS PRECEDENT      49   
            6.1    Conditions Precedent to Initial Loans      49   
            6.2    Conditions Precedent to All Credit Extensions      51   
SECTION 7.            COLLATERAL      52                7.1    Grant of Security
Interest      52                7.2    Lien on Deposit Accounts; Cash Collateral
     52                7.3    Real Estate Collateral      53                7.4
   Investment Property and other Equity Interests.      53                7.5   
Miscellaneous Collateral      54                7.6    Limitations      55   
            7.7    Further Assurances      55    SECTION 8.   
        COLLATERAL ADMINISTRATION      55                8.1    Borrowing Base
Reports      55                8.2    Accounts      56                8.3   
Inventory      57                8.4    Equipment      57                8.5   
Deposit Accounts      58                8.6    General Provisions      58   
            8.7    Power of Attorney      59    SECTION 9.   
        REPRESENTATIONS AND WARRANTIES      60                9.1    General
Representations and Warranties      60                9.2    Complete Disclosure
     65    SECTION 10.            COVENANTS AND CONTINUING AGREEMENTS      65   
            10.1    Affirmative Covenants      65                10.2   
Negative Covenants      70   

 

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TABLE OF CONTENTS

(continued)

 

          Page               10.3    Financial Covenants      75    SECTION 11.
           EVENTS OF DEFAULT; REMEDIES ON DEFAULT      75                11.1   
Events of Default      75                11.2    Remedies upon Default      76
               11.3    License      77                11.4    Setoff      77   
            11.5    Remedies Cumulative; No Waiver      78    SECTION 12.   
        AGENT      78                12.1    Appointment, Authority and Duties
of Agent      78                12.2    Agreements Regarding Collateral and
Borrower Materials      79                12.3    Reliance By Agent      80   
            12.4    Action Upon Default      80                12.5    Ratable
Sharing      80                12.6    Indemnification      80   
            12.7    Limitation on Responsibilities of Agent      80   
            12.8    Successor Agent and Co-Agents      81                12.9   
Due Diligence and Non-Reliance      81                12.10    Remittance of
Payments and Collections      82                12.11    Individual Capacities
     82                12.12    Titles      82                12.13    Bank
Product Providers      83                12.14    No Third Party Beneficiaries
     83    SECTION 13.            BENEFIT OF AGREEMENT; ASSIGNMENTS      83   
            13.1    Successors and Assigns      83                13.2   
Participations      83                13.3    Assignments      84   
            13.4    Replacement of Certain Lenders      85    SECTION 14.   
        MISCELLANEOUS      85                14.1    Consents, Amendments and
Waivers      85                14.2    Indemnity      86                14.3   
Notices and Communications      86                14.4    Performance of
Borrowers’ Obligations      87   

 

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TABLE OF CONTENTS

(continued)

 

          Page               14.5    Credit Inquiries      87   
            14.6    Severability      87                14.7    Cumulative
Effect; Conflict of Terms      87                14.8    Counterparts; Execution
     88                14.9    Entire Agreement      88                14.10   
Relationship with Lenders      88                14.11    No Advisory or
Fiduciary Responsibility      88                14.12    Confidentiality      88
               14.13    GOVERNING LAW      89                14.14    Consent to
Forum      89                14.15    Waivers by Borrowers      89   
            14.16    Patriot Act Notice      90                14.17    NO ORAL
AGREEMENT      90                14.18    Acknowledgement and Consent to Bail-In
of EEA Financial Institutions      90    SECTION 15.            FX HEDGING
ARRANGEMENTS      90                15.1    Credit Approval      90   
            15.2    Trade Information      91                15.3    Covenants
relating to FX Hedging Arrangements      91                15.4    Obligations
of FX Hedging Arrangement Providers      92   

 

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LIST OF EXHIBITS AND SCHEDULES

 

Exhibit A      Assignment Exhibit B      Assignment Notice Schedule 1.1(A)     
Foreign Account Debtors Schedule 1.1(B)      Revolver Commitments of Lenders
Schedule 2.2      Existing Letters of Credit Schedule 8.5      Deposit Accounts
Schedule 8.6.1      Business Locations Schedule 9.1.4      Names and Capital
Structure Schedule 9.1.10      Brokers Schedule 9.1.11      Patents, Trademarks,
Copyrights and Licenses Schedule 9.1.14      Environmental Matters
Schedule 9.1.15      Restrictive Agreements Schedule 9.1.16(a)      Litigation
Schedule 9.1.16(b)      Commercial Tort Claims Schedule 9.1.18      Pension
Plans Schedule 9.1.20      Labor Contracts Schedule 10.2.1      Permitted
Contingent Obligations Schedule 10.2.2      Existing Liens Schedule 10.2.16     
Existing Affiliate Transactions

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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated as of
November 29, 2016, among ARCTIC CAT INC., a Minnesota corporation (“Arctic
Cat”), and the Subsidiaries of Arctic Cat identified on the signature pages
hereto, as borrowers (collectively, the “Borrowers”), the financial institutions
party to this Agreement from time to time as lenders (collectively, “Lenders”),
and BANK OF AMERICA, N.A., a national banking association, as agent for the
Lenders (“Agent”).

R E C I T A L S:

Certain of the Borrowers, Agent, and certain other financial institutions
entered into that certain Loan and Security Agreement dated as of November 10,
2009 (as amended, restated or otherwise modified prior to the date hereof, the
“Original Loan Agreement”), pursuant to which Agent and such other financial
institutions made certain loans and other financial accommodations to such
Borrowers;

In order to, among other things, amend and restate the Original Loan Agreement
in its entirety, Borrowers, Agent, and certain other financial institutions
entered into that certain Amended and Restated Loan and Security Agreement dated
as of November 8, 2013 (as amended, restated or otherwise modified prior to the
date hereof, the “2013 Loan Agreement”), pursuant to which Agent and such other
financial institutions made certain loans and other financial accommodations to
Borrowers;

Borrowers, Agent, and Lenders desire to amend in certain respects and restate in
its entirety the 2013 Loan Agreement as set forth herein; and

Borrowers have requested that Lenders provide a credit facility to Borrowers to
finance their mutual and collective business enterprise. Lenders are willing to
provide the credit facility on the terms and conditions set forth in this
Agreement.

NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties
agree that the 2013 Loan Agreement shall be amended and restated to read in its
entirety as set forth herein, and further agree as follows:

 

  SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION

1.1 Definitions. As used herein, the following terms have the meanings set forth
below:

2013 Loan Agreement: as defined in the Recitals of this Agreement.

2013 Loan Documents: as defined in Section 2.3.

Account: as defined in the UCC, including all rights to payment for goods sold
or leased, or for services rendered.

Account Debtor: a Person obligated under an Account, Chattel Paper or General
Intangible.

Accounts Formula Amount: 80% of the Value of Eligible Accounts.

ACPS: Arctic Cat Production Support LLC, a Minnesota limited liability company.

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Acquisition: a transaction or series of transactions resulting in
(a) acquisition of a business, division or substantially all assets of a Person;
(b) record or beneficial ownership of 50% or more of the Equity Interests of a
Person; or (c) merger, consolidation or combination of a Borrower or Subsidiary
with another Person.

Affiliate: 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. “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise. “Controlling” and
“Controlled” have correlative meanings.

Agent Fee Letter: that certain Fee Letter dated as of November 7, 2016, by Agent
and accepted and agreed to by the Borrowers, as amended, restated, supplemented,
or otherwise modified from time to time.

Agent Indemnitees: Agent and its officers, directors, employees, Affiliates,
agents and attorneys.

Agent Professionals: attorneys, accountants, appraisers, auditors, business
valuation experts, environmental engineers or consultants, turnaround
consultants, and other professionals and experts retained by Agent.

Agreement Currency: as defined in Section 1.5.

Allocable Amount: as defined in Section 5.10.3.

Anti-Terrorism Law: any law relating to terrorism or money laundering, including
the Patriot Act.

Applicable Law: all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities.

Applicable Margin: Up to and including the First Interest Rate Trigger Date, the
Applicable Margin shall be a margin of 2.75% with respect to LIBOR Loans and a
margin of 1.75% with respect to Base Rate Loans. Beginning on the first day
after the First Interest Rate Trigger Date and continuing up to and including
the Second Interest Rate Trigger Date, the Applicable Margin shall be a margin
of 2.25% with respect to LIBOR Loans and a margin of 1.25% with respect to Base
Rate Loans. Beginning on the first day after the Second Interest Rate Trigger
Date and continuing thereafter, the Applicable Margin shall be the margin set
forth below, as determined by the average daily Availability for the last Fiscal
Quarter:

 

Level

  

Availability

  

Base Rate Loans

  

LIBOR Loans

I    Availability > 50% of the aggregate amount of the Revolver Commitments   
0.25%    1.25% II    Availability > 25% and < 50% of the aggregate amount of the
Revolver Commitments    0.50%    1.50% III    Availability < 25% of the
aggregate amount of the Revolver Commitments    0.75%    1.75%

 

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At all times after the Second Interest Rate Trigger Date, the Applicable Margin
shall be subject to increase or decrease by Agent on the first day of the
calendar month following each Fiscal Quarter end. If, by the first day of any
month after the Second Interest Rate Trigger Date, any financial statement or
Borrowing Base Report due in the preceding month has not been received, then, at
the option of Agent or Required Lenders, margins shall be determined as if Level
III were applicable until the first day of the calendar month following actual
receipt.

Approved Fund: any Person (other than a natural Person) engaged in making,
purchasing, holding or otherwise investing in commercial loans in its ordinary
course of activities.

Arctic Cat Sales: Arctic Cat Sales Inc., a Minnesota corporation.

Asset Disposition: a sale, lease, license, consignment, transfer or other
disposition of Property of an Obligor, including any disposition in connection
with a sale-leaseback transaction or synthetic lease.

Assignment: an assignment agreement between a Lender and Eligible Assignee, in
the form of Exhibit A or otherwise satisfactory to Agent.

Availability: the Borrowing Base minus Revolver Usage.

Availability Reserve: the sum (without duplication) of (a) the Inventory
Reserve; (b) the Rent and Charges Reserve; (c) the Bank Product Reserve
(excluding any portion of the Bank Product Reserve that relates to an FX Hedging
Arrangement Reserve); (d) the Eligible Accounts Reserve; (e) during the months
of January through April of each year and during the months of November through
December of each year, the FX Hedging Arrangement Reserve; (f) the aggregate
amount of liabilities secured by Liens upon Collateral that are or may be senior
to Agent’s Liens or that may be required to be paid to permit or facilitate
exercise of rights or remedies with respect to Collateral (excluding the
aggregate amount of liabilities secured by Liens permitted under
Section 10.2.2(l)) (but imposition of any such reserve shall not waive an Event
of Default arising therefrom); (g) the Fixed Asset Reserve; and (h) such
additional reserves, in such amounts and with respect to such matters, as Agent
in its reasonable discretion may elect to impose from time to time (including
without limitation reserves relating to any negative mark-to-market arising out
of or relating to any Hedging Agreements).

Average Availability: as of any applicable date and for the thirty-day period
ending as of such date, the thirty-day average of the Borrowers’ Availability.

Bail-In Action: the exercise of any Write-Down and Conversion Powers by the
applicable EEA Resolution Authority in respect of any liability of an EEA
Financial Institution.

Bail-In Legislation: with respect to any EEA Member Country implementing Article
55 of Directive 2014/59/EU of the European Parliament and of the Council of the
European Union, the implementing law for such EEA Member Country from time to
time which is described in the EU Bail-In Legislation Schedule.

Bank of America: Bank of America, N.A., a national banking association, and its
successors and assigns.

 

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Bank of America Indemnitees: Bank of America and its officers, directors,
employees, Affiliates, agents and attorneys.

Bank Product: any of the following products, services or facilities extended to
any Borrower or Affiliate of a Borrower by a Lender or any of its Affiliates:
(a) Cash Management Services; (b) products under Hedging Agreements;
(c) commercial credit card and merchant card services; and (d) other banking
products or services, other than Letters of Credit.

Bank Product Reserve: the aggregate amount of reserves established by Agent from
time to time in its discretion in respect of Secured Bank Product Obligations.

Bankruptcy Code: Title 11 of the United States Code.

Base Rate: for any day, a per annum rate equal to the greatest of (a) the Prime
Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or
(c) LIBOR for a 30 day interest period as of such day, plus 1.00%.

Base Rate Loan: a Loan that bears interest based on the Base Rate.

Board of Governors: the Board of Governors of the Federal Reserve System.

Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt
that (i) arises from the lending of money by any Person to such Obligor, (ii) is
evidenced by notes, drafts, bonds, debentures, credit documents or similar
instruments, (iii) accrues interest or is a type upon which interest charges are
customarily paid (excluding trade payables owing in the Ordinary Course of
Business), or (iv) was issued or assumed as full or partial payment for
Property; (b) Capital Leases; (c) reimbursement obligations with respect to
letters of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.

Borrower Agent: as defined in Section 4.4.

Borrower Materials: Borrowing Base Reports, Compliance Certificates and other
information, reports, financial statements and other materials delivered by
Borrowers hereunder, as well as other Reports and information provided by Agent
to Lenders.

Borrowing: a group of Loans that are made or converted together on the same day
and have the same interest option and, if applicable, Interest Period.

Borrowing Base: on any date of determination, an amount equal to the lesser of
(a) the aggregate Revolver Commitments; or (b) the sum of the Accounts Formula
Amount, plus the Inventory Formula Amount, plus the Trade Name Amount, plus the
Fixed Asset Formula Amount, minus the Availability Reserve; provided, however,
that no Account, Inventory, Equipment, Real Estate or other Property acquired in
an Acquisition or otherwise outside the Ordinary Course of Business shall be
included in the calculation of the Borrowing Base until completion of applicable
field examinations and appraisals (which shall not be included in the limits on
the number of field examinations or appraisals provided in Section 10.1.1)
satisfactory to Agent; provided, however, that Agent will use best efforts to
complete such field examinations and appraisals, as applicable, within sixty
(60) days of the date Borrower Agent notifies Agent of such items being
acquired.

Borrowing Base Report: a report of the Borrowing Base by Borrowers, in form and
substance reasonably satisfactory to Agent.

 

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Business Day: any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the laws of, or are in fact
closed in, North Carolina and Chicago, Illinois, and if such day relates to a
LIBOR Loan, any such day on which dealings in Dollar deposits are conducted in
the London interbank market.

Capital Expenditures: all liabilities incurred or expenditures made by a
Borrower or Subsidiary for the acquisition of fixed assets or tooling, or any
improvements, replacements, substitutions or additions thereto with a useful
life of more than one year.

Capital Lease: any lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

Cash Collateral: cash, and any interest or other income earned thereon, that is
delivered to Agent to Cash Collateralize any Obligations.

Cash Collateral Account: a demand deposit, money market or other account
established by Agent at such financial institution as Agent may select in its
discretion, which account shall be subject to a Lien in favor of Agent.

Cash Collateralize: the delivery of cash to Agent, as security for the payment
of Obligations, in an amount equal to (a) with respect to LC Obligations, 105%
of the aggregate LC Obligations, and (b) with respect to any inchoate,
contingent or other Obligations (including Secured Bank Product Obligations),
Agent’s good faith estimate of the amount due or to become due, including fees,
expenses and indemnification hereunder. “Cash Collateralization” has a
correlative meaning.

Cash Dominion Trigger Period: the period commencing on the day that (a) an Event
of Default occurs or (b) Availability is less than the greater of
(i) $19,500,000 or (ii) 15% of the aggregate Revolver Commitments at such time.

Cash Equivalents: (a) marketable obligations issued or unconditionally
guaranteed by, and backed by the full faith and credit of, the U.S. government,
maturing within 12 months of the date of acquisition; (b) certificates of
deposit, time deposits and bankers’ acceptances maturing within 12 months of the
date of acquisition, and overnight bank deposits, in each case which are issued
by Bank of America or a commercial bank organized under the laws of the United
States or any state or district thereof, rated A-1 (or better) by S&P or P-1 (or
better) by Moody’s at the time of acquisition, and (unless issued by a Lender)
not subject to offset rights; (c) repurchase obligations with a term of not more
than 30 days for underlying investments of the types described in clauses
(a) and (b) entered into with any bank described in clause (b); (d) commercial
paper issued by Bank of America or rated A-1 (or better) by S&P or P-1 (or
better) by Moody’s, and maturing within nine months of the date of acquisition;
and (e) shares of any money market fund that has substantially all of its assets
invested continuously in the types of investments referred to above, has net
assets of at least $500,000,000 and has the highest rating obtainable from
either Moody’s or S&P.

Cash Management Services: services relating to operating, collections, payroll,
trust, or other depository or disbursement accounts, including automated
clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled
disbursement, overdraft, depository, information reporting, lockbox and stop
payment services.

CERCLA: the Comprehensive Environmental Response Compensation and Liability Act
(42 U.S.C. § 9601 et seq.).

 

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Change in Law: the occurrence, after the date hereof, of (a) the adoption,
taking effect or phasing in of any law, rule, regulation or treaty; (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof; or (c) the making, issuance or
application of any request, guideline, requirement or directive (whether or not
having the force of law) by any Governmental Authority; provided, however, that
“Change in Law” shall include, regardless of the date enacted, adopted or
issued, all requests, rules, guidelines, requirements or directives (i) under or
relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act, or
(ii) promulgated pursuant to Basel III by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any similar
authority) or any other Governmental Authority.

Change of Control: (a) any Person or group (within the meaning of the Securities
Exchange Act of 1934, as amended) shall own and control, beneficially and of
record, at least 40% of the Equity Interests of Arctic Cat; (b) Arctic Cat
ceases to own and control, beneficially and of record, directly or indirectly,
all of the Equity Interests in each other Borrower; (c) a change in the majority
of directors of Arctic Cat, unless approved by the then majority of directors;
or (d) all or substantially all of a Borrower’s assets are sold or transferred,
other than sale or transfer to another Borrower.

Claims: all claims, liabilities, obligations, losses, damages, penalties,
judgments, proceedings, interest, costs and expenses of any kind (including
remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses)
at any time (including after Full Payment of the Obligations or replacement of
Agent or any Lender) incurred by any Indemnitee or asserted against any
Indemnitee by any Obligor or other Person, in any way relating to (a) any Loans,
Letters of Credit, Loan Documents, Borrower Materials, or the use thereof or
transactions relating thereto, (b) any action taken or omitted in connection
with any Loan Documents, (c) the existence or perfection of any Liens, or
realization upon any Collateral, (d) exercise of any rights or remedies under
any Loan Documents or Applicable Law, or (e) failure by any Obligor to perform
or observe any terms of any Loan Document, in each case including all costs and
expenses relating to any investigation, litigation, arbitration or other
proceeding (including an Insolvency Proceeding or appellate proceedings),
whether or not the applicable Indemnitee is a party thereto.

Closing Date: as defined in Section 6.1.

Code: the Internal Revenue Code of 1986.

Collateral: all Property described in Section 7.1, all Property described in any
Security Documents as security for any Obligations, and all other Property that
now or hereafter secures (or is intended to secure) any Obligations.

Commitment Termination Date: the earliest to occur of (a) the Termination Date;
(b) the date on which Borrowers terminate the Revolver Commitments pursuant to
Section 2.1.4; or (c) the date on which the Revolver Commitments are terminated
pursuant to Section 11.2.

Commodity Exchange Act: the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

Compliance Certificate: a certificate, in form and substance satisfactory to
Agent, by which Borrowers certify compliance with Section 10.3.

Connection Income Taxes: Other Connection Taxes that are imposed on or measured
by net income (however denominated), or are franchise or branch profits Taxes.

Contingent Obligation: any obligation of a Person arising from a guaranty,
indemnity or other assurance of payment or performance of any Debt, lease,
dividend or other obligation (“primary

 

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obligations”) of another obligor (“primary obligor”) in any manner, whether
directly or indirectly, including any obligation of such Person under any
(a) guaranty, endorsement, co-making or sale with recourse of an obligation of a
primary obligor; (b) obligation to make take-or-pay or similar payments
regardless of nonperformance by any other party to an agreement; and
(c) arrangement (i) to purchase any primary obligation or security therefor,
(ii) to supply funds for the purchase or payment of any primary obligation,
(iii) to maintain or assure working capital, equity capital, net worth or
solvency of the primary obligor, (iv) to purchase Property or services for the
purpose of assuring the ability of the primary obligor to perform a primary
obligation, or (v) otherwise to assure or hold harmless the holder of any
primary obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be the stated or determinable amount of the
primary obligation (or, if less, the maximum amount for which such Person may be
liable under the instrument evidencing the Contingent Obligation) or, if not
stated or determinable, the maximum reasonably anticipated liability with
respect thereto.

CWA: the Clean Water Act (33 U.S.C. §§ 1251 et seq.).

Dealer Finance Agreements: (i) the Vendor Agreement dated as of December 15,
2015 among Arctic Cat, Arctic Cat Sales and GE Commercial Distribution Finance
Canada and (ii) the Vendor Agreement dated as of October 14, 2009, among Arctic
Cat, Arctic Cat Sales Inc. and GE Commercial Distribution Finance Corporation,
each together with the letters and instruments referenced therein and any
amendments, restatements or replacements thereto, provided, however, that no
such amendment to, restatement of, or replacement of such agreements, letters or
instruments shall be entered into without the prior written consent of the
Required Lenders if such amendment, restatement, or refinancing would change the
nature of the obligations of any Borrower or any Subsidiary thereunder in a
manner adverse to such Borrower or Subsidiary.

Dealer Floorplan Finance Receivables: amounts owing to any Borrower under all
Dealer Finance Agreements.

Dealer Contras: means the amount that any Borrower or any Subsidiary may be
obligated to pay to its dealers on account of sales incentives in accordance
with its dealer sales incentive program, including but not limited to any
accounts payable of the Borrowers, dealer deposits, co-op advertising, special
discount programs, marketing programs, and other similar items treated as dealer
contras in accordance with GAAP.

Debt: as applied to any Person, without duplication, (a) all items that would be
included as liabilities on a balance sheet in accordance with GAAP, including
Capital Leases, but excluding trade payables incurred and being paid in the
Ordinary Course of Business; (b) all Contingent Obligations; (c) all
reimbursement obligations in connection with letters of credit issued for the
account of such Person; and (d) in the case of a Borrower, the Obligations. The
Debt of a Person shall include any recourse Debt of any partnership in which
such Person is a general partner or joint venturer.

Default: an event or condition that, with the lapse of time or giving of notice,
would constitute an Event of Default.

Default Rate: for any Obligation (including, to the extent permitted by law,
interest not paid when due), 2% plus the interest rate otherwise applicable
thereto.

Defaulting Lender: any Lender that (a) has failed to comply with its funding
obligations hereunder, and such failure is not cured within two Business Days;
(b) has notified Agent or any Borrower that such Lender does not intend to
comply with its funding obligations hereunder or under any other credit
facility, or has made a public statement to that effect; (c) has failed, within
three Business

 

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Days following request by Agent or any Borrower, to confirm in a manner
satisfactory to Agent and Borrowers that such Lender will comply with its
funding obligations hereunder; or (d) has, or has a direct or indirect parent
company that has, become the subject of an Insolvency Proceeding (including
reorganization, liquidation, or appointment of a receiver, custodian,
administrator or similar Person by the Federal Deposit Insurance Corporation or
any other regulatory authority) or a Bail-In Action; provided, however, that a
Lender shall not be a Defaulting Lender solely by virtue of a Governmental
Authority’s ownership of an equity interest in such Lender or parent company
unless the ownership provides immunity for such Lender from jurisdiction of
courts within the United States or from enforcement of judgments or writs of
attachment on its assets, or permits such Lender or Governmental Authority to
repudiate or otherwise to reject such Lender’s agreements.

Deposit Account Control Agreement: control agreement satisfactory to Agent
executed by an institution maintaining a Deposit Account for an Obligor, to
perfect Agent’s Lien on such account.

Designated Jurisdiction: a country or territory that is the subject of a
Sanction.

Distressed Trade Name Value: the distressed value of the Borrowers’ trade names
expected to be realized, net of all liquidation expenses, as determined by Agent
in its sole discretion based upon the Trade Name Appraisal.

Distribution: any declaration or payment of a distribution, interest or dividend
on any Equity Interest (other than payment-in-kind); distribution, advance or
repayment of Debt to a holder of Equity Interests; or purchase, redemption, or
other acquisition or retirement for value of any Equity Interest.

Dividend: as defined in Section 7.4.3.

Dollars: lawful money of the United States.

Dominion Account: a special account established by Borrowers at Bank of America
or another bank acceptable to Agent, over which Agent has control.

EBITDA: determined on a consolidated basis for Borrowers and Subsidiaries, net
income, calculated before interest expense, provision for income taxes,
depreciation and amortization expense, gains or losses arising from the sale of
capital assets, gains arising from the write-up of assets, non-cash stock
options, and any extraordinary gains (in each case, to the extent included in
determining net income).

EEA Financial Institution: means (a) any credit institution or investment firm
established in any EEA Member Country which is subject to the supervision of an
EEA Resolution Authority, (b) any entity established in an EEA Member Country
which is a parent of an institution described in clause (a) of this definition,
or (c) any financial institution established in an EEA Member Country which is a
subsidiary of an institution described in clauses (a) or (b) of this definition
and is subject to consolidated supervision with its parent.

EEA Member Country: any of the member states of the European Union, Iceland,
Liechtenstein, and Norway.

EEA Resolution Authority: any public administrative authority or any person
entrusted with public administrative authority of any EEA Member Country
(including any delegee) having responsibility for the resolution of any EEA
Financial Institution.

 

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Eligible Account: an Account owing to a Borrower that arises in the Ordinary
Course of Business from the sale of goods or rendition of services and is
payable in Dollars, net of (without duplication) any applied or unapplied
credits or other allowance (with any such unapplied credits or other allowances
being applied to the most current accounts receivable owed to such Borrower) and
any Dealer Contras, in each case meeting the following requirements: (a) (i) it
is a foreign Account owing from one of the Account Debtors listed on Schedule
1.1(A) and backed by a letter of credit for the benefit of a Borrower and
acceptable to Agent in its sole discretion, (ii) it is the Net Yamaha Account,
or (iii) it is a domestic or Canadian Account (in each case other than the Net
Yamaha Account) that is acceptable to Agent in its sole discretion; (b) it
conforms with all covenants and representations herein; (c) no Insolvency
Proceeding has been commenced by or against the Account Debtor, and the Account
Debtor has not failed, has not suspended or ceased doing business, is not
liquidating, dissolving or winding up its affairs, is Solvent, and is not
subject to any Sanction or on any specially designated nationals list maintained
by OFAC; (d) it is subject to a duly perfected, first priority Lien in favor of
Agent, and is not subject to any other Lien; (e) the goods giving rise to it
have been delivered to and accepted by the Account Debtor, the services giving
rise to it have been accepted by the Account Debtor, or it otherwise represents
a final sale; (f) it is not evidenced by Chattel Paper or an Instrument of any
kind, and has not been reduced to judgment; (g) it is not more than 30 days past
due from the originally scheduled payment date; (h) it does not arise from a
sale to an Affiliate of any Borrower; (i) is not subject to a Dealer Finance
Agreement; (j) 50% or more of the Accounts owing by the Account Debtor thereof
to any of the Borrowers are Eligible Accounts; and (k) it is otherwise deemed by
Agent, in its reasonable discretion, to be an Eligible Account.

Eligible Accounts Reserve: the aggregate amount of reserves established by Agent
from time to time in its sole discretion in respect of Eligible Accounts.

Eligible Assignee: a Person that is (a) a Lender, Affiliate of a Lender or
Approved Fund; (b) an assignee approved by Borrower Agent (which approval shall
not be unreasonably withheld or delayed, and shall be deemed given if no
objection is made within two Business Days after notice of the proposed
assignment) and Agent; and (c) during an Event of Default, any Person acceptable
to Agent in its discretion.

Eligible Equipment: Equipment owned by a Borrower that meets the following
requirements: it (a) meets all standards imposed by any Governmental Authority,
and does not constitute hazardous materials under any Environmental Law;
(b) conforms with the covenants and representations herein; (c) is subject to
Agent’s duly perfected, first priority Lien, and no other Lien; (d) is within
the continental United States; (e) is not located on leased premises or in the
possession of a repairman or other Person (other than an Obligor), unless the
lessor, repairman, or such Person has delivered a Lien Waiver or an appropriate
Rent and Charges Reserve has been established; and (f) is otherwise deemed by
Agent, in its reasonable discretion, to be Eligible Equipment.

Eligible In-Transit Inventory: Inventory owned by a Borrower that would be
Eligible Inventory if it were not subject to a Document and in transit from a
foreign location to a location of the Borrowers within the United States, and
that Agent, in its reasonable discretion, deems to be Eligible In-Transit
Inventory. Without limiting the foregoing, no Inventory shall be Eligible
In-Transit Inventory unless it (a) is subject to a negotiable Document showing
Agent (or, with the consent of Agent, the applicable Borrower) as consignee,
which Document is in the possession of Agent or such other Person as Agent shall
approve; (b) is fully insured in a manner satisfactory to Agent; (c) is not sold
by a vendor that has a right to reclaim, divert shipment of, repossess, stop
delivery, claim any reservation of title or otherwise assert Lien rights against
the Inventory, or with respect to whom any Borrower is in default of any
obligations; (d) is subject to purchase orders and other sale documentation
satisfactory to Agent, and title has passed to the applicable Borrower; (e) is
shipped by a common carrier that is not affiliated with the vendor and is not
subject to any Sanction or any specially designated nationals list maintained by
OFAC; and (f) is being handled by a customs broker, freight-forwarder or other
handler that has delivered a Lien Waiver.

 

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Eligible Inventory: Inventory owned by a Borrower that meets the following
requirements: it (a) is finished goods or raw materials, and not
work-in-process, packaging or shipping materials, decals, personal watercraft
parts, labels, samples, prototype inventory, display items, bags, or
manufacturing supplies; (b) is not product verification build inventory (unless
it is salvaged inventory that otherwise meets the criteria for Eligible
Inventory hereunder); (c) is not held on consignment, nor subject to any deposit
or down payment; (d) is in new or saleable condition and is not damaged,
defective, or otherwise unfit for sale; (e) is not slow-moving, obsolete,
defective or unmerchantable; (f) meets all standards imposed by any Governmental
Authority, has not been acquired from a Person subject to any Sanction or on any
specially designated nationals list maintained by OFAC, and does not constitute
hazardous materials under any Environmental Law; (g) conforms with the covenants
and representations herein; (h) is subject to Agent’s duly perfected, first
priority Lien, and no other Lien; (i) is within the continental United States or
Canada, is not in transit except between locations of Borrowers, and is not
consigned to any Person; (j) is not subject to any warehouse receipt or
negotiable Document; (k) is not subject to any License or other arrangement that
restricts such Borrower’s or Agent’s right to dispose of such Inventory, unless
Agent has received an appropriate Lien Waiver; (l) is not located on leased
premises or in the possession of a warehouseman, processor, repairman, mechanic,
shipper, freight forwarder or other Person, unless the lessor or such Person has
delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been
established; (m) is reflected in the details of a current perpetual inventory
report; and (n) is otherwise deemed by Agent, in its reasonable discretion, to
be Eligible Inventory.

Eligible Real Estate: Real Estate owned by a Borrower that meets the following
requirements: it (a) it is subject to a Mortgage and all Real Estate Related
Documents with respect thereto have been delivered to Agent; (b) conforms with
the covenants and representations herein; (c) is subject to Agent’s duly
perfected, first priority Lien, and no other Lien, other than, as applicable,
Liens permitted under Section 10.2.2(h); (d) is within the continental United
States; and (e) is otherwise deemed by Agent, in its reasonable discretion, to
be Eligible Real Estate.

Enforcement Action: any action to enforce any Obligations (other than Secured
Bank Product Obligations) or Loan Documents or to exercise any rights or
remedies relating to any Collateral (whether by judicial action, self-help,
notification of Account Debtors, setoff or recoupment, credit bid, action in an
Obligor’s Insolvency Proceeding or otherwise).

Environmental Laws: Applicable Laws (including programs, permits and guidance
promulgated by regulators) relating to public health (other than occupational
safety and health regulated by OSHA) or the protection or pollution of the
environment, including CERCLA, RCRA and CWA.

Environmental Notice: a notice (whether written or oral) from any Governmental
Authority or other Person of any possible noncompliance with, investigation of a
possible violation of, litigation relating to, or potential fine or liability
under any Environmental Law, or with respect to any Environmental Release,
environmental pollution or hazardous materials, including any complaint,
summons, citation, order, claim, demand or request for correction, remediation
or otherwise.

Environmental Release: a release as defined in CERCLA or under any other
Environmental Law.

Equipment Appraisal: the appraisal of Borrowers’ Equipment delivered or to be
delivered pursuant to Section 10.1.12(a).

 

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Equity Interest: the interest of any (a) shareholder in a corporation;
(b) partner in a partnership (whether general, limited, limited liability or
joint venture); (c) member in a limited liability company; or (d) other Person
having any other form of equity security or ownership interest.

ERISA: the Employee Retirement Income Security Act of 1974.

ERISA Affiliate: any trade or business (whether or not incorporated) under
common control with an Obligor within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).

ERISA Event: (a) a Reportable Event with respect to a Pension Plan;
(b) withdrawal of an Obligor or ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) complete or
partial withdrawal by an Obligor or ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d) filing of a
notice of intent to terminate, the treatment of a Pension Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the institution of
proceedings by the PBGC to terminate a Pension Plan; (e) the determination that
any Pension Plan or Multiemployer Plan is considered an at-risk plan or a plan
in critical or endangered status under the Code or ERISA; (f) an event or
condition that constitutes grounds under Section 4042 of ERISA for termination
of, or appointment of a trustee to administer, any Pension Plan; (g) imposition
of any liability under Title IV of ERISA, other than for PBGC premiums due but
not delinquent under Section 4007 of ERISA, upon any Obligor or ERISA Affiliate;
or (h) failure by an Obligor or ERISA Affiliate to meet all applicable
requirements under the Pension Funding Rules in respect of a Pension Plan,
whether or not waived, or to make a required contribution to a Multiemployer
Plan.

EU Bail-In Legislation Schedule: the EU Bail-In Legislation Schedule published
by the Loan Market Association (or any successor person), as in effect from time
to time.

Event of Default: as defined in Section 11.

Examination Trigger Year: any calendar year during which Availability is at any
time less than the greater of (a) 20% of the aggregate Revolver Commitments or
(b) $26,000,000.

Excluded Swap Obligation: with respect to an Obligor, each Swap Obligation as to
which, and only to the extent that, such Obligor’s guaranty of or grant of a
Lien as security for such Swap Obligation is or becomes illegal under the
Commodity Exchange Act because the Obligor does not constitute an “eligible
contract participant” as defined in the act (determined after giving effect to
any keepwell, support or other agreement for the benefit of such Obligor and all
guarantees of Swap Obligations by other Obligors) when such guaranty or grant of
Lien becomes effective with respect to the Swap Obligation. If a Hedging
Agreement governs more than one Swap Obligation, only the Swap Obligation(s) or
portions thereof described in the foregoing sentence shall be Excluded Swap
Obligation(s) for the applicable Obligor.

Excluded Taxes: (a) Taxes imposed on or measured by a Recipient’s net income
(however denominated), franchise Taxes and branch profits Taxes (i) as a result
of such Recipient being organized under the laws of, or having its principal
office or applicable Lending Office located in, the jurisdiction imposing such
Tax, or (ii) constituting Other Connection Taxes; (b) U.S. federal withholding
Taxes imposed on amounts payable to or for the account of a Lender with respect
to its interest in a Loan or Revolver Commitment pursuant to a law in effect
when the Lender acquires such interest (except pursuant to an assignment request
by Borrower Agent under Section 13.4) or changes its Lending Office,

 

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unless the Taxes were payable to its assignor immediately prior to such
assignment or to the Lender immediately prior to its change in Lending Office;
(c) Taxes attributable to a Recipient’s failure to comply with Section 5.9; and
(d) U.S. federal withholding Taxes imposed pursuant to FATCA. In no event shall
“Excluded Taxes” include any withholding Tax imposed on amounts paid by or on
behalf of a foreign Obligor to a Recipient that has complied with Section 5.9.2.

Existing Obligations: as defined in Section 2.3.

Extraordinary Expenses: all costs, expenses or advances that Agent may incur
during a Default or Event of Default, or during the pendency of an Insolvency
Proceeding of an Obligor, including those relating to (a) any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation or
advertising for sale, sale, collection, or other preservation of or realization
upon any Collateral; (b) any action, arbitration or other proceeding (whether
instituted by or against Agent, any Lender, any Obligor, any representative of
creditors of an Obligor or any other Person) in any way relating to any
Collateral (including the validity, perfection, priority or avoidability of
Agent’s Liens with respect to any Collateral), Loan Documents, Letters of Credit
or Obligations, including any lender liability or other Claims; (c) the exercise
of any rights or remedies of Agent in, or the monitoring of, any Insolvency
Proceeding; (d) settlement or satisfaction of taxes, charges or Liens with
respect to any Collateral; (e) any Enforcement Action; and (f) negotiation and
documentation of any modification, waiver, workout, restructuring or forbearance
with respect to any Loan Documents or Obligations. Such costs, expenses and
advances include transfer fees, Other Taxes, storage fees, insurance costs,
permit fees, utility reservation and standby fees, legal fees, appraisal fees,
brokers’ and auctioneers’ fees and commissions, accountants’ fees, environmental
study fees, wages and salaries paid to employees of any Obligor or independent
contractors in liquidating any Collateral, and travel expenses.

Fair Market Value: with respect to Borrowers’ Real Estate, the fair market value
of such Real Estate as determined by Agent in its reasonable discretion based
upon the Real Estate Appraisal.

FATCA: Sections 1471 through 1474 of the Code (including any amended or
successor version if substantively comparable and not materially more onerous to
comply with), and any agreements entered into pursuant to Section 1471(b)(1) of
the Code.

Federal Funds Rate: (a) the weighted average of interest rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on the applicable Business Day (or on the preceding
Business Day, if the applicable day is not a Business Day), as published by the
Federal Reserve Bank of New York on the next Business Day; or (b) if no such
rate is published on the next Business Day, the average rate (rounded up, if
necessary, to the nearest 1/8 of 1%) charged to Bank of America on the
applicable day on such transactions, as determined by Agent.

First Interest Rate Trigger Date: The last day of the “Subject Period” specified
in the first Compliance Certificate delivered by Borrowers to Agent pursuant to
Section 10.1.2(c) after the Closing Date (a) showing that EBITDA (calculated on
a trailing twelve-month basis) was greater than or equal to $5,000,000 as of the
end of such Subject Period and (b) including a certification from the chief
financial officer of the Borrower Agent that no Default or Event of Default has
occurred and is continuing as of the date of such Compliance Certificate. For
the avoidance of confusion, the First Interest Rate Trigger Date shall be the
last day of a calendar month.

Fiscal Quarter: each period of three months, with the first Fiscal Quarter of
any Fiscal Year commencing on the first day of such Fiscal Year.

 

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Fiscal Year: the fiscal year of Borrowers and Subsidiaries for accounting and
tax purposes, ending on March 31 of each year.

Fixed Asset Formula Amount: the lesser of (a) $10,000,000 or (b) the sum of
(i) the lesser of (x) $2,000,000 or (y) 85% of the NOLV Percentage of the Value
of Eligible Equipment, which amount shall reduce by 1/90th on the last day of
each calendar month after Agent’s receipt and approval of the Equipment
Appraisal (provided, however, that the amount determined pursuant to this clause
(y) shall be $0 at all times prior to Agent’s receipt and approval of the
Equipment Appraisal, but shall never be less than $0) plus (ii) the lesser of
(x) $8,000,000 or (y) 75% of the Fair Market Value of the Eligible Real Estate,
which amount shall reduce by 1/90th on the last day of each calendar month after
Agent’s receipt and approval of the Real Estate Appraisal (provided, however,
that the amount determined pursuant to this clause (y) shall be $0 at all times
prior to Agent’s receipt and approval of the Real Estate Appraisal, but shall
never be less than $0).

Fixed Asset Reserve: the aggregate amount of reserves established by Agent from
time to time in its sole discretion in respect of Eligible Equipment and/or
Eligible Real Estate.

Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for
Borrowers and Subsidiaries for the applicable trailing twelve-month period, of
(a) EBITDA minus Capital Expenditures (except those financed with Borrowed Money
other than Revolver Loans), cash taxes paid, stock repurchases, and
Distributions made in cash to (b) Fixed Charges.

Fixed Charges: the sum of (a) interest expense (other than payment-in-kind) and
(b) principal payments made on Borrowed Money (other than Revolver Loans).

Fixed Charge Trigger Period: the period commencing on the day that (a) an Event
of Default occurs or (b) Availability is less than the greater of
(i) $16,250,000 or (ii) 12.5% of the aggregate Revolver Commitments.

FLSA: the Fair Labor Standards Act of 1938.

Foreign Lender: any Lender that is not a U.S. Person.

Foreign Plan: any employee benefit plan or arrangement (a) maintained or
contributed to by any Obligor or Subsidiary that is not subject to the laws of
the United States; or (b) mandated by a government other than the United States
for employees of any Obligor or Subsidiary.

Foreign Subsidiary: a Subsidiary that is a “controlled foreign corporation”
under Section 957 of the Code, such that a guaranty by such Subsidiary of the
Obligations or a Lien on the assets of such Subsidiary to secure the Obligations
would result in material tax liability to Borrowers.

Fronting Exposure: a Defaulting Lender’s interest in LC Obligations, Swingline
Loans and Protective Advances, except to the extent Cash Collateralized by the
Defaulting Lender or allocated to other Lenders hereunder.

Full Payment: with respect to any Obligations, (a) the full and indefeasible
cash payment thereof, including any interest, fees and other charges accruing
during an Insolvency Proceeding (whether or not allowed in the proceeding); and
(b) if such Obligations are LC Obligations or inchoate or contingent in nature,
Cash Collateralization thereof (or delivery of a standby letter of credit
acceptable to Agent in its discretion, in the amount of required Cash
Collateral). No Loan shall be deemed to have been paid in full unless all
Revolver Commitments related to such Loan have terminated.

 

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Fund Loan Documents: (a) that certain Fund Loan Agreement, dated as of the NMTC
Closing Date, by and between WF Paint & Assembly and Arctic Cat Sales, as
amended, restated, supplemented, or otherwise modified from time to time,
(b) that certain Promissory Note, dated as of the NMTC Closing Date, made by WF
Paint & Assembly in favor of Arctic Cat Sales, in the original principal amount
of $10,776,000, as amended, restated, replaced, supplemented, or otherwise
modified from time to time, (c) that certain Security and Pledge Agreement,
dated as of the NMTC Closing Date, by and between WF Paint & Assembly and Arctic
Cat Sales, as amended, restated, supplemented, or otherwise modified from time
to time, and (d) any and all other documents, agreements or understandings that
evidence, secure, provide for the guaranty of, or otherwise govern the terms and
conditions of the Debt evidenced by the documents referred to in clauses (a) and
(b), each as amended, restated, supplemented, or otherwise modified from time to
time.

FX Hedging Arrangement: any Hedging Agreement that relates to foreign exchange
risks and all agreements, documents, or obligations relating thereto.

FX Hedging Arrangement Providers: as defined in Section 15.1.

FX Hedging Arrangement Reserve: the sum of the individual absolute values of the
Borrowers’ net liability from time to time under all FX Hedging Arrangements
provided by each FX Lender, to the extent that the net mark-to-market value of
all FX Hedging Arrangements provided by each such FX Lender is negative.

FX Lenders: as defined in Section 15.3.

GAAP: generally accepted accounting principles in effect in the United States
from time to time.

Governmental Approvals: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.

Governmental Authority: any federal, state, local, foreign or other agency,
authority, body, commission, court, instrumentality, political subdivision,
central bank, or other entity or officer exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions for any
governmental, judicial, investigative, regulatory or self-regulatory authority
(including the Financial Conduct Authority, the Prudential Regulation Authority
and any supra-national bodies such as the European Union or European Central
Bank).

Guarantor Payment: as defined in Section 5.10.3.

Guarantors: each Person that guarantees payment or performance of Obligations.

Guaranty: each guaranty agreement executed by a Guarantor in favor of Agent.

Hedging Agreement: a “swap agreement” as defined in Section 101(53B)(A) of the
Bankruptcy Code, including without limitation FX Hedging Arrangements.

Indemnified Taxes: (a) Taxes, other than Excluded Taxes, imposed on or relating
to any payment of an Obligation; and (b) to the extent not otherwise described
in clause (a), Other Taxes.

Indemnitees: Agent Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and
Bank of America Indemnitees.

 

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Insolvency Proceeding: any case or proceeding commenced by or against a Person
under any state, federal or foreign law for, or any agreement of such Person to,
(a) the entry of an order for relief under the Bankruptcy Code, or any other
insolvency, debtor relief or debt adjustment law; (b) the appointment of a
receiver, trustee, liquidator, administrator, conservator or other custodian for
such Person or any part of its Property; or (c) an assignment or trust mortgage
for the benefit of creditors.

Insurance Assignment: each collateral assignment of insurance pursuant to which
an Obligor assigns to Agent, for the benefit of Secured Parties, such Obligor’s
rights under key-man life, business interruption or other insurance policies as
Agent deems appropriate, as security for the Obligations.

Intellectual Property: all intellectual and similar Property of a Person,
including inventions, designs, patents, copyrights, trademarks, service marks,
trade names, trade secrets, confidential or proprietary information, customer
lists, know-how, software and databases; all embodiments or fixations thereof
and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records
relating to the foregoing.

Intellectual Property Claim: any claim or assertion (whether in writing, by suit
or otherwise) that a Borrower’s or Subsidiary’s ownership, use, marketing, sale
or distribution of any Inventory, Equipment, Intellectual Property or other
Property violates another Person’s Intellectual Property.

Interest Period: as defined in Section 3.1.3.

Inventory: as defined in the UCC, including all goods intended for sale, lease,
display or demonstration; all work in process; and all raw materials, and other
materials and supplies of any kind that are or could be used in connection with
the manufacture, printing, packing, shipping, advertising, sale, lease or
furnishing of such goods, or otherwise used or consumed in a Borrower’s business
(but excluding Equipment).

Inventory Formula Amount: (a) the lesser of (i) 65% of the Value of Eligible
Inventory (excluding, however (x) Eligible Inventory consisting of finished
all-terrain vehicles and finished recreational off-highway vehicles and (y) from
June 1 through December 31 of each calendar year, Eligible Inventory consisting
of finished snowmobiles) or (ii) 85% of the NOLV Percentage of the Value of
Eligible Inventory (excluding, however (x) Eligible Inventory consisting of
finished all-terrain vehicles and finished recreational off-highway vehicles and
(y) from June 1 through December 31 of each calendar year, Eligible Inventory
consisting of finished snowmobiles); plus (b) from June 1 through December 31 of
each calendar year, the lesser of (i) 75% of the Value of Eligible Inventory
consisting of finished snowmobiles or (ii) 85% of the NOLV Percentage of the
Value of Eligible Inventory consisting of finished snowmobiles; plus (c) the
lesser of (i) 75% of the Value of Eligible Inventory consisting of finished
all-terrain vehicles and finished recreational off-highway vehicles or (ii) 85%
of the NOLV Percentage of the Value of Eligible Inventory consisting of finished
all-terrain vehicles and finished recreational off-highway vehicles; plus
(d) the lesser of (i) $10,000,000 or (ii) 65% of the Value of Eligible
In-Transit Inventory. For purposes of calculating the Borrowing Base, the
Inventory Formula Amount shall in no event exceed $130,000,000.

Inventory Reserve: reserves established by Agent to reflect factors that may
negatively impact the Value of Inventory, including change in salability,
obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or
mix, markdowns and vendor chargebacks.

Investment: an Acquisition, an acquisition of record or beneficial ownership of
any Equity Interests of a Person, or an advance or capital contribution to or
other investment in a Person.

 

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IP Assignment: a collateral assignment or security agreement pursuant to which
an Obligor grants a Lien on its Intellectual Property to Agent, as security for
its Obligations.

IRS: the United States Internal Revenue Service.

Issuing Bank: Bank of America (including any Lending Office of Bank of America),
or any replacement issuer appointed pursuant to Section 2.2.4.

Issuing Bank Indemnitees: Issuing Bank and its officers, directors, employees,
Affiliates, agents and attorneys.

Judgment Currency: as defined in Section 1.5.

LC Application: an application by Borrower Agent to Issuing Bank for issuance of
a Letter of Credit, in form and substance satisfactory to Issuing Bank and
Agent.

LC Conditions: the following conditions necessary for issuance of a Letter of
Credit: (a) each of the conditions set forth in Section 6; (b) after giving
effect to such issuance, total LC Obligations do not exceed the Letter of Credit
Subline, no Overadvance exists and Revolver Usage does not exceed the Borrowing
Base; (c) the Letter of Credit and payments thereunder are denominated in
Dollars or other currency satisfactory to Agent and Issuing Bank; and (d) the
purpose and form of the proposed Letter of Credit are satisfactory to Agent and
Issuing Bank in their discretion.

LC Documents: all documents, instruments and agreements (including LC Requests
and LC Applications) delivered by Borrowers or any other Person to Issuing Bank
or Agent in connection with any Letter of Credit.

LC Obligations: the sum of (a) all amounts owing by Borrowers for drawings under
Letters of Credit; and (b) the Stated Amount of all outstanding Letters of
Credit.

LC Request: a request for issuance of a Letter of Credit, to be provided by
Borrower Agent to Issuing Bank, in form satisfactory to Agent and Issuing Bank.

Lender Indemnitees: Lenders and Secured Bank Product Providers, and their
officers, directors, employees, Affiliates, agents and attorneys.

Lenders: as defined in the preamble to this Agreement (including Agent in its
capacity as a provider of Swingline Loans) and any Person who hereafter becomes
a “Lender” pursuant to an Assignment, including any Lending Office of any of the
foregoing.

Lending Office: the office (including any domestic or foreign Affiliate or
branch) designated as such by a Lender or Issuing Bank by notice to Agent and
Borrower Agent.

Letter of Credit: any standby or documentary letter of credit, foreign guaranty,
documentary bankers acceptance or similar instrument issued by Issuing Bank for
the account or benefit of a Borrower or Affiliate of a Borrower.

Letter of Credit Subline: $30,000,000.

LIBOR: the per annum rate of interest (rounded up to the nearest 1/8th of 1%)
determined by Agent at or about 11:00 a.m. (London time) two Business Days prior
to an interest period, for a term

 

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equivalent to such period, equal to the London Interbank Offered Rate, or
comparable or successor rate approved by Agent, as published on the applicable
Reuters screen page (or other commercially available source designated by Agent
from time to time); provided, that any comparable or successor rate shall be
applied by Agent, if administratively feasible, in a manner consistent with
market practice; provided further, that in no event shall LIBOR be less than
zero.

LIBOR Loan: each set of Revolver Loans having a common length and commencement
of Interest Period.

License: any license or agreement under which an Obligor is authorized to use
Intellectual Property in connection with any manufacture, marketing,
distribution or disposition of Collateral, any use of Property or any other
conduct of its business.

Licensor: any Person from whom an Obligor obtains the right to use any
Intellectual Property.

Lien: a Person’s interest in Property securing an obligation owed to, or a claim
by, such Person, including any lien, security interest, pledge, hypothecation,
assignment, trust, reservation, encroachment, easement, right-of-way, covenant,
condition, restriction, lease, or other title exception or encumbrance.

Lien Waiver: an agreement, in form and substance satisfactory to Agent, by which
(a) for any material Collateral located on leased premises or premises subject
to a mortgage, the lessor or mortgagee, as applicable, waives or subordinates
any Lien it may have on the Collateral, and agrees to permit Agent to enter upon
the premises and remove the Collateral or to use the premises to store or
dispose of the Collateral; (b) for any Collateral held by a warehouseman,
processor, shipper, customs broker or freight forwarder, such Person waives or
subordinates any Lien it may have on the Collateral, agrees to hold any
Documents in its possession relating to the Collateral as agent for Agent, and
agrees to deliver the Collateral to Agent upon request; (c) for any Collateral
held by a repairman, mechanic or bailee, such Person acknowledges Agent’s Lien,
waives or subordinates any Lien it may have on the Collateral, and agrees to
deliver the Collateral to Agent upon request; and (d) for any Collateral subject
to a Licensor’s Intellectual Property rights, the Licensor grants to Agent the
right, vis-à-vis such Licensor, to enforce Agent’s Liens with respect to the
Collateral, including the right to dispose of it with the benefit of the
Intellectual Property, whether or not a default exists under any applicable
License.

Loan: a Revolver Loan.

Loan Documents: this Agreement, Other Agreements, Security Documents (including,
without limitation, the 2013 Loan Documents and the omnibus reaffirmation
agreement referred to in Section 6.1 hereof), and amendments to any of the
foregoing that may hereafter be in effect from time to time.

Loan Year: each 12 month period commencing on the Closing Date and on each
anniversary of the Closing Date.

Margin Stock: as defined in Regulation U of the Board of Governors.

Material Adverse Effect: the effect of any event or circumstance that, taken
alone or in conjunction with other events or circumstances, (a) has or could be
reasonably expected to have a material adverse effect on the assets, business,
liabilities, operations, Properties, prospects or condition (financial or
otherwise) of Arctic Cat individually, of Arctic Cat Sales Inc. individually, or
of all Obligors taken as a whole, on the value of any material Collateral, on
the enforceability of any Loan Documents, or on the validity or priority of
Agent’s Liens on any Collateral; (b) impairs the ability of an Obligor to
perform its obligations under the Loan Documents, including repayment of any
Obligations; or (c) otherwise impairs the ability of Agent or any Lender to
enforce or collect any Obligations or to realize upon any Collateral.

 

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Material Contract: any agreement or arrangement to which a Borrower or
Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a
material contract under any securities law applicable to such Person, including
the Securities Act of 1933; (b) for which breach, termination, nonperformance or
failure to renew could reasonably be expected to have a Material Adverse Effect;
or (c) that relates to Subordinated Debt, or to Debt in an aggregate amount of
$5,000,000 or more.

Maximum FX MTM Position: as defined in Section 15.3.

MMCDC Sub-CDE: MMCDC New Markets Fund XLIX, LLC, a Delaware limited liability
company, together with its successors and assigns under the NMTC Financing
Documents.

Moody’s: Moody’s Investors Service, Inc., and its successors.

Mortgage: a mortgage or deed of trust in which an Obligor grants a Lien on its
Real Estate to Agent, as security for the Obligations, including without
limitation the amended and restated mortgages and deed of trust dated as of even
date with this Agreement.

Multiemployer Plan: any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which an Obligor or ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

Multiple Employer Plan: a Plan that has two or more contributing sponsors,
including an Obligor or ERISA Affiliate, at least two of whom are not under
common control, as described in Section 4064 of ERISA.

Net Proceeds: with respect to an Asset Disposition, proceeds (including, when
received, any deferred or escrowed payments) received by a Borrower or
Subsidiary in cash from such disposition, net of (a) reasonable and customary
costs and expenses actually incurred in connection therewith, including legal
fees and sales commissions; (b) amounts applied to repayment of Debt secured by
a Permitted Lien senior to Agent’s Liens on Collateral sold; (c) transfer or
similar taxes; and (d) reserves for indemnities, until such reserves are no
longer needed.

Net Yamaha Account: the total amount of the Accounts owing to Borrowers by
Yamaha Motor Corporation, Yamaha Motor Canada Ltd, and Yamaha Motor
Corp-Minocqua that would meet the definition of “Eligible Account”, less any
amount owing by Borrowers to Yamaha Motor Co. Ltd.

NMTC Closing Date: February 11, 2016.

NMTC Disbursement Account: the deposit account number 4129-395745 held at Wells
Fargo Bank, National Association, in the name of ACPS.

NMTC Equipment: the Original NMTC Equipment and Equipment owned by ACPS and
purchased by ACPS entirely with the proceeds of the NMTC Loans from time to time
in accordance with the NMTC Financing Documents and this Agreement.

NMTC Facility: the NMTC Equipment and that certain paint facility located on the
Real Estate commonly known as 601 Brooks Avenue South, Thief River Falls,
Minnesota 56701 and consisting of approximately 234,375 square feet of space and
leased from Arctic Cat by ACPS pursuant to that certain lease agreement dated as
of January 1, 2003.

 

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NMTC Financing: collectively, (a) the acquisition, construction, equipping and
operation of the NMTC Equipment in the NMTC Facility by ACPS, using the proceeds
of the NMTC Loans, (b) the NMTC Investment, and (c) interest payments and
scheduled amortization payments by ACPS on the NMTC Loans.

NMTC Financing Documents: the NMTC Loan Agreement, the Fund Loan Documents, and
any other agreement or instrument to which any Obligor is party, bound, or
beneficiary in connection with the NMTC Financing.

NMTC Intercreditor Agreement: that certain Intercreditor Agreement, dated as of
the NMTC Closing Date, by and among the Agent, Wells Fargo Sub-CDE, and MMCDC
Sub-CDE, and acknowledged and agreed to by the Obligors, as amended, restated,
supplemented, or otherwise modified from time to time in accordance with its
terms.

NMTC Investment: the Investment in the form of a secured loan from Arctic Cat
Sales to WF Paint & Assembly, in a principal amount not to exceed $10,776,000.

NMTC Loan Agreement: that certain Loan Agreement, dated as of the NMTC Closing
Date, by and among ACPS, the Wells Fargo Sub-CDE, and the MMCDC Sub-CDE, as
amended, restated, supplemented, or otherwise modified from time to time.

NMTC Loans: collectively, the loans to ACPS to provide funding for the financing
of the NMTC Facility from (a) Wells Fargo Sub-CDE in an aggregate principal
amount not to exceed $4,000,000 and (b) MMCDC Sub-CDE in a principal amount not
to exceed $11,520,000.

NOLV Percentage: (a) with respect to Borrowers’ Inventory, the net orderly
liquidation value of such Inventory (which shall be the “high season” net
orderly liquidation value of such Inventory, as set forth in the applicable
appraisal, during the period beginning on June 1 and ending on December 31 of
each calendar year, and shall be the “low season” net orderly liquidation value
of such Inventory, as set forth in the applicable appraisal, during the period
beginning on January 1 and ending on May 31 of each calendar year), expressed as
a percentage, expected to be realized at an orderly, negotiated sale held within
a reasonable period of time, net of all liquidation expenses, as determined from
the most recent appraisal of Borrowers’ Inventory performed pursuant to this
Agreement by an appraiser and on terms satisfactory to Agent, (b) with respect
to the Seasonal FX Collateral Pool, the net orderly liquidation value of the
Seasonal FX Collateral Pool, expressed as a percentage, expected to be realized
at an orderly, negotiated sale held within a reasonable period of time, net of
all liquidation expenses, as determined from the most recent appraisal of
Borrowers’ Seasonal FX Collateral Pool performed pursuant to this Agreement by
an appraiser and on terms satisfactory to Agent, and (c) with respect to
Borrowers’ Equipment, the net orderly liquidation value of such Equipment,
expressed as a percentage, expected to be realized at an orderly, negotiated
sale held within a reasonable period of time, net of all liquidation expenses,
as determined by Agent in its sole discretion based upon the Equipment
Appraisal.

Notice of Borrowing: a request by Borrower Agent for a Borrowing of Revolver
Loans, in form reasonably satisfactory to Agent.

Notice of Conversion/Continuation: a request provided by Borrower Agent for a
conversion or continuation of any Loans as LIBOR Loans, in form reasonably
satisfactory to Agent.

 

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Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC
Obligations and other obligations of Obligors with respect to Letters of Credit,
(c) interest, expenses, fees, indemnification obligations, Extraordinary
Expenses and other amounts payable by Obligors under Loan Documents, (d) Secured
Bank Product Obligations, and (e) other Debts, obligations and liabilities of
any kind owing by Obligors pursuant to the Loan Documents (including, without
limitation, the Existing Obligations), whether now existing or hereafter
arising, whether evidenced by a note or other writing, whether allowed in any
Insolvency Proceeding, whether arising from an extension of credit, issuance of
a letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
and whether direct or indirect, absolute or contingent, due or to become due,
primary or secondary, or joint or several; provided, that Obligations of an
Obligor shall not include its Excluded Swap Obligations.

Obligor: each Borrower, Guarantor, or other Person that is liable for payment of
any of the Obligations or that has granted a Lien on any of its assets in favor
of Agent to secure any of the Obligations.

OFAC: Office of Foreign Assets Control of the U.S. Treasury Department.

Ordinary Course of Business: the ordinary course of business of any Borrower or
Subsidiary, undertaken in good faith and consistent with Applicable Law and past
practices.

Organic Documents: with respect to any Person, its charter, certificate or
articles of incorporation, bylaws, articles of organization, limited liability
agreement, operating agreement, members agreement, shareholders agreement,
partnership agreement, certificate of partnership, certificate of formation,
voting trust agreement, or similar agreement or instrument governing the
formation or operation of such Person.

Original Closing Date: November 10, 2009.

Original NMTC Equipment: the Equipment acquired by ACPS in connection with the
NMTC Financing and described on Exhibit C.

OSHA: the Occupational Safety and Hazard Act of 1970.

Other Agreement: the NMTC Intercreditor Agreement and each LC Document, Agent
Fee Letter, Lien Waiver, Real Estate Related Document, Borrowing Base Report,
Compliance Certificate, Borrower Materials, or other note, document, instrument
or agreement (other than this Agreement or a Security Document) now or hereafter
delivered by an Obligor or other Person to Agent or a Lender in connection with
any transactions relating hereto.

Other Connection Taxes: Taxes imposed on a Recipient due to a present or former
connection between it and the taxing jurisdiction (other than connections
arising from the Recipient having executed, delivered, become party to,
performed obligations or received payments under, received or perfected a Lien
or engaged in any other transaction pursuant to, enforced, or sold or assigned
an interest in, any Loan or Loan Document).

Other Taxes: all present or future stamp, court, documentary, intangible,
recording, filing or similar Taxes that arise from any payment made under, from
the execution, delivery, performance, enforcement or registration of, from the
receipt or perfection of a Lien under, or otherwise with respect to, any Loan
Document, except Other Connection Taxes imposed with respect to an assignment
(other than an assignment made pursuant to Section 13.4(c)).

Overadvance: as defined in Section 2.1.5.

 

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Overadvance Loan: a Base Rate Loan made when an Overadvance exists or is caused
by the funding thereof.

Participant: as defined in Section 13.2.

Patriot Act: the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L.
No. 107-56, 115 Stat. 272 (2001).

Payment Item: each check, draft or other item of payment payable to a Borrower,
including those constituting proceeds of any Collateral.

PBGC: the Pension Benefit Guaranty Corporation.

Pension Funding Rules: Code and ERISA rules regarding minimum required
contributions (including installment payments) to Pension Plans set forth in,
for plan years ending prior to the Pension Protection Act of 2006 effective
date, Section 412 of the Code and Section 302 of ERISA, both as in effect prior
to such act, and thereafter, Sections 412, 430, 431, 432 and 436 of the Code and
Sections 302, 303, 304 and 305 of ERISA.

Pension Plan: any employee pension benefit plan (as defined in Section 3(2) of
ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by an Obligor or ERISA Affiliate or to which the
Obligor or ERISA Affiliate contributes or has an obligation to contribute, or in
the case of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the preceding five plan years.

Permitted Asset Disposition: as long as no Default or Event of Default exists
and all Net Proceeds are remitted to Agent, an Asset Disposition that is (a) a
sale of Inventory in the Ordinary Course of Business; (b) a disposition of
Equipment no longer used or useful in the Borrowers’ business that, in the
aggregate during any 12 month period, has a fair market or book value (whichever
is more) of $1,000,000 or less; (c) a disposition of Inventory that is obsolete,
unmerchantable or otherwise unsalable in the Ordinary Course of Business;
(d) termination of a lease of real or personal Property that is not necessary
for the Ordinary Course of Business, could not reasonably be expected to have a
Material Adverse Effect and does not result from an Obligor’s default; or
(e) approved in writing by Agent and Required Lenders.

Permitted Contingent Obligations: Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the Ordinary Course
of Business; (b) existing on the Closing Date and identified on Schedule 10.2.1,
and any extension or renewal thereof that does not increase the amount of such
Contingent Obligation when extended or renewed; (c) incurred in the Ordinary
Course of Business with respect to surety, appeal or performance bonds, or other
similar obligations; (d) arising from customary indemnification obligations in
favor of purchasers in connection with dispositions of Equipment permitted
hereunder; (e) arising under the Loan Documents; (f) in an aggregate amount of
$1,000,000 or less at any time; (g) of Arctic Cat under that certain Repayment
Guaranty, made as of the NMTC Closing Date by Arctic Cat to and for the benefit
of the NMTC Lenders, as in effect on the NMTC Closing Date, but only so long as
such guaranty is unsecured and the Debt guarantied thereby is permitted pursuant
to Section 10.2.1(j); (h) of Arctic Cat under that certain Investment Fund Put
and Call Agreement, dated as of the NMTC Closing Date, by and between Wells
Fargo Community Investment Holdings, LLC, a Delaware limited liability company,
and Arctic Cat, as in effect on the NMTC Closing Date, but only so long as the
obligations of Arctic Cat thereunder are unsecured and the NMTC Loans are
permitted pursuant to Section 10.2.1(j); and (i) of Arctic Cat and ACPS under
that certain Indemnity Agreement, dated as of the NMTC Closing Date, made by
Arctic Cat and ACPS for the benefit of Wells Fargo Community Investment
Holdings, LLC, as in effect on the NMTC Closing Date, but only so long as the
obligations of Arctic Cat thereunder are unsecured and the NMTC Loans are
permitted pursuant to Section 10.2.1(j).

 

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Permitted Lien: as defined in Section 10.2.2.

Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries
that is unsecured or secured only by a Purchase Money Lien, as long as the
aggregate amount with respect to all Borrowers does not exceed $6,000,000 at any
time.

Permitted Term Loan: a single term loan financing provided to any or all of the
Obligors, so long as (a) such term loan and all obligations related thereto
shall be secured solely by the Obligors’ trade names and/or Real Estate (but
not, in any event, by any of the NMTC Equipment), (b) reasonably final drafts of
the loan documents concerning such term loan shall be provided to Agent for
review at least ten (10) Business Days prior to the execution thereof by any
party (unless otherwise agreed to by Agent in writing), and such documentation
is acceptable to Agent in all respects, (c) on or prior to the date that any
portion of such term loan is advanced, (i) the Obligors, Agent, and the Required
Lenders shall have entered into an amendment to this Agreement, in form and
substance acceptable to Agent in all respects, in order to make such
modifications as are required by Agent in connection with such term loan
(including, without limitation, modifications to the definition of “Borrowing
Base” and/or any of the components thereof) and (ii) Agent and the term lender
(or agent for a group of such term lenders) shall have entered into an
intercreditor agreement in form and substance acceptable to Agent in all
respects, and Obligors shall have acknowledged and agreed to the same,
(d) concurrently with the initial advance of such term loan, the
then-outstanding principal balance of the Loans shall be paid down by the lesser
of (i) $30,000,000 or (ii) the entire then-outstanding principal balance of the
Loans (but, for the avoidance of confusion, such payment shall not constitute a
reduction of any Commitment), and (e) no Default or Event of Default shall exist
at the time of, or result from, the funding of such term loan, the execution and
delivery of the loan documents concerning such term loan by any Obligor, or the
performance by any Obligor of its obligations thereunder.

Person: any individual, corporation, limited liability company, partnership,
joint venture, association, trust, unincorporated organization, Governmental
Authority or other entity.

Plan: an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
for employees of an Obligor or ERISA Affiliate, or to which an Obligor or ERISA
Affiliate is required to contribute on behalf of its employees.

Platform: as defined in Section 14.3.3.

Pledge Agreement: each equity pledge agreement pursuant to which an Obligor
grants to Agent, for the benefit of Secured Parties, a Lien on such Obligor’s
equity interests in each of its domestic and foreign Subsidiaries, as security
for the Obligations.

Prime Rate: the rate of interest announced by Bank of America from time to time
as its prime rate. Such rate is set by Bank of America on the basis of various
factors, including its costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above or below such rate. Any change in such rate publicly
announced by Bank of America shall take effect at the opening of business on the
day specified in the announcement.

Pro Rata: with respect to any Lender, a percentage (rounded to the ninth decimal
place) determined (a) by dividing the amount of such Lender’s Revolver
Commitment by the aggregate outstanding Revolver Commitments; or (b) following
termination of the Revolver Commitments, by

 

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dividing the amount of such Lender’s Loans and LC Obligations by the aggregate
outstanding Loans and LC Obligations or, if all Loans and LC Obligations have
been paid in full and/or Cash Collateralized, by dividing such Lender’s and its
Affiliates’ remaining Obligations by the aggregate remaining Obligations.

Properly Contested: with respect to any obligation of an Obligor, (a) the
obligation is subject to a bona fide dispute regarding amount or the Obligor’s
liability to pay; (b) the obligation is being properly contested in good faith
by appropriate proceedings promptly instituted and diligently pursued;
(c) appropriate reserves have been established in accordance with GAAP;
(d) non-payment could not have a Material Adverse Effect, nor result in
forfeiture or sale of any assets of the Obligor; (e) no Lien is imposed on
assets of the Obligor, unless bonded and stayed to the satisfaction of Agent;
and (f) if the obligation results from entry of a judgment or other order, such
judgment or order is stayed pending appeal or other judicial review.

Property: any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.

Protective Advances: as defined in Section 2.1.6.

Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of
the purchase price of fixed assets; (b) Debt (other than the Obligations)
incurred within ten (10) days before or after acquisition of any fixed assets,
for the purpose of financing any of the purchase price thereof; and (c) any
renewals, extensions or refinancings (but not increases) thereof.

Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only
the fixed assets acquired with such Debt and constituting a Capital Lease or a
purchase money security interest under the UCC.

Qualified ECP: an Obligor with total assets exceeding $10,000,000, or that
constitutes an “eligible contract participant” under the Commodity Exchange Act
and can cause another Person to qualify as an “eligible contract participant”
under Section 1a(18)(A)(v)(II) of such act.

RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

Real Estate: all right, title and interest (whether as owner, lessor or lessee)
in any real Property or any buildings, structures, parking areas or other
improvements thereon.

Real Estate Appraisal: the appraisal of Borrowers’ Real Estate delivered or to
be delivered pursuant to Section 10.1.12(a).

Real Estate Related Documents: with respect to any Real Estate subject to a
Mortgage, the following, in form and substance satisfactory to Agent: (a) a
mortgagee title policy (or binder therefor) covering Agent’s interest under each
Mortgage, in a form and in an amount and by an insurer acceptable to Agent,
which must be fully paid on such effective date; (b) such assignments of leases,
estoppel letters, attornment agreements, subordination agreements, consents,
waivers and releases as Agent may reasonably require with respect to other
Persons having an interest in the Real Estate; (c) a current, as-built survey of
the Real Estate, containing a metes-and-bounds property description and
certified by a licensed surveyor acceptable to Agent and, if requested by Agent,
a zoning report with respect to the Real Estate; (d) a life-of-loan flood hazard
determination and, if the Real Estate is located in a special flood hazard area,
an acknowledged notice to borrower and flood insurance in an amount, with
endorsements, and by an insurer acceptable to Agent and Lenders; (e) a current
appraisal of the Real Estate, prepared by an appraiser acceptable to Agent and
Lenders, and in form and substance satisfactory to Required

 

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Lenders; (f) an environmental assessment, prepared by environmental engineers
acceptable to Agent, and such other reports, certificates, studies or data as
Agent may reasonably require, all in form and substance satisfactory to Required
Lenders; and (g) such other documents, instruments or agreements as Agent may
reasonably require with respect to any environmental risks regarding the Real
Estate.

Recipient: Agent, Issuing Bank, any Lender or any other recipient of a payment
to be made by an Obligor under a Loan Document or on account of an Obligation.

Refinancing Conditions: the following conditions for Refinancing Debt: (a) it is
in an aggregate principal amount that does not exceed the principal amount of
the Debt being extended, renewed or refinanced; (b) it has a final maturity no
sooner than, a weighted average life no less than, and an interest rate no
greater than, the Debt being extended, renewed or refinanced; (c) it is
subordinated to the Obligations at least to the same extent as the Debt being
extended, renewed or refinanced; (d) the representations, covenants and defaults
applicable to it are no less favorable to Borrowers than those applicable to the
Debt being extended, renewed or refinanced; (e) no additional Lien is granted to
secure it; (f) no additional Person is obligated on such Debt; and (g) upon
giving effect to it, no Default or Event of Default exists.

Refinancing Debt: Borrowed Money that is the result of an extension, renewal or
refinancing of Debt permitted under Section 10.2.1(b), (d) or (f).

Reimbursement Date: as defined in Section 2.2.2.

Rent and Charges Reserve: the aggregate of (a) all past due rent and other
amounts owing by an Obligor to any landlord, warehouseman, processor, repairman,
mechanic, shipper, freight forwarder, broker or other Person who possesses any
Collateral or could assert a Lien on any Collateral; and (b) a reserve at least
equal to three months’ rent and other charges that could be payable to any such
Person, unless it has executed a Lien Waiver.

Report: as defined in Section 12.2.3.

Reportable Event: any event set forth in Section 4043(c) of ERISA, other than an
event for which the 30 day notice period has been waived.

Required Lenders: Secured Parties holding more than 65% of (a) the aggregate
outstanding Revolver Commitments; or (b) following termination of the Revolver
Commitments, the aggregate outstanding Loans and LC Obligations or, if all Loans
and LC Obligations have been Paid in Full, the aggregate remaining Obligations;
provided, however, that Revolver Commitments, Loans and other Obligations held
by a Defaulting Lender and its Affiliates shall be disregarded in making such
calculation, but any related Fronting Exposure shall be deemed held as a Loan or
LC Obligation by the Secured Party that funded the applicable Loan or issued the
applicable Letter of Credit; provided, further, however, that if there are only
two Lenders and neither Lender is a Defaulting Lender, then both Lenders shall
be Required Lenders.

Restricted Investment: any Investment by a Borrower or Subsidiary, other than
(a) Investments in Subsidiaries to the extent existing on the Closing Date;
(b) Cash Equivalents that are subject to Agent’s Lien and control, pursuant to
documentation in form and substance satisfactory to Agent; and (c) loans and
advances permitted under Section 10.2.6.

Restrictive Agreement: an agreement (other than a Loan Document) that conditions
or restricts the right of any Borrower, Subsidiary or other Obligor to incur or
repay Borrowed Money, to grant Liens on any assets, to declare or make
Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt.

 

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Revolver Commitment: for any Lender, its obligation to make Revolver Loans and
to participate in LC Obligations up to the maximum principal amount shown on
Schedule 1.1(B), as hereafter modified pursuant to an Assignment to which it is
a party.

Revolver Commitments: the aggregate amount of such commitments of all Lenders.

Revolver Loan: a loan made pursuant to Section 2.1, and any Swingline Loan,
Overadvance Loan or Protective Advance.

Revolver Usage: (a) the aggregate amount of outstanding Revolver Loans; plus
(b) the aggregate Stated Amount of outstanding Letters of Credit, except to the
extent Cash Collateralized by Borrowers.

Royalties: all royalties, fees, expense reimbursement and other amounts payable
by a Borrower under a License.

S&P: Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill
Companies, Inc., and any successor thereto.

Sanction: any sanction administered or enforced by the U.S. Government
(including OFAC), United Nations Security Council, European Union, Her Majesty’s
Treasury or other sanctions authority.

Seasonal FX Collateral Pool: all Collateral consisting of Borrowers’ Real
Estate, machinery, and equipment.

Seasonal FX Collateral Pool Amount: the sum of (a) eighty-five percent (85%) of
the NOLV Percentage of the Seasonal FX Collateral Pool (other than Real Estate)
in the aggregate from time to time plus (b) seventy-five percent (75%) of the
Fair Market Value of the Real Estate in the Seasonal FX Collateral Pool in the
aggregate from time to time.

Second Interest Rate Trigger Date: The last day of the “Subject Period”
specified in the first Compliance Certificate delivered by Borrowers to Agent
pursuant to Section 10.1.2(c) with respect to a “Subject Period” ending after
the First Interest Rate Trigger Date and (a) showing that the Fixed Charge
Coverage Ratio (calculated on a trailing twelve-month basis) was greater than or
equal to 1.00 to 1.00 with respect to such Subject Period and (b) including a
certification from the chief financial officer of the Borrower Agent that no
Default or Event of Default has occurred and is continuing as of the date of
such Compliance Certificate. For the avoidance of confusion, the Second Interest
Rate Trigger Date shall be the last day of a calendar month.

Secured Bank Product Obligations: Debt, obligations and other liabilities with
respect to Bank Products owing by a Borrower or Affiliate of a Borrower to a
Secured Bank Product Provider; provided, that Secured Bank Product Obligations
of an Obligor shall not include its Excluded Swap Obligations.

Secured Bank Product Provider: (a) Bank of America or any of its Affiliates; and
(b) any other Lender or Affiliate of a Lender that is providing a Bank Product,
provided such provider delivers written notice to Agent, in form and substance
satisfactory to Agent, within ten (10) days following the later of the Closing
Date or creation of the Bank Product, (i) describing the Bank Product and
setting forth the maximum amount to be secured by the Collateral and the
methodology to be used in calculating such amount, and (ii) agreeing to be bound
by Section 12.13.

 

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Secured Parties: Agent, Issuing Bank, Lenders and Secured Bank Product
Providers.

Security Documents: the Guaranties, Mortgages, IP Assignments, Pledge
Agreements, Deposit Account Control Agreements, and all other documents,
instruments and agreements now or hereafter securing (or given with the intent
to secure) any of the Obligations.

Senior Officer: the chairman of the board, president, chief executive officer or
chief financial officer of a Borrower or, if the context requires, an Obligor.

Settlement Report: a report summarizing Revolver Loans and participations in LC
Obligations outstanding as of a given settlement date, allocated to Lenders on a
Pro Rata basis in accordance with their Revolver Commitments.

Solvent: as to any Person, such Person (a) owns Property whose fair salable
value is greater than the amount required to pay all of its debts (including
contingent, subordinated, unmatured and unliquidated liabilities); (b) owns
Property whose present fair salable value (as defined below) is greater than the
probable total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person as they become absolute and matured;
(c) is able to pay all of its debts as they mature; (d) has capital that is not
unreasonably small for its business and is sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage; (e) is not “insolvent” within the meaning of Section 101(32) of the
Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise)
any obligations or liabilities (contingent or otherwise) under any Loan
Documents, or made any conveyance in connection therewith, with actual intent to
hinder, delay or defraud either present or future creditors of such Person or
any of its Affiliates. “Fair salable value” means the amount that could be
obtained for assets within a reasonable time, either through collection or
through sale under ordinary selling conditions by a capable and diligent seller
to an interested buyer who is willing (but under no compulsion) to purchase.

Specified Obligor: an Obligor that is not then an “eligible contract
participant” under the Commodity Exchange Act (determined prior to giving effect
to Section 5.10).

Spot Rate: the exchange rate, as determined by Agent, that is applicable to
conversion of one currency into another currency, which is (a) the exchange rate
reported by Bloomberg (or other commercially available source designated by
Agent) as of the end of the preceding business day in the financial market for
the first currency; or (b) if such report is unavailable for any reason, the
spot rate for the purchase of the first currency with the second currency as in
effect during the preceding business day in Agent’s principal foreign exchange
trading office for the first currency.

Stated Amount: the outstanding amount of a Letter of Credit, including any
automatic increase or tolerance (whether or not then in effect) provided by the
Letter of Credit or related LC Documents.

Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and
junior in right of payment to Full Payment of all Obligations in a manner, and
is otherwise on terms (including maturity, interest, fees, repayment, and
covenants), satisfactory to Agent.

Subsidiary: any entity at least 50% of whose voting securities or Equity
Interests is owned by a Borrower or combination of Borrowers (including indirect
ownership through other entities in which a Borrower directly or indirectly owns
50% of the voting securities or Equity Interests).

Swap Obligations: with respect to an Obligor, its obligations under a Hedging
Agreement that constitutes a “swap” within the meaning of Section 1a(47) of the
Commodity Exchange Act.

 

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Swingline Loan: any Borrowing of Base Rate Loans funded with Agent’s funds,
until such Borrowing is settled among Lenders or repaid by Borrowers.

Taxes: all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

Termination Date: the earlier of (a) November 29, 2021, or (b) 60 days prior to
the termination date or maturity date of any Dealer Finance Agreement, if not
sooner replaced by a dealer floor plan financing that is acceptable to Agent in
its sole discretion.

Trade Name Amount: the difference of (a) the Unadjusted Trade Name Amount minus
(b) the lesser of (i) $8,000,000 or (ii) 75% of the Fair Market Value of the
Eligible Real Estate, which amount shall reduce by 1/90th on the last day of
each calendar month after Agent’s receipt and approval of the appraisal upon
which such Fair Market Value is based (provided, however, that the amount
determined pursuant to this clause (ii) shall be $0 at all times prior to
Agent’s receipt and approval of the Real Estate Appraisal, but shall never be
less than $0).

Trade Name Appraisal: the appraisal of Borrowers’ trade names delivered or to be
delivered pursuant to Section 10.1.12(a).

Transferee: any actual or potential Eligible Assignee, Participant or other
Person acquiring an interest in any Obligations.

UCC: the Uniform Commercial Code as in effect in the State of Illinois or, when
the laws of any other jurisdiction govern the perfection or enforcement of any
Lien, the Uniform Commercial Code of such jurisdiction.

Unadjusted Trade Name Amount: (a) Until Agent has obtained and approved the
Trade Name Appraisal, $18,000,000, which amount shall reduce by 1/36th on
December 31, 2016 and on the last day of each calendar month thereafter (but
shall never be less than $0) and (b) on and after the date, if any, upon which
Agent has obtained and approved the Trade Name Appraisal, an amount initially
equal to 85% of the Distressed Trade Name Value, which amount shall reduce by
1/36th on the last day of each calendar month (but shall never be less than $0).

Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to the Code, ERISA or the Pension Protection Act of
2006 for the applicable plan year.

Unused Line Fee Rate: a per annum rate equal to (a) 0.375%, if average daily
Revolver Usage was less than 50% of the Borrowing Base during the preceding
calendar month, or (b) 0.25%, if average daily Revolver Usage was greater than
or equal to 50% of the Borrowing Base during such month.

Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.

U.S. Person: “United States Person” as defined in Section 7701(a)(30) of the
Code.

U.S. Tax Compliance Certificate: as defined in Section 5.9.2(b)(iii).

 

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Value: (a) for Inventory, its value determined on the basis of the lower of cost
or market, calculated on a first-in, first-out basis, and excluding any portion
of cost attributable to intercompany profit among Borrowers and their
Affiliates; (b) for an Account, its face amount, net of any returns, rebates,
discounts (calculated on the shortest terms), credits, allowances or Taxes
(including sales, excise or other taxes) that have been or could be claimed by
the Account Debtor or any other Person; and (c) for Equipment, the value of such
Equipment as determined by Agent in its sole discretion based upon the Equipment
Appraisal.

Wells Fargo Holdings: means Wells Fargo Community Investment Holdings, LLC, a
Delaware limited liability company, together with its successor and assigns
under the NMTC Financing Documents.

Wells Fargo Sub-CDE means Wells Fargo Community Development Enterprise Round 12
Subsidiary 6, LLC, a Delaware limited liability company, together with its
successors and assigns under the NMTC Financing Documents.

WF Paint & Assembly: means WF Paint & Assembly Investment Fund, LLC, a Delaware
limited liability company, together with its successor and assigns under the
NMTC Financing Documents.

Write-Down and Conversion Powers: means, with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority
from time to time under the Bail-In Legislation for the applicable EEA Member
Country, which write-down and conversion powers are described in the EU Bail-In
Legislation Schedule.

1.2 Accounting Terms. Under the Loan Documents (except as otherwise specified
therein), all accounting terms shall be interpreted, all accounting
determinations shall be made, and all financial statements shall be prepared, in
accordance with GAAP applied on a basis consistent with the most recent audited
financial statements of Borrowers delivered to Agent before the Closing Date and
using the same inventory valuation method as used in such financial statements
(provided, however, that consolidating financial statements need not be prepared
in accordance with GAAP, but must be prepared on a basis consistent with the
most recent consolidating financial statements of Borrowers delivered to Agent
before the Closing Date and using the same inventory valuation method as used in
such financial statements), except for any change required or permitted by GAAP
if Borrowers’ certified public accountants concur in such change, the change is
disclosed to Agent, and all relevant provisions of the Loan Documents are
amended in a manner satisfactory to Required Lenders to take into account the
effects of the change.

1.3 Uniform Commercial Code. As used herein, the following terms are defined in
accordance with the UCC in effect in the State of Illinois from time to time:
“Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,” “Document,”
“Equipment,” “General Intangibles,” “Goods,” “Instrument,” “Investment
Property,” “Letter-of-Credit Right” and “Supporting Obligation.”

1.4 Certain Matters of Construction. The terms “herein,” “hereof,” “hereunder”
and other words of similar import refer to this Agreement as a whole and not to
any particular section, paragraph or subdivision. Any pronoun used shall be
deemed to cover all genders. In the computation of periods of time from a
specified date to a later specified date, “from” means “from and including,” and
“to” and “until” each mean “to but excluding.” The terms “including” and
“include” shall mean “including, without limitation” and, for purposes of each
Loan Document, the parties agree that the rule of ejusdem generis shall not be
applicable to limit any provision. Section titles appear as a matter of
convenience only and shall not affect the interpretation of any Loan Document.
All references to (a) laws include all related regulations, interpretations,
supplements, amendments and successor provisions; (b) any document, instrument
or agreement include any amendments, waivers and other modifications, extensions
or renewals (to the extent permitted by the Loan Documents); (c) any section
mean, unless the context

 

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otherwise requires, a section of this Agreement; (d) any exhibits or schedules
mean, unless the context otherwise requires, exhibits and schedules attached
hereto, which are hereby incorporated by reference; (e) any Person include
successors and assigns; (f) time of day mean time of day at Agent’s notice
address under Section 14.3.1; or (g) discretion of Agent, Issuing Bank or any
Lender mean the sole and absolute discretion of such Person. All determinations
(including calculations of Borrowing Base and financial covenants) made from
time to time under the Loan Documents shall be made in light of the
circumstances existing at such time. Borrowing Base calculations shall be
consistent with historical methods of valuation and calculation, and otherwise
satisfactory to Agent (and not necessarily calculated in accordance with GAAP).
Borrowers shall have the burden of establishing any alleged negligence,
misconduct or lack of good faith by Agent, Issuing Bank or any Lender under any
Loan Documents. No provision of any Loan Documents shall be construed against
any party by reason of such party having, or being deemed to have, drafted the
provision. Reference to a Borrower’s “knowledge” or similar concept means actual
knowledge of a Senior Officer, or knowledge that a Senior Officer would have
obtained if he or she had engaged in good faith and diligent performance of his
or her duties, including reasonably specific inquiries of employees or agents
and a good faith attempt to ascertain the matter.

1.5 Currency Equivalents.

1.5.1 Calculations. All references in the Loan Documents to Loans, Letters of
Credit, Obligations, Borrowing Base components and other amounts shall be
denominated in Dollars, unless expressly provided otherwise. The Dollar
equivalent of any amounts denominated or reported under a Loan Document in a
currency other than Dollars shall be determined by Agent on a daily basis, based
on the current Spot Rate. Borrowers shall report Value and other Borrowing Base
components to Agent in the currency invoiced by Borrowers or shown in Borrowers’
financial records, and unless expressly provided otherwise, shall deliver
financial statements and calculate financial covenants in Dollars.
Notwithstanding anything herein to the contrary, if any Obligation is funded and
expressly denominated in a currency other than Dollars, Borrowers shall repay
such Obligation in such other currency.

1.5.2 Judgments. If, for purposes of obtaining judgment in any court, it is
necessary to convert a sum from the currency provided under a Loan Document
(“Agreement Currency”) into another currency, the Spot Rate shall be used as the
rate of exchange. Notwithstanding any judgment in a currency (“Judgment
Currency”) other than the Agreement Currency, a Borrower shall discharge its
obligation in respect of any sum due under a Loan Document only if, on the
Business Day following receipt by Agent of payment in the Judgment Currency,
Agent can use the amount paid to purchase the sum originally due in the
Agreement Currency. If the purchased amount is less than the sum originally due,
such Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify Agent and Lenders against such loss. If the purchased
amount is greater than the sum originally due, Agent shall return the excess
amount to such Borrower (or to the Person legally entitled thereto).

 

  SECTION 2. CREDIT FACILITIES

2.1 Revolver Commitment.

2.1.1 Revolver Loans. Immediately prior to the effectiveness of this Agreement,
the outstanding principal balance of the “Revolver Loans” as of the date hereof
made under the 2013 Loan Agreement was $69,695,411.89 (the “Outstanding Closing
Date Revolving Loan Balance”). Immediately upon giving effect to this Agreement,
the Outstanding Closing Date Revolving Loan Balance shall be continued and shall
convert automatically, for all purposes of this Agreement, to outstanding
Revolver Loans hereunder owing to the Lenders as if such Revolver Loans had been
made by the Lenders to Borrowers hereunder on a Pro Rata basis in accordance
with their respective Revolver Commitments. Each Lender agrees, severally on a
Pro Rata basis up to its Revolver Commitment, on the terms set forth

 

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herein, to make Revolver Loans to Borrowers from time to time through the
Commitment Termination Date. The Revolver Loans may be repaid and reborrowed as
provided herein. In no event shall Lenders have any obligation to honor a
request for a Revolver Loan if Revolver Usage at such time plus the requested
Loan would exceed the Borrowing Base.

2.1.2 Notes. Loans and interest accruing thereon shall be evidenced by the
records of Agent and the applicable Lender. At the request of a Lender,
Borrowers shall deliver promissory note(s) to such Lender, evidencing its
Loan(s).

2.1.3 Use of Proceeds. The proceeds of Revolver Loans shall be used by Borrowers
solely (a) to satisfy existing Debt; (b) to issue standby or commercial letters
of credit; (c) to pay fees and transaction expenses associated with the closing
of this credit facility; (d) to pay Obligations in accordance with this
Agreement; and (e) for lawful corporate purposes of Borrowers, including working
capital. Borrowers shall not, directly or indirectly, use any Letter of Credit
or Loan proceeds, nor use, lend, contribute or otherwise make available any
Letter of Credit or Loan proceeds to any Subsidiary, joint venture partner or
other Person, (i) to fund any activities of or business with any Person, or in
any Designated Jurisdiction, that, at the time of issuance of the Letter of
Credit or funding of the Loan, is the subject of any Sanction; (ii) in any
manner that would result in a violation of a Sanction by any Person (including
any Secured Party or other individual or entity participating in a transaction);
or (iii) for any purpose that would breach the U.S. Foreign Corrupt Practices
Act of 1977, UK Bribery Act 2010 or similar law in any jurisdiction.

2.1.4 Voluntary Reduction or Termination of Revolver Commitments.

(a) The Revolver Commitments shall terminate on the Termination Date, unless
sooner terminated in accordance with this Agreement. Upon at least ninety
(90) days prior written notice to Agent at any time after the first Loan Year,
Borrowers may, at their option, terminate the Revolver Commitments and this
credit facility. Any notice of termination given by Borrowers shall be
irrevocable. On the termination date, Borrowers shall make Full Payment of all
Obligations.

(b) Borrowers may permanently reduce the Revolver Commitments, on a ratable
basis for all Lenders, upon at least ninety (90) days prior written notice to
Agent delivered at any time after the first Loan Year, which notice shall
specify the amount of the reduction and shall be irrevocable once given. Each
reduction shall be in a minimum amount of $5,000,000, or an increment of
$1,000,000 in excess thereof; provided, however, that Borrowers may not reduce
the Revolver Commitments below $10,000,000 unless Borrowers fully reduce the
Revolver Commitments to $0.

2.1.5 Overadvances. If Revolver Usage exceeds the Borrowing Base
(“Overadvance”), the excess amount shall be payable by Borrowers on demand by
Agent, but all such Revolver Loans shall nevertheless constitute Obligations
secured by the Collateral and entitled to all benefits of the Loan Documents.
Agent may require Lenders to honor requests for Overadvance Loans and to forbear
from requiring Borrowers to cure an Overadvance, (a) when no other Event of
Default is known to Agent, as long as (i) the Overadvance does not continue for
more than thirty (30) consecutive days (and no Overadvance may exist for at
least five (5) consecutive days thereafter before further Overadvance Loans are
required), and (ii) the Overadvance is not known by Agent to exceed 10% of the
Borrowing Base; and (b) regardless of whether an Event of Default exists, if
Agent discovers an Overadvance not previously known by it to exist, as long as
from the date of such discovery the Overadvance is not increased by more than
$10,000,000 and does not continue for more than thirty (30) consecutive days. In
no event shall Overadvance Loans be requested or made available if making such
Loans would cause Revolver Usage to exceed the aggregate Revolver Commitments.
Any funding of an Overadvance Loan or sufferance of an Overadvance shall not
constitute a waiver by Agent or Lenders of the Event of Default caused thereby.
In no event shall any Borrower or other Obligor be deemed a beneficiary of this
Section nor authorized to enforce any of its terms.

 

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2.1.6 Protective Advances. Agent shall be authorized, in its discretion, at any
time that any conditions in Section 6 are not satisfied, to make Base Rate Loans
(“Protective Advances”) (a) up to and including an aggregate amount of
$5,000,000 outstanding at any time, if Agent deems such Loans necessary or
desirable to preserve or protect Collateral, or to enhance the collectability or
repayment of Obligations, as long as such Loans do not cause Revolver Usage to
exceed the aggregate Revolver Commitments; or (b) to pay any other amounts
chargeable to Obligors under any Loan Documents, including interest, costs, fees
and expenses. Lenders shall participate on a Pro Rata basis in Protective
Advances outstanding from time to time. Required Lenders may at any time revoke
Agent’s authority to make further Protective Advances under clause (a) by
written notice to Agent; provided, however, that such ability to revoke Agent’s
authority shall not apply with respect to Protective Advances that are in an
aggregate amount of $5,000,000 or less. Absent such revocation, Agent’s
determination that funding of a Protective Advance is appropriate shall be
conclusive.

2.2 Letter of Credit Facility.

2.2.1 Issuance of Letters of Credit. Issuing Bank shall issue Letters of Credit
from time to time until 30 days prior to the Termination Date (or until the
Commitment Termination Date, if earlier), on the terms set forth herein,
including the following:

(a) Each Borrower acknowledges that Issuing Bank’s issuance of any Letter of
Credit is conditioned upon Issuing Bank’s receipt of a LC Application with
respect to the requested Letter of Credit, as well as such other instruments and
agreements as Issuing Bank may customarily require for issuance of a letter of
credit of similar type and amount. Issuing Bank shall have no obligation to
issue any Letter of Credit unless (i) Issuing Bank receives a LC Request and LC
Application at least three (3) Business Days prior to the requested date of
issuance; (ii) each LC Condition is satisfied; and (iii) if a Defaulting Lender
exists, such Lender or Borrowers have entered into arrangements satisfactory to
Agent and Issuing Bank to eliminate any Fronting Exposure associated with such
Lender. If, in sufficient time to act, Issuing Bank receives written notice from
Agent or Required Lenders that a LC Condition has not been satisfied, Issuing
Bank shall not issue the requested Letter of Credit. Prior to receipt of any
such notice, Issuing Bank shall not be deemed to have knowledge of any failure
of LC Conditions.

(b) Letters of Credit may be requested by Borrower Agent to support obligations
incurred in the Ordinary Course of Business, or as otherwise approved by Agent.
Increase, renewal or extension of a Letter of Credit shall be treated as
issuance of a new Letter of Credit, except that Issuing Bank may require a new
LC Application in its discretion.

(c) Borrowers assume all risks of the acts, omissions or misuses of any Letter
of Credit by the beneficiary. In connection with issuance of any Letter of
Credit, none of Agent, Issuing Bank or any Lender shall be responsible for the
existence, character, quality, quantity, condition, packing, value or delivery
of any goods purported to be represented by any Documents; any differences or
variation in the character, quality, quantity, condition, packing, value or
delivery of any goods from that expressed in any Documents; the form, validity,
sufficiency, accuracy, genuineness or legal effect of any Documents or of any
endorsements thereon; the time, place, manner or order in which shipment of
goods is made; partial or incomplete shipment of, or failure to ship, any goods
referred to in a Letter of Credit or Documents; any deviation from instructions,
delay, default or fraud by any shipper or other Person in connection with any
goods, shipment or delivery; any breach of contract between a shipper or vendor
and a Borrower; errors, omissions, interruptions or delays in transmission or
delivery of any

 

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messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or
otherwise; errors in interpretation of technical terms; the misapplication by a
beneficiary of any Letter of Credit or the proceeds thereof; or any consequences
arising from causes beyond the control of Issuing Bank, Agent or any Lender,
including any act or omission of a Governmental Authority. The rights and
remedies of Issuing Bank under the Loan Documents shall be cumulative. Issuing
Bank shall be fully subrogated to the rights and remedies of each beneficiary
whose claims against Borrowers are discharged with proceeds of any Letter of
Credit.

(d) In connection with its administration of and enforcement of rights or
remedies under any Letters of Credit or LC Documents, Issuing Bank shall be
entitled to act, and shall be fully protected in acting, upon any certification,
documentation or communication in whatever form believed by Issuing Bank, in
good faith, to be genuine and correct and to have been signed, sent or made by a
proper Person. Issuing Bank may consult with and employ legal counsel,
accountants and other experts to advise it concerning its obligations, rights
and remedies, and shall be entitled to act upon, and shall be fully protected in
any action taken in good faith reliance upon, any advice given by such experts.
Issuing Bank may employ agents and attorneys-in-fact in connection with any
matter relating to Letters of Credit or LC Documents, and shall not be liable
for the negligence or misconduct of agents and attorneys-in-fact selected with
reasonable care.

2.2.2 Reimbursement; Participations.

(a) If Issuing Bank honors any request for payment under a Letter of Credit,
Borrowers shall pay to Issuing Bank, on the same day (“Reimbursement Date”), the
amount paid by Issuing Bank under such Letter of Credit, together with interest
at the interest rate for Base Rate Loans from the Reimbursement Date until
payment by Borrowers. The obligation of Borrowers to reimburse Issuing Bank for
any payment made under a Letter of Credit shall be absolute, unconditional,
irrevocable, and joint and several, and shall be paid without regard to any lack
of validity or enforceability of any Letter of Credit or the existence of any
claim, setoff, defense or other right that Borrowers may have at any time
against the beneficiary. Whether or not Borrower Agent submits a Notice of
Borrowing, Borrowers shall be deemed to have requested a Borrowing of Base Rate
Loans in an amount necessary to pay all amounts due Issuing Bank on any
Reimbursement Date and each Lender shall fund its Pro Rata share of such
Borrowing whether or not the Revolver Commitments have terminated, an
Overadvance exists or is created thereby, or the conditions in Section 6 are
satisfied.

(b) Each Lender hereby irrevocably and unconditionally purchases from Issuing
Bank, without recourse or warranty, an undivided Pro Rata participation in all
LC Obligations outstanding from time to time. Issuing Bank is issuing Letters of
Credit in reliance upon this participation. If Borrowers do not make a payment
to Issuing Bank when due hereunder, Agent shall promptly notify Lenders and each
Lender shall within one Business Day after such notice pay to Agent, for the
benefit of Issuing Bank, the Lender’s Pro Rata share of such payment. Upon
request by a Lender, Issuing Bank shall provide copies of Letters of Credit and
LC Documents in its possession at such time.

(c) The obligation of each Lender to make payments to Agent for the account of
Issuing Bank in connection with Issuing Bank’s payment under a Letter of Credit
shall be absolute, unconditional and irrevocable, not subject to any
counterclaim, setoff, qualification or exception whatsoever, and shall be made
in accordance with this Agreement under all circumstances, irrespective of any
lack of validity or unenforceability of any Loan Documents; any draft,
certificate or other document presented under a Letter of Credit having been
determined to be forged, fraudulent, noncompliant, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
any waiver by Issuing Bank of a requirement that exists for its protection (and
not a Borrower’s protection) or that does not materially prejudice a Borrower;
any honor of an electronic demand for payment even if a

 

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draft is required; any payment of an item presented after a Letter of Credit’s
expiration date if authorized by the UCC or applicable customs or practices; or
any setoff or defense that an Obligor may have with respect to any Obligations.
Issuing Bank does not assume any responsibility for any failure or delay in
performance or any breach by any Borrower or other Person of any obligations
under any LC Documents. Issuing Bank does not make to Lenders any express or
implied warranty, representation or guaranty with respect to any Letter of
Credit, Collateral, LC Document or Obligor. Issuing Bank shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties contained in, or for the execution, validity,
genuineness, effectiveness or enforceability of any LC Documents; the validity,
genuineness, enforceability, collectability, value or sufficiency of any
Collateral or the perfection of any Lien therein; or the assets, liabilities,
financial condition, results of operations, business, creditworthiness or legal
status of any Obligor.

(d) No Issuing Bank Indemnitee shall be liable to any Lender or other Person for
any action taken or omitted to be taken in connection with any Letter of Credit
or LC Document except as a result of its gross negligence or willful misconduct.
Issuing Bank may refrain from taking any action with respect to a Letter of
Credit until it receives written instructions (and in its discretion,
appropriate assurances) from the Lenders.

(e) Notwithstanding anything to the contrary contained herein, immediately upon
giving effect to this Agreement, outstanding “Letters of Credit” under, and as
defined in, the 2013 Loan Agreement shall be continued and shall convert
automatically, for all purposes of this Agreement to outstanding Letters of
Credit hereunder as if such Letters of Credit had been issued hereunder. Such
Letters of Credit are described on Schedule 2.2.

2.2.3 Cash Collateral. Subject to Section 2.1.5, if at any time (a) an Event of
Default exists, (b) the Commitment Termination Date has occurred, or (c) the
Termination Date is scheduled to occur within twenty (20) Business Days, then
Borrowers shall, at Issuing Bank’s or Agent’s request, Cash Collateralize all
outstanding Letters of Credit. Borrowers shall, at Issuing Bank’s or Agent’s
request at any time, Cash Collateralize the Fronting Exposure of any Defaulting
Lender. If Borrowers fail to provide any Cash Collateral as required hereunder,
Lenders may (and shall upon direction of Agent) advance, as Revolver Loans, the
amount of Cash Collateral required (whether or not the Revolver Commitments have
terminated, an Overadvance exists or the conditions in Section 6 are satisfied).

2.2.4 Resignation of Issuing Bank. Issuing Bank may resign at any time upon
notice to Agent and Borrowers. From the effective date of such resignation,
Issuing Bank shall have no obligation to issue, amend, renew, extend or
otherwise modify any Letter of Credit, but shall continue to have all rights and
other obligations of an Issuing Bank hereunder relating to any Letter of Credit
issued by it prior to such date. Agent shall promptly appoint a replacement
Issuing Bank, which, as long as no Default or Event of Default exists, shall be
reasonably acceptable to Borrowers.

2.3 Effect of Amendment and Restatement. Upon the execution and delivery of this
Agreement, the “Obligations”, as defined in the 2013 Loan Agreement (the
“Existing Obligations”), shall continue to be in full force and effect, but
shall be governed by the terms and conditions set forth in this Agreement. This
Agreement does not constitute a novation or repayment of any Existing
Obligation. Without limiting the generality of the foregoing, the letters of
credit described on Schedule 2.2 shall continue as Letters of Credit outstanding
under this Agreement and shall be governed by the terms and conditions set forth
in this Agreement, as described in more detail in Section 2.2.2(e). The Existing
Obligations, together with any and all additional Obligations incurred by
Obligors hereunder or under any of the other Loan Documents, shall continue to
be secured by all of the pledges and grants of security interests provided in
connection with the Original Loan Agreement or the 2013 Loan Agreement (and,
from and after the date hereof, shall be secured by all of the pledges and
grants of security interests

 

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provided in connection with this Agreement and the other Security Documents
provided in connection with this Agreement), all as more specifically set forth
in this Agreement and the other Security Documents. Each Borrower hereby
reaffirms its obligations under each “Loan Document”, as defined in the 2013
Loan Agreement (collectively, the “2013 Loan Documents”), to which it is party,
as amended, restated, supplemented or otherwise modified by this Agreement and
by the other Loan Documents delivered on the Closing Date. Each Borrower further
agrees that each such 2013 Loan Document shall remain in full force and effect
following the execution and delivery of this Agreement and that all references
to the “Loan Agreement” or “Loan and Security Agreement” in each such 2013 Loan
Document shall be deemed to refer to this Agreement. Immediately prior to the
effectiveness of this Agreement, all of the “Revolver Commitments”, as defined
in the 2013 Loan Agreement, of JPMorgan Chase Bank, N.A., were assigned to Bank
of America, N.A., in its capacity as a “Lender”, as defined in the 2013 Loan
Agreement, under the 2013 Loan Agreement. The Outstanding Closing Date Revolving
Loan Balance is hereby deemed to be assigned by Bank of America, N.A., in its
capacity as a “Lender”, as defined in the 2013 Loan Agreement, under the 2013
Loan Agreement, to the Lenders (as defined herein) under this Agreement and
reallocated on a Pro Rata basis in accordance with their respective Revolver
Commitments.

 

  SECTION 3. INTEREST, FEES AND CHARGES

3.1 Interest.

3.1.1 Rates and Payment of Interest.

(a) The Obligations shall bear interest (i) if a Base Rate Loan, at the Base
Rate in effect from time to time, plus the Applicable Margin; (ii) if a LIBOR
Loan, at LIBOR for the applicable Interest Period, plus the Applicable Margin;
and (iii) if any other Obligation (including, to the extent permitted by law,
interest not paid when due), at the Base Rate in effect from time to time, plus
the Applicable Margin for Base Rate Loans.

(b) During an Insolvency Proceeding with respect to any Borrower, or during any
other Event of Default if Agent or Required Lenders in their discretion so
elect, Obligations shall bear interest at the Default Rate (whether before or
after any judgment). Each Borrower acknowledges that the cost and expense to
Agent and Lenders due to an Event of Default are difficult to ascertain and that
the Default Rate is fair and reasonable compensation for this.

(c) Interest shall accrue from the date a Loan is advanced or Obligation is
incurred or payable, until paid in full by Borrowers, and shall in no event be
less than zero at any time. Interest accrued on the Loans shall be due and
payable in arrears, (i) on the first day of each month; (ii) on any date of
prepayment, with respect to the principal amount of Loans being prepaid; and
(iii) on the Commitment Termination Date. Interest accrued on any other
Obligations shall be due and payable as provided in the Loan Documents and, if
no payment date is specified, shall be due and payable on demand.

3.1.2 Application of LIBOR to Outstanding Loans.

(a) Borrowers may on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Loans to,
or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
Loan. During any Default or Event of Default, Agent may (and shall at the
direction of Required Lenders) declare that no Loan may be made, converted or
continued as a LIBOR Loan.

 

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(b) Whenever Borrowers desire to convert or continue Loans as LIBOR Loans,
Borrower Agent shall give Agent a Notice of Conversion/Continuation, no later
than 11:00 a.m. at least two Business Days before the requested conversion or
continuation date. Promptly after receiving any such notice, Agent shall notify
each Lender thereof. Each Notice of Conversion/Continuation shall be
irrevocable, and shall specify the amount of Loans to be converted or continued,
the conversion or continuation date (which shall be a Business Day), and the
duration of the Interest Period (which shall be deemed to be 30 days if not
specified). If, upon the expiration of any Interest Period for any LIBOR Loan,
Borrowers shall have failed to deliver a Notice of Conversion/Continuation, they
shall be deemed to have elected to convert such Loan into a Base Rate Loan.
Agent does not warrant or accept responsibility for, nor shall it have any
liability with respect to, administration, submission or any other matter
related to any rate described in the definition of LIBOR.

3.1.3 Interest Periods. In connection with the making, conversion or
continuation of any LIBOR Loans, Borrowers shall select an interest period
(“Interest Period”) to apply, which interest period shall be 7, 30, 60, or 90
days (in each case if available from all Lenders); provided, however, that:

(a) the Interest Period shall begin on the date the Loan is made or continued
as, or converted into, a LIBOR Loan, and shall expire on the numerically
corresponding day in the calendar month at its end;

(b) if any Interest Period (other than a 7-day Interest Period) begins on a day
for which there is no corresponding day in the calendar month at its end or if
such corresponding day falls after the last Business Day of such month, then
such Interest Period shall expire on the last Business Day of such month; and if
any Interest Period would otherwise expire on a day that is not a Business Day,
the period shall expire on the next Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day; and

(c) no Interest Period shall extend beyond the Termination Date.

3.1.4 Interest Rate Not Ascertainable. If, due to any circumstance affecting the
interbank market, Agent determines that adequate and fair means do not exist for
ascertaining LIBOR on any applicable date or that any Interest Period is not
available on the basis provided herein, then Agent shall immediately notify
Borrowers of such determination. Until Agent notifies Borrowers that such
circumstance no longer exists, the obligation of Lenders to make affected LIBOR
Loans shall be suspended and no further Loans may be converted into or continued
as such LIBOR Loans.

3.2 Fees.

3.2.1 Unused Line Fee. Borrowers shall pay to Agent, for the Pro Rata benefit of
Lenders, a fee equal to the Unused Line Fee Rate times the amount by which the
Revolver Commitments exceed the average daily Revolver Usage during any month.
Such fee shall be payable in arrears, on the first day of each month and on the
Commitment Termination Date.

3.2.2 LC Facility Fees. Borrowers shall pay (a) to Agent, for the Pro Rata
benefit of Lenders, a fee equal to the Applicable Margin in effect for LIBOR
Loans times the average daily Stated Amount of Letters of Credit, which fee
shall be payable monthly in arrears, on the first day of each month; (b) to
Agent, for its own account, a fronting fee equal to 0.125% per annum on the
Stated Amount of each Letter of Credit, which fee shall be payable monthly in
arrears, on the first day of each month; and (c) to Issuing Bank, for its own
account, all customary charges associated with the issuance, amending,
negotiating, payment, processing, transfer and administration of Letters of
Credit, which charges shall be paid as and when incurred. During an Event of
Default, the fee payable under clause (a) shall be increased by 2% per annum.

 

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3.2.3 Fee Letters. Borrowers shall pay all fees set forth in the Agent Fee
Letter and in any other fee letter executed by any of the Borrowers in
connection with this Agreement.

3.3 Computation of Interest, Fees, Yield Protection. All interest, as well as
fees and other charges calculated on a per annum basis, shall be computed for
the actual days elapsed, based on a year of 360 days. Each determination by
Agent of any interest, fees or interest rate hereunder shall be final,
conclusive and binding for all purposes, absent manifest error. All fees shall
be fully earned when due and shall not be subject to rebate, refund or
proration. All fees payable under Section 3.2 are compensation for services and
are not, and shall not be deemed to be, interest or any other charge for the
use, forbearance or detention of money. A certificate as to amounts payable by
Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.8, submitted to Borrower Agent
by Agent or the affected Lender shall be final, conclusive and binding for all
purposes, absent manifest error, and Borrowers shall pay such amounts to the
appropriate party within ten (10) days following receipt of the certificate.

3.4 Reimbursement Obligations. Borrowers shall pay all Extraordinary Expenses
promptly upon request. Borrowers shall also reimburse Agent and its Affiliates
for all legal, accounting, appraisal, consulting, and other fees, costs and
expenses incurred by Agent or any such Affiliate in connection with
(a) negotiation, preparation, and enforcement of and any due diligence relating
to any Loan Documents, including any amendment or other modification thereof;
(b) administration of and actions relating to any Collateral, Loan Documents and
transactions contemplated thereby, including any actions taken to perfect or
maintain priority of Agent’s Liens on any Collateral, to maintain any insurance
required hereunder or to verify Collateral; (c) syndication and administration
of the Loan Documents and Obligations thereunder; and (d) subject to the limits
of Section 10.1.1(b), each inspection, field examination, audit or appraisal
with respect to any Obligor or Collateral, whether prepared by Agent’s personnel
or a third party (including Agent’s standard charges for field examinations and
per diem charges and out-of-pocket expenses for Agent’s employees performing
such field examinations). All legal, accounting and consulting fees shall be
charged to Borrowers by Agent’s or its Affiliate’s (as applicable) professionals
at their full hourly rates, regardless of any alternative fee arrangements that
Agent, any Lender or any of their Affiliates may have with such professionals
that otherwise might apply to this or any other transaction. Borrowers
acknowledge that counsel may provide Agent with a benefit (such as a discount,
credit or accommodation for other matters) based on counsel’s overall
relationship with Agent, including fees paid hereunder. If, for any reason
(including inaccurate reporting in any Borrower Materials), it is determined
that a higher Applicable Margin should have applied to a period than was
actually applied, then the proper margin shall be applied retroactively and
Borrowers shall immediately pay to Agent, for the ratable benefit of Lenders, an
amount equal to the difference between the amount of interest and fees that
would have accrued using the proper margin and the amount actually paid. All
amounts payable by Borrowers under this Section shall be due on demand.

3.5 Illegality. If any Lender determines that any Applicable Law has made it
unlawful, or that any Governmental Authority has asserted that it is unlawful,
for any Lender to make, maintain or fund LIBOR Loans, or to determine or charge
interest rates based upon LIBOR, or any Governmental Authority has imposed
material restrictions on the authority of such Lender to purchase or sell, or to
take deposits of, Dollars in the London interbank market, then, on notice
thereof by such Lender to Agent, any obligation of such Lender to make or
continue LIBOR Loans or to convert Base Rate Loans to LIBOR Loans shall be
suspended until such Lender notifies Agent that the circumstances giving rise to
such determination no longer exist. Upon delivery of such notice, Borrowers
shall prepay or, if applicable, convert all LIBOR Loans of such Lender to Base
Rate Loans, either on the last day of the Interest Period therefor, if such
Lender may lawfully continue to maintain such LIBOR Loans to such day, or

 

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immediately, if such Lender may not lawfully continue to maintain such LIBOR
Loans. Upon any such prepayment or conversion, Borrowers shall also pay accrued
interest on the amount so prepaid or converted.

3.6 Inability to Determine Rates. Agent will promptly notify Borrower Agent and
Lenders if, in connection with any Loan or request for a Loan, (a) Agent
determines that (i) Dollar deposits are not being offered to banks in the London
interbank Eurodollar market for the applicable Loan amount or Interest Period,
or (ii) adequate and reasonable means do not exist for determining LIBOR for the
Interest Period; or (b) Agent or Required Lenders determine for any reason that
LIBOR for the Interest Period does not adequately and fairly reflect the cost to
Lenders of funding the Loan. Thereafter, Lenders’ obligations to make or
maintain affected LIBOR Loans and utilization of the LIBOR component (if
affected) in determining Base Rate shall be suspended until Agent (upon
instruction by Required Lenders) withdraws the notice. Upon receipt of such
notice, Borrower Agent may revoke any pending request for a LIBOR Loan or,
failing that, will be deemed to have requested a Base Rate Loan.

3.7 Increased Costs; Capital Adequacy.

3.7.1 Increased Costs Generally. If any Change in Law shall:

(a) impose, modify or deem applicable any reserve, liquidity, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by,
any Lender (except any reserve requirement reflected in calculating LIBOR) or
Issuing Bank;

(b) subject any Recipient to Taxes (other than (i) Indemnified Taxes, (ii) Taxes
described in clauses (b) through (d) of the definition of Excluded Taxes, and
(iii) Connection Income Taxes) with respect to any Loan, Letter of Credit,
Revolver Commitment or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto; or

(c) impose on any Lender, Issuing Bank or interbank market any other condition,
cost or expense affecting any Loan, Letter of Credit, participation in LC
Obligations, Revolver Commitment or Loan Document;

and the result thereof shall be to increase the cost to a Lender of making or
maintaining any Loan or Revolver Commitment, or converting to or continuing any
interest option for a Loan, or to increase the cost to a Lender or Issuing Bank
of participating in, issuing or maintaining any Letter of Credit (or of
maintaining its obligation to participate in or to issue any Letter of Credit),
or to reduce the amount of any sum received or receivable by a Lender or Issuing
Bank hereunder (whether of principal, interest or any other amount) then, upon
request of such Lender or Issuing Bank, Borrowers will pay to it such additional
amount(s) as will compensate it for the additional costs incurred or reduction
suffered.

3.7.2 Capital Requirements. If a Lender or Issuing Bank determines that a Change
in Law affecting such Lender or Issuing Bank or its holding company, if any,
regarding capital or liquidity requirements has or would have the effect of
reducing the rate of return on such Lender’s, Issuing Bank’s or holding
company’s capital as a consequence of this Agreement, or such Lender’s or
Issuing Bank’s Revolver Commitments, Loans, Letters of Credit or participations
in LC Obligations or Loans, to a level below that which such Lender, Issuing
Bank or holding company could have achieved but for such Change in Law (taking
into consideration its policies with respect to capital adequacy), then from
time to time Borrowers will pay to such Lender or Issuing Bank, as the case may
be, such additional amounts as will compensate it or its holding company for the
reduction suffered.

 

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3.7.3 LIBOR Loan Reserves. If any Lender is required to maintain reserves with
respect to liabilities or assets consisting of or including Eurocurrency funds
or deposits, Borrowers shall pay additional interest to such Lender on each
LIBOR Loan equal to the costs of such reserves allocated to the Loan by the
Lender (as determined by it in good faith, which determination shall be
conclusive). The additional interest shall be due and payable on each interest
payment date for the Loan; provided, however, that if the Lender notifies
Borrowers (with a copy to Agent) of the additional interest less than ten
(10) days prior to the interest payment date, then such interest shall be
payable ten (10) days after Borrowers’ receipt of the notice.

3.7.4 Compensation. Failure or delay on the part of any Lender or Issuing Bank
to demand compensation pursuant to this Section shall not constitute a waiver of
its right to demand such compensation, but Borrowers shall not be required to
compensate a Lender or Issuing Bank for any increased costs or reductions
suffered more than nine months (plus any period of retroactivity of the Change
in Law giving rise to the demand) prior to the date that the Lender or Issuing
Bank notifies Borrower Agent of the applicable Change in Law and of such
Lender’s or Issuing Bank’s intention to claim compensation therefor.

3.8 Mitigation. If any Lender gives a notice under Section 3.5 or requests
compensation under Section 3.7, or if Borrowers are required to pay any
Indemnified Taxes or additional amounts with respect to a Lender under
Section 5.8, then at the request of Borrower Agent, such Lender shall use
reasonable efforts to designate a different Lending Office or to assign its
rights and obligations hereunder to another of its offices, branches or
Affiliates, if, in the judgment of such Lender, such designation or assignment
(a) would eliminate the need for such notice or reduce amounts payable or to be
withheld in the future, as applicable; and (b) would not subject the Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
it or unlawful. Borrowers shall pay all reasonable costs and expenses incurred
by any Lender in connection with any such designation or assignment.

3.9 Funding Losses. If for any reason (a) any Borrowing, conversion or
continuation of a LIBOR Loan does not occur on the date specified therefor in a
Notice of Borrowing or Notice of Conversion/Continuation (whether or not
withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on a day
other than the end of its Interest Period, (c) Borrowers fail to repay a LIBOR
Loan when required hereunder, or (d) a Lender (other than a Defaulting Lender)
is required to assign a LIBOR Loan prior to the end of its Interest Period
pursuant to Section 13.4, then Borrowers shall pay to Agent its customary
administrative charge and to each Lender all losses, expenses, and fees arising
from redeployment of funds or termination of match funding. For purposes of
calculating amounts payable under this Section, a Lender shall be deemed to have
funded a LIBOR Loan by a matching deposit or other borrowing in the London
interbank market for a comparable amount and period, whether or not the Loan was
in fact so funded.

3.10 Maximum Interest. Notwithstanding anything to the contrary contained in any
Loan Document, the interest paid or agreed to be paid under the Loan Documents
shall not exceed the maximum rate of non-usurious interest permitted by
Applicable Law (“maximum rate”). If Agent or any Lender shall receive interest
in an amount that exceeds the maximum rate, the excess interest shall be applied
to the principal of the Obligations or, if it exceeds such unpaid principal,
refunded to Borrowers. In determining whether the interest contracted for,
charged or received by Agent or a Lender exceeds the maximum rate, such Person
may, to the extent permitted by Applicable Law, (a) characterize any payment
that is not principal as an expense, fee or premium rather than interest;
(b) exclude voluntary prepayments and the effects thereof; and (c) amortize,
prorate, allocate and spread in equal or unequal parts the total amount of
interest throughout the contemplated term of the Obligations hereunder.

 

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  SECTION 4. LOAN ADMINISTRATION

4.1 Manner of Borrowing and Funding Revolver Loans.

4.1.1 Notice of Borrowing.

(a) Whenever Borrowers desire funding of Revolver Loans, Borrower Agent shall
give Agent a Notice of Borrowing. Such notice must be received by Agent by 11:00
a.m. (i) on the requested funding date, in the case of Base Rate Loans, and
(ii) at least two Business Days prior to the requested funding date, in the case
of LIBOR Loans. Notices received after such time shall be deemed received on the
next Business Day. Each Notice of Borrowing shall be irrevocable and shall
specify (A) the amount of the Borrowing, (B) the requested funding date (which
must be a Business Day), (C) whether the Borrowing is to be made as a Base Rate
Loan or LIBOR Loan, and (D) in the case of a LIBOR Loan, the applicable Interest
Period (which shall be deemed to be thirty (30) days if not specified).

(b) Unless payment is otherwise made by Borrowers, the becoming due of any
Obligation (whether principal, interest, fees or other charges, including
Extraordinary Expenses, LC Obligations, Cash Collateral and Secured Bank Product
Obligations) shall be deemed to be a request for a Base Rate Loan on the due
date in the amount due and the Loan proceeds shall be disbursed as direct
payment of such Obligation. In addition, Agent may, at its option, charge such
amount against any operating, investment or other account of a Borrower
maintained with Agent or any of its Affiliates.

(c) If a Borrower maintains a disbursement account with Agent or any of its
Affiliates, then presentation for payment in the account of a Payment Item when
there are insufficient funds to cover it shall be deemed to be a request for a
Base Rate Loan on the presentation date, in the amount of the Payment Item.
Proceeds of the Loan may be disbursed directly to the account.

4.1.2 Fundings by Lenders. Except for Borrowings to be made as Swingline Loans,
Agent shall endeavor to notify Lenders of each Notice of Borrowing (or deemed
request for a Borrowing) by 1:00 p.m. on the proposed funding date for a Base
Rate Loan or by 3:00 p.m. at least two Business Days before a proposed funding
of a LIBOR Loan. Each Lender shall fund its Pro Rata share of a Borrowing in
immediately available funds not later than 3:00 p.m. on the requested funding
date, unless Agent’s notice is received after the times provided above, in which
case Lender shall fund by 11:00 a.m. on the next Business Day. Subject to its
receipt of such amounts from Lenders, Agent shall disburse the Borrowing
proceeds as directed by Borrower Agent. Unless Agent shall have received (in
sufficient time to act) written notice from a Lender that it does not intend to
fund its share of a Borrowing, Agent may assume that such Lender has deposited
or promptly will deposit its share with Agent, and Agent may disburse a
corresponding amount to Borrowers. If a Lender’s share of a Borrowing or of a
settlement under Section 4.1.3(b) is not received by Agent, then Borrowers agree
to repay to Agent on demand the amount of such share, together with interest
thereon from the date disbursed until repaid, at the rate applicable to the
Borrowing. A Lender or Issuing Bank may fulfill its obligations under Loan
Documents through one or more Lending Offices, and this shall not affect any
obligation of Obligors under the Loan Documents or with respect to any
Obligations.

4.1.3 Swingline Loans; Settlement.

(a) To fulfill any request for a Base Rate Loan hereunder, Agent may in its
discretion advance Swingline Loans to Borrowers, up to an aggregate outstanding
amount of $10,000,000. Swingline Loans shall constitute Revolver Loans for all
purposes, except that payments thereon shall be made to Agent for its own
account until Lenders have funded their participations therein as provided
below.

 

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(b) Settlement of Loans, including Swingline Loans, among Lenders and Agent
shall take place on a date determined from time to time by Agent (but at least
weekly, unless the settlement amount is de minimis), on a Pro Rata basis in
accordance with the Settlement Report delivered by Agent to Lenders. Between
settlement dates, Agent may in its discretion apply payments on Revolver Loans
to Swingline Loans, regardless of any designation by Borrowers or any provision
herein to the contrary. Each Lender hereby purchases, without recourse or
warranty, an undivided Pro Rata participation in all Swingline Loans outstanding
from time to time until settled. If a Swingline Loan cannot be settled among
Lenders, whether due to an Obligor’s Insolvency Proceeding or for any other
reason, each Lender shall pay the amount of its participation in the Loan to
Agent, in immediately available funds, within one Business Day after Agent’s
request therefor. Lenders’ obligations to make settlements and to fund
participations are absolute, irrevocable and unconditional, without offset,
counterclaim or other defense, and whether or not the Revolver Commitments have
terminated, an Overadvance exists or the conditions in Section 6 are satisfied.

4.1.4 Notices. Borrowers may request, convert or continue Loans, select interest
rates and transfer funds based on telephonic or e-mailed instructions to Agent.
Borrowers shall confirm each such request by prompt delivery to Agent of a
Notice of Borrowing or Notice of Conversion/Continuation, if applicable, but if
it differs materially from the action taken by Agent or Lenders, the records of
Agent and Lenders shall govern. Neither Agent nor any Lender shall have any
liability for any loss suffered by a Borrower as a result of Agent or any Lender
acting upon its understanding of telephonic or e-mailed instructions from a
person believed in good faith by Agent or any Lender to be a person authorized
to give such instructions on a Borrower’s behalf.

4.2 Defaulting Lender. Notwithstanding anything herein to the contrary:

4.2.1 Reallocation of Pro Rata Share; Amendments. For purposes of determining
Lenders’ obligations or rights to fund, participate in or receive collections
with respect to Loans and Letters of Credit (including existing Swingline Loans,
Protective Advances and LC Obligations), Agent may in its discretion reallocate
Pro Rata shares by excluding a Defaulting Lender’s Revolver Commitments and
Loans from the calculation of shares. A Defaulting Lender shall have no right to
vote on any amendment, waiver or other modification of a Loan Document, except
as provided in Section 14.1.1(c).

4.2.2 Payments; Fees. Agent may, in its discretion, receive and retain any
amounts payable to a Defaulting Lender under the Loan Documents, and a
Defaulting Lender shall be deemed to have assigned to Agent such amounts until
all Obligations owing to Agent, non-Defaulting Lenders and other Secured Parties
have been paid in full. Agent may use such amounts to cover the Defaulting
Lender’s defaulted obligations, to Cash Collateralize such Lender’s Fronting
Exposure, to readvance the amounts to Borrowers or to repay Obligations. A
Lender shall not be entitled to receive any fees accruing hereunder while it is
a Defaulting Lender, and its unfunded Revolver Commitment shall be disregarded
for purposes of calculating the unused line fee under Section 3.2.1. If any LC
Obligations owing to a Defaulted Lender are reallocated to other Lenders, fees
attributable to such LC Obligations under Section 3.2.2 shall be paid to such
Lenders. Agent shall be paid all fees attributable to LC Obligations that are
not reallocated.

4.2.3 Status; Cure. Agent may determine in its discretion that a Lender
constitutes a Defaulting Lender and the effective date of such status shall be
conclusive and binding on all parties, absent manifest error. Borrowers, Agent
and Issuing Bank may agree in writing that a Lender has ceased to be a
Defaulting Lender, whereupon Pro Rata shares shall be reallocated without
exclusion of the reinstated Lender’s Revolver Commitments and Loans, and the
Revolver Usage and other exposures under the Revolver Commitments shall be
reallocated among Lenders and settled by Agent (with

 

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appropriate payments by the reinstated Lender, including payment of any breakage
costs for reallocated LIBOR Loans) in accordance with the readjusted Pro Rata
shares. Unless expressly agreed by Borrowers, Agent and Issuing Bank, no
reinstatement of a Defaulting Lender shall constitute a waiver or release of
claims against such Lender. The failure of any Lender to fund a Loan, to make a
payment in respect of LC Obligations or otherwise to perform obligations
hereunder shall not relieve any other Lender of its obligations under any Loan
Document. No Lender shall be responsible for default by another Lender.

4.3 Number and Amount of LIBOR Loans; Determination of Rate. Each Borrowing of
LIBOR Loans when made shall be in a minimum amount of $2,000,000, plus an
increment of $100,000 in excess thereof. No more than four Borrowings of LIBOR
Loans may be outstanding at any time, and all LIBOR Loans having the same length
and beginning date of their Interest Periods shall be aggregated together and
considered one Borrowing for this purpose. Upon determining LIBOR for any
Interest Period requested by Borrowers, Agent shall promptly notify Borrower
Agent thereof by telephone or electronically and, if requested by Borrower
Agent, shall confirm any telephonic notice in writing.

4.4 Borrower Agent. Each Borrower hereby designates Arctic Cat (“Borrower
Agent”) as its representative and agent for all purposes under the Loan
Documents, including requests for and receipt of Loans and Letters of Credit,
designation of interest rates, delivery or receipt of communications, delivery
of Borrower Materials, payment of Obligations, requests for waivers, amendments
or other accommodations, actions under the Loan Documents (including in respect
of compliance with covenants), and all other dealings with Agent, Issuing Bank
or any Lender. Borrower Agent hereby accepts such appointment. Agent and Lenders
shall be entitled to rely upon, and shall be fully protected in relying upon,
any notice or communication (including any notice of borrowing) delivered by
Borrower Agent on behalf of any Borrower. Agent and Lenders may give any notice
or communication with a Borrower hereunder to Borrower Agent on behalf of such
Borrower. Each of Agent, Issuing Bank and Lenders shall have the right, in its
discretion, to deal exclusively with Borrower Agent for all purposes under the
Loan Documents. Each Borrower agrees that any notice, election, communication,
delivery, representation, agreement, action, omission or undertaking on its
behalf by Borrower Agent shall be binding upon and enforceable against it.

4.5 One Obligation. The Loans, LC Obligations and other Obligations constitute
one general obligation of Borrowers and are secured by Agent’s Lien on all
Collateral; provided, however, that Agent and each Lender shall be deemed to be
a creditor of, and the holder of a separate claim against, each Borrower to the
extent of any Obligations jointly or severally owed by such Borrower.

4.6 Effect of Termination. On the effective date of the termination of all
Revolver Commitments, the Obligations shall be immediately due and payable, and
each Secured Bank Product Provider may terminate its Bank Products. Until Full
Payment of the Obligations, all undertakings of Borrowers contained in the Loan
Documents shall continue, and Agent shall retain its Liens in the Collateral and
all of its rights and remedies under the Loan Documents. Agent shall not be
required to terminate its Liens unless it receives Cash Collateral or a written
agreement, in each case satisfactory to it, protecting Agent and Lenders from
dishonor or return of any Payment Item previously applied to the Obligations.
Sections 2.2, 3.4, 3.6, 3.7, 3.9, 5.4, 5.8, 5.9, 12, 14.2, this Section, and
each indemnity or waiver given by an Obligor or Lender in any Loan Document,
shall survive Full Payment of the Obligations.

 

  SECTION 5. PAYMENTS

5.1 General Payment Provisions. All payments of Obligations shall be made in
Dollars, without offset, counterclaim or defense of any kind, free and clear of
(and without deduction for) any Taxes, and in immediately available funds, not
later than 12:00 noon on the due date. Any payment after

 

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such time shall be deemed made on the next Business Day. Any payment of a LIBOR
Loan prior to the end of its Interest Period shall be accompanied by all amounts
due under Section 3.9. Borrowers agree that Agent shall have the continuing,
exclusive right to apply and reapply payments and proceeds of Collateral against
the Obligations, in such manner as Agent deems advisable, but whenever possible,
any prepayment of Loans shall be applied first to Base Rate Loans and then to
LIBOR Loans. If any payment (other than payments on LIBOR Loans) under any Loan
Document shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day. If any payment on a LIBOR
Loan becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day unless the result
of such extension would be to extend such payment into another calendar month,
in which event such payment shall be made on the immediately preceding Business
Day. In the case of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate for the
period of such extension.

5.2 Repayment of Revolver Loans. Revolver Loans shall be due and payable in full
on the Termination Date, unless payment is sooner required hereunder. Revolver
Loans may be prepaid from time to time, without penalty or premium. Subject to
Section 2.1.5, if an Overadvance exists at any time, Borrowers shall, on the
sooner of Agent’s demand or the first Business Day after any Borrower has
knowledge thereof, repay Revolver Loans in an amount sufficient to reduce
Revolver Usage to the Borrowing Base. If any Asset Disposition includes the
disposition of any Account, Inventory, Equipment, trade name, or Real Estate,
Borrowers shall apply Net Proceeds to repay Revolver Loans equal to the greater
of (a) the net book value of such Accounts and Inventory, the value of such
Equipment or trade name, or the fair market value of such Real Estate, as
applicable, or (b) the reduction in the Borrowing Base resulting from the
disposition.

5.3 Payment of Other Obligations. Obligations other than Loans, including LC
Obligations and Extraordinary Expenses, shall be paid by Borrowers as provided
in the Loan Documents or, if no payment date is specified, on demand.

5.4 Marshaling; Payments Set Aside. None of Agent or Lenders shall be under any
obligation to marshal any assets in favor of any Obligor or against any
Obligations. If any payment by or on behalf of Borrowers is made to Agent,
Issuing Bank or any Lender, or if Agent, Issuing Bank or any Lender exercises a
right of setoff, and any of such payment or setoff is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by Agent, Issuing Bank or a Lender in
its discretion) to be repaid to a trustee, receiver or any other Person, then
the Obligation originally intended to be satisfied, and all Liens, rights and
remedies relating thereto, shall be revived and continued in full force and
effect as if such payment or setoff had not occurred.

5.5 Application and Allocation of Payments.

5.5.1 Application. Payments made by Borrowers hereunder shall be applied
(a) first, as specifically required hereby; (b) second, to Obligations then due
and owing; (c) third, to other Obligations specified by Borrowers; and
(d) fourth, as determined by Agent in its discretion.

5.5.2 Post-Default Allocation. Notwithstanding anything in any Loan Document to
the contrary, during an Event of Default, monies to be applied to the
Obligations, whether arising from payments by Obligors, realization on
Collateral, setoff or otherwise, shall be allocated as follows:

(a) first, to all fees, indemnification, costs and expenses, including
Extraordinary Expenses, owing to Agent;

 

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(b) second, to all amounts owing to Agent on Swingline Loans, Protective
Advances, and Loans and participations that a Defaulting Lender has failed to
settle or fund;

(c) third, to all amounts owing to Issuing Bank;

(d) fourth, to all Obligations (other than Secured Bank Product Obligations)
constituting fees, indemnification, costs or expenses owing to Lenders;

(e) fifth, to all Obligations (other than Secured Bank Product Obligations)
constituting interest;

(f) sixth, to Cash Collateralize all LC Obligations;

(g) seventh, to all Loans, and to Secured Bank Product Obligations arising under
Hedge Agreements (including Cash Collateralization thereof) up to the amount of
Reserves existing therefor;

(h) eighth, to all other Secured Bank Product Obligations; and

(i) last, to all remaining Obligations.

Amounts shall be applied to payment of each category of Obligations only after
Full Payment of amounts payable from time to time under all preceding
categories. If amounts are insufficient to satisfy a category, they shall be
paid ratably among outstanding Obligations in the category. Monies and proceeds
obtained from an Obligor shall not be applied to its Excluded Swap Obligations,
but appropriate adjustments shall be made with respect to amounts obtained from
other Obligors to preserve the allocations in any applicable category. Agent
shall have no obligation to calculate the amount of any Secured Bank Product
Obligation and may request a reasonably detailed calculation thereof from a
Secured Bank Product Provider. If the provider fails to deliver the calculation
within five days following request, Agent may assume the amount is zero. The
allocations set forth in this Section are solely to determine the rights and
priorities among Secured Parties, and may be changed by agreement of the
affected Secured Parties, without the consent of any Obligor. This Section is
not for the benefit of or enforceable by any Obligor, and each Borrower
irrevocably waives the right to direct the application of any payments or
Collateral proceeds subject to this Section.

5.5.3 Erroneous Application. Agent shall not be liable for any application of
amounts made by it in good faith and, if any such application is subsequently
determined to have been made in error, the sole recourse of any Lender or other
Person to which such amount should have been made shall be to recover the amount
from the Person that actually received it (and, if such amount was received by a
Secured Party, the Secured Party agrees to return it).

5.6 Dominion Account. During any Cash Dominion Trigger Period, the ledger
balance in the main Dominion Account as of the end of a Business Day shall be
applied to the Obligations at the beginning of the next Business Day. If a
credit balance results from such application, it shall not accrue interest in
favor of Borrowers and shall be made available to Borrowers in their operating
account as long as no Default or Event of Default exists and no Revolver Loans
are outstanding.

5.7 Account Stated. Agent shall maintain, in accordance with its customary
practices, loan account(s) evidencing the Debt of Borrowers hereunder. Any
failure of Agent to record anything in a loan account, or any error in doing so,
shall not limit or otherwise affect the obligation of Borrowers to pay any
amount owing hereunder. Entries made in a loan account shall constitute
presumptive evidence

 

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of the information contained therein. If any information contained in a loan
account is provided to or inspected by any Person, the information shall be
conclusive and binding on such Person for all purposes absent manifest error,
except to the extent such Person notifies Agent in writing within thirty
(30) days after receipt or inspection that specific information is subject to
dispute.

5.8 Taxes

5.8.1 Payments Free of Taxes; Obligation to Withhold; Tax Payment.

(a) All payments of Obligations by Obligors shall be made without deduction or
withholding for any Taxes, except as required by Applicable Law. If Applicable
Law (as determined by Agent in its discretion) requires the deduction or
withholding of any Tax from any such payment by Agent or an Obligor, then Agent
or such Obligor shall be entitled to make such deduction or withholding based on
information and documentation provided pursuant to Section 5.9.

(b) If Agent or any Obligor is required by the Code to withhold or deduct Taxes,
including backup withholding and withholding taxes, from any payment, then
(i) Agent shall pay the full amount that it determines is to be withheld or
deducted to the relevant Governmental Authority pursuant to the Code, and
(ii) to the extent the withholding or deduction is made on account of
Indemnified Taxes, the sum payable by the applicable Obligor shall be increased
as necessary so that the Recipient receives an amount equal to the sum it would
have received had no such withholding or deduction been made.

(c) If Agent or any Obligor is required by any Applicable Law other than the
Code to withhold or deduct Taxes from any payment, then (i) Agent or such
Obligor, to the extent required by Applicable Law, shall timely pay the full
amount to be withheld or deducted to the relevant Governmental Authority, and
(ii) to the extent the withholding or deduction is made on account of
Indemnified Taxes, the sum payable by the applicable Obligor shall be increased
as necessary so that the Recipient receives an amount equal to the sum it would
have received had no such withholding or deduction been made.

5.8.2 Payment of Other Taxes. Without limiting the foregoing, Borrowers shall
timely pay to the relevant Governmental Authority in accordance with Applicable
Law, or at Agent’s option, timely reimburse Agent for payment of, any Other
Taxes.

5.8.3 Tax Indemnification.

(a) Each Borrower shall indemnify and hold harmless, on a joint and several
basis, each Recipient against any Indemnified Taxes (including those imposed or
asserted on or attributable to amounts payable under this Section) payable or
paid by a Recipient or required to be withheld or deducted from a payment to a
Recipient, and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. Each
Borrower shall indemnify and hold harmless Agent against any amount that a
Lender or Issuing Bank fails for any reason to pay indefeasibly to Agent as
required pursuant to this Section. Each Borrower shall make payment within ten
(10) days after demand for any amount or liability payable under this Section. A
certificate as to the amount of such payment or liability delivered to Borrowers
by a Lender or Issuing Bank (with a copy to Agent), or by Agent on its own
behalf or on behalf of any Recipient, shall be conclusive absent manifest error.

(b) Each Lender and Issuing Bank shall indemnify and hold harmless, on a several
basis, (i) Agent against any Indemnified Taxes attributable to such Lender or
Issuing Bank (but

 

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only to the extent Borrowers have not already paid or reimbursed Agent therefor
and without limiting Borrowers’ obligation to do so), (ii) Agent and Obligors,
as applicable, against any Taxes attributable to such Lender’s failure to
maintain a Participant register as required hereunder, and (iii) Agent and
Obligors, as applicable, against any Excluded Taxes attributable to such Lender
or Issuing Bank, in each case, that are payable or paid by Agent or an Obligor
in connection with any Obligations, and any reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
Each Lender and Issuing Bank shall make payment within ten (10) days after
demand for any amount or liability payable under this Section. A certificate as
to the amount of such payment or liability delivered to any Lender or Issuing
Bank by Agent shall be conclusive absent manifest error.

5.8.4 Evidence of Payments. If Agent or an Obligor pays any Taxes pursuant to
this Section, then upon request, Agent shall deliver to Borrower Agent or
Borrower Agent shall deliver to Agent, respectively, a copy of a receipt issued
by the appropriate Governmental Authority evidencing the payment, a copy of any
return required by Applicable Law to report the payment, or other evidence of
payment reasonably satisfactory to Agent or Borrower Agent, as applicable.

5.8.5 Treatment of Certain Refunds. Unless required by Applicable Law, at no
time shall Agent have any obligation to file for or otherwise pursue on behalf
of a Lender or Issuing Bank, nor have any obligation to pay to any Lender or
Issuing Bank, any refund of Taxes withheld or deducted from funds paid for the
account of a Lender or Issuing Bank. If a Recipient determines in its discretion
that it has received a refund of any Taxes as to which it has been indemnified
by Borrowers or with respect to which a Borrower has paid additional amounts
pursuant to this Section, it shall pay Borrowers an amount equal to such refund
(but only to the extent of indemnity payments made, or additional amounts paid,
by Borrowers with respect to the Taxes giving rise to such refund), net of all
out-of-pocket expenses (including Taxes) incurred by such Recipient, and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund), provided that Borrowers agree, upon request by the
Recipient, to repay the amount paid over to Borrowers (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) to the
Recipient if the Recipient is required to repay such refund to the Governmental
Authority. Notwithstanding anything herein to the contrary, no Recipient shall
be required to pay any amount to Borrowers if such payment would place the
Recipient in a less favorable net after-Tax position than it would have been in
if the Tax subject to indemnification and giving rise to such refund had not
been deducted, withheld or otherwise imposed and the indemnification payments or
additional amounts with respect to such Tax had never been paid. In no event
shall Agent or any Recipient be required to make its tax returns (or any other
information relating to its taxes that it deems confidential) available to any
Obligor or other Person.

5.8.6 Survival. Each party’s obligations under Sections 5.8 and 5.9 shall
survive the resignation or replacement of Agent or any assignment of rights by
or replacement of a Lender or Issuing Bank, the termination of the Revolver
Commitments, and the repayment, satisfaction, discharge or Full Payment of the
Obligations.

5.8.7 FATCA Grandfathering. For purposes of determining withholding Taxes
imposed under FATCA, the Obligors and the Agent shall treat (and the Lenders
hereby authorize the Agent to treat) the Loans as not qualifying as
“grandfathered obligations” within the meaning of Treasury Regulation
Section 1.1471-2(b)(2)(i).

5.9 Lender Tax Information.

5.9.1 Status of Lenders. Any Lender that is entitled to an exemption from or
reduction of withholding Tax with respect to payments of Obligations shall
deliver to Borrowers and Agent

 

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properly completed and executed documentation reasonably requested by Borrowers
or Agent as will permit such payments to be made without or at a reduced rate of
withholding. In addition, any Lender, if reasonably requested by Borrowers or
Agent, shall deliver such other documentation prescribed by Applicable Law or
reasonably requested by Borrowers or Agent to enable them to determine whether
such Lender is subject to backup withholding or information reporting
requirements. Notwithstanding the foregoing, such documentation (other than
documentation described in Sections 5.9.2(a), (b) and (d)) shall not be required
if a Lender reasonably believes delivery of the documentation would subject it
to any material unreimbursed cost or expense or would materially prejudice its
legal or commercial position.

5.9.2 Documentation. Without limiting the foregoing, if any Borrower is a U.S.
Person,

(a) Any Lender that is a U.S. Person shall deliver to Borrowers and Agent on or
prior to the date on which such Lender becomes a Lender hereunder (and from time
to time thereafter upon reasonable request of Borrowers or Agent), executed
originals of IRS Form W-9, certifying that such Lender is exempt from U.S.
federal backup withholding Tax;

(b) Any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrowers and Agent (in such number of copies as shall be requested
by the recipient) on or prior to the date on which such Foreign Lender becomes a
Lender hereunder (and from time to time thereafter upon reasonable request of
Borrowers or Agent), whichever of the following is applicable:

(i) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party, (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN or
W-8BEN-E (or any form replacing such form) establishing an exemption from or
reduction of U.S. federal withholding Tax pursuant to the “interest” article of
such tax treaty, and (y) with respect to other payments under the Loan
Documents, IRS Form W-8BEN or W-8BEN-E (or any form replacing such form)
establishing an exemption from or reduction of U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

(ii) executed originals of IRS Form W-8ECI;

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate in form
satisfactory to Agent to the effect that such Foreign Lender is not a “bank”
within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent
shareholder” of a Borrower within the meaning of Section 881(c)(3)(B) of the
Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of
the Code (“U.S. Tax Compliance Certificate”), and (y) executed originals of IRS
Form W-8BEN or W-8BEN-E (or any form replacing such form); or

(iv) to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or
W-8BEN-E (or any form replacing such form), a U.S. Tax Compliance Certificate in
form satisfactory to Agent, IRS Form W-9, and/or other certification documents
from each beneficial owner, as applicable; provided that if the Foreign Lender
is a partnership and one or more direct or indirect partners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate on behalf of each such direct and
indirect partner;

 

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(c) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrowers and Agent (in such number of copies as shall be requested
by the recipient) on or prior to the date on which such Foreign Lender becomes a
Lender hereunder (and from time to time thereafter upon the reasonable request
of Borrowers or Agent), executed originals of any other form prescribed by
Applicable Law as a basis for claiming exemption from or a reduction in U.S.
federal withholding Tax, duly completed, together with such supplementary
documentation as may be prescribed by Applicable Law to permit Borrowers or
Agent to determine the withholding or deduction required to be made; and

(d) if payment of an Obligation to a Lender would be subject to U.S. federal
withholding Tax imposed by FATCA if such Lender were to fail to comply with the
applicable reporting requirements of FATCA (including those contained in
Section 1471(b) or 1472(b) of the Code), such Lender shall deliver to Borrowers
and Agent at the time(s) prescribed by law and otherwise as reasonably requested
by Borrowers or Agent such documentation prescribed by Applicable Law (including
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by Borrowers or Agent as may be necessary for them to
comply with their obligations under FATCA and to determine that such Lender has
complied with its obligations under FATCA or to determine the amount to deduct
and withhold from such payment. Solely for purposes of this clause (d), “FATCA”
shall include any amendments made to FATCA after the date hereof.

5.9.3 Redelivery of Documentation. If any form or certification previously
delivered by a Lender pursuant to this Section expires or becomes obsolete or
inaccurate in any respect, such Lender shall promptly update the form or
certification or notify Borrowers and Agent in writing of its inability to do
so.

5.10 Nature and Extent of Each Borrower’s Liability.

5.10.1 Joint and Several Liability. Each Borrower agrees that it is jointly and
severally liable for, and absolutely and unconditionally guarantees to Agent and
Lenders the prompt payment and performance of, all Obligations, except its
Excluded Swap Obligations. Each Borrower agrees that its guaranty obligations
hereunder constitute a continuing guaranty of payment and not of collection,
that such obligations shall not be discharged until Full Payment of the
Obligations, and that such obligations are absolute and unconditional,
irrespective of (a) the genuineness, validity, regularity, enforceability,
subordination or any future modification of, or change in, any Obligations or
Loan Document, or any other document, instrument or agreement to which any
Obligor is or may become a party or be bound; (b) the absence of any action to
enforce this Agreement (including this Section) or any other Loan Document, or
any waiver, consent or indulgence of any kind by Agent or any Lender with
respect thereto; (c) the existence, value or condition of, or failure to perfect
a Lien or to preserve rights against, any security or guaranty for any
Obligations or any action, or the absence of any action, by Agent or any Lender
in respect thereof (including the release of any security or guaranty); (d) the
insolvency of any Obligor; (e) any election by Agent or any Lender in an
Insolvency Proceeding for the application of Section 1111(b)(2) of the
Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise;
(g) the disallowance of any claims of Agent or any Lender against any Obligor
for the repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (h) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except Full Payment of the Obligations.

5.10.2 Waivers.

 

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(a) Each Borrower expressly waives all rights that it may have now or in the
future under any statute, at common law, in equity or otherwise, to compel Agent
or Lenders to marshal assets or to proceed against any Obligor, other Person or
security for the payment or performance of any Obligations before, or as a
condition to, proceeding against such Borrower. Each Borrower waives all
defenses available to a surety, guarantor or accommodation co-obligor other than
Full Payment of Obligations and waives, to the maximum extent permitted by law,
any right to revoke any guaranty of Obligations as long as it is a Borrower. It
is agreed among each Borrower, Agent and Lenders that the provisions of this
Section 5.10 are of the essence of the transaction contemplated by the Loan
Documents and that, but for such provisions, Agent and Lenders would decline to
make Loans and issue Letters of Credit. Each Borrower acknowledges that its
guaranty pursuant to this Section is necessary to the conduct and promotion of
its business, and can be expected to benefit such business.

(b) Agent and Lenders may, in their discretion, pursue such rights and remedies
as they deem appropriate, including realization upon Collateral or any Real
Estate by judicial foreclosure or nonjudicial sale or enforcement, without
affecting any rights and remedies under this Section 5.10. If, in taking any
action in connection with the exercise of any rights or remedies, Agent or any
Lender shall forfeit any other rights or remedies, including the right to enter
a deficiency judgment against any Borrower or other Person, whether because of
any Applicable Laws pertaining to “election of remedies” or otherwise, each
Borrower consents to such action and waives any claim based upon it, even if the
action may result in loss of any rights of subrogation that any Borrower might
otherwise have had. Any election of remedies that results in denial or
impairment of the right of Agent or any Lender to seek a deficiency judgment
against any Borrower shall not impair any other Borrower’s obligation to pay the
full amount of the Obligations. Each Borrower waives all rights and defenses
arising out of an election of remedies, such as nonjudicial foreclosure with
respect to any security for Obligations, even though that election of remedies
destroys such Borrower’s rights of subrogation against any other Person. Agent
may bid Obligations, in whole or part, at any foreclosure, trustee or other
sale, including any private sale, and the amount of such bid need not be paid by
Agent but shall be credited against the Obligations. The amount of the
successful bid at any such sale, whether Agent or any other Person is the
successful bidder, shall be conclusively deemed to be the fair market value of
the Collateral, and the difference between such bid amount and the remaining
balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Section 5.10, notwithstanding that any present
or future law or court decision may have the effect of reducing the amount of
any deficiency claim to which Agent or any Lender might otherwise be entitled
but for such bidding at any such sale.

5.10.3 Extent of Liability; Contribution.

(a) Notwithstanding anything herein to the contrary, each Borrower’s liability
under this Section 5.10 shall not exceed the greater of (i) all amounts for
which such Borrower is primarily liable, as described in clause (c) below, and
(ii) such Borrower’s Allocable Amount.

(b) If any Borrower makes a payment under this Section 5.10 of any Obligations
(other than amounts for which such Borrower is primarily liable) (a “Guarantor
Payment”) that, taking into account all other Guarantor Payments previously or
concurrently made by any other Borrower, exceeds the amount that such Borrower
would otherwise have paid if each Borrower had paid the aggregate Obligations
satisfied by such Guarantor Payments in the same proportion that such Borrower’s
Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such
Borrower shall be entitled to receive contribution and indemnification payments
from, and to be reimbursed by, each other Borrower for the amount of such
excess, ratably based on their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment. The “Allocable Amount” for any
Borrower shall be the maximum amount that could then be recovered from such
Borrower under this Section 5.10 without rendering such payment voidable under
Section 548 of the Bankruptcy Code or under any applicable state fraudulent
transfer or conveyance act, or similar statute or common law.

 

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(c) Section 5.10.3(a) shall not limit the liability of any Borrower to pay or
guarantee Loans made directly or indirectly to it (including Loans advanced
hereunder to any other Person and then re-loaned or otherwise transferred to, or
for the benefit of, such Borrower), LC Obligations relating to Letters of Credit
issued to support its business, Secured Bank Product Obligations incurred to
support its business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder. Agent and Lenders shall have the right, at
any time in their discretion, to condition Loans and Letters of Credit upon a
separate calculation of borrowing availability for each Borrower and to restrict
the disbursement and use of Loans and Letters of Credit to a Borrower based on
that calculation.

(d) Each Obligor that is a Qualified ECP when its guaranty of or grant of Lien
as security for a Swap Obligation becomes effective hereby jointly and
severally, absolutely, unconditionally and irrevocably undertakes to provide
funds or other support to each Specified Obligor with respect to such Swap
Obligation as may be needed by such Specified Obligor from time to time to honor
all of its obligations under the Loan Documents in respect of such Swap
Obligation (but, in each case, only up to the maximum amount of such liability
that can be hereby incurred without rendering such Qualified ECP’s obligations
and undertakings under this Section 5.10 voidable under any applicable
fraudulent transfer or conveyance act). The obligations and undertakings of each
Qualified ECP under this Section shall remain in full force and effect until
Full Payment of all Obligations. Each Obligor intends this Section to
constitute, and this Section shall be deemed to constitute, a guarantee of the
obligations of, and a “keepwell, support or other agreement” for the benefit of,
each Obligor for all purposes of the Commodity Exchange Act.

5.10.4 Joint Enterprise. Each Borrower has requested that Agent and Lenders make
this credit facility available to Borrowers on a combined basis, in order to
finance Borrowers’ business most efficiently and economically. Borrowers’
business is a mutual and collective enterprise, and the successful operation of
each Borrower is dependent upon the successful performance of the integrated
group. Borrowers believe that consolidation of their credit facility will
enhance the borrowing power of each Borrower and ease administration of the
facility, all to their mutual advantage. Borrowers acknowledge that Agent’s and
Lenders’ willingness to extend credit and to administer the Collateral on a
combined basis hereunder is done solely as an accommodation to Borrowers and at
Borrowers’ request.

5.10.5 Subordination. Each Borrower hereby subordinates any claims, including
any rights at law or in equity to payment, subrogation, reimbursement,
exoneration, contribution, indemnification or set off, that it may have at any
time against any other Obligor, howsoever arising, to the Full Payment of its
Obligations.

 

  SECTION 6. CONDITIONS PRECEDENT

6.1 Conditions Precedent to Initial Loans. In addition to the conditions set
forth in Section 6.2, Agent, Issuing Bank, and Lenders shall not be required to
fund any requested Loan, issue or arrange for issuance of any Letter of Credit,
or otherwise extend credit or grant any other accommodation to or for the
benefit of Borrowers, until the date (“Closing Date”) that each of the following
conditions has been satisfied, or waived by Agent in writing in Agent’s sole
discretion:

(a) Each Loan Document, including without limitation that certain Second Omnibus
Amendment and Reaffirmation of Existing Ancillary Documents by and among
Obligors, Agent, and Lenders concerning the 2013 Loan Documents, shall have been
duly executed and delivered to Agent by each of the signatories thereto, and
each Obligor shall be in compliance with all terms thereof.

 

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(b) Agent shall have received acknowledgments of all filings or recordations
necessary to perfect its Liens in the Collateral, as well as UCC and Lien
searches and other evidence satisfactory to Agent that such Liens are the only
Liens upon the Collateral, except Permitted Liens.

(c) Agent shall have received (a) an amendment to each Mortgage and a date down
endorsement to each title insurance policy, each in form and substance
satisfactory to Agent and (b) with respect to all Real Estate subject to a
Mortgage (i) a life-of-loan flood hazard determination and, if the Real Estate
is located in a special flood hazard area, an acknowledged notice to borrower
and flood insurance by an insurer acceptable to Agent, and (ii) to the extent
requested by Agent or not previously provided to Agent, an environmental
assessment, prepared by environmental engineers acceptable to Agent, and such
other reports, certificates, studies or data as Agent may reasonably require,
all in form and substance satisfactory to Agent.

(d) to the extent not previously delivered to Agent, Agent shall have received
duly executed agreements establishing each Dominion Account and related lockbox,
in form and substance, and with financial institutions, satisfactory to Agent.

(e) Agent shall have received certificates, in form and substance satisfactory
to it, from a knowledgeable Senior Officer of Borrower Agent certifying that,
after giving effect to the initial Loans and transactions hereunder, (i) each
Borrower is Solvent; (ii) no Default or Event of Default exists; (iii) the
representations and warranties set forth in Section 9 and in all other documents
previously or concurrently delivered by one or more of the Borrowers to Agent
are true and correct in all material respects (except to the extent that any
such representation or warranty is qualified by its terms with respect to
materiality, in which case such certification shall provide that such
representation or warranty is true and correct in all respects); (iv) each
Borrower has complied with all agreements and conditions to be satisfied by it
under the Loan Documents; (v) each Borrower has obtained all governmental and
third party consents and approvals as may be appropriate or required in
connection with the Loan Documents; and (vi) to the best of Borrowers’
knowledge, the Dealer Finance Agreements are sufficient in all material respects
for the financing needs of the Borrowers’ dealers.

(f) Agent shall have received a certificate of a duly authorized officer of each
Obligor, certifying (i) that attached copies of such Obligor’s Organic Documents
are true and complete, and in full force and effect, without amendment except as
shown; (ii) that an attached copy of resolutions authorizing execution and
delivery of the Loan Documents is true and complete, and that such resolutions
are in full force and effect, were duly adopted, have not been amended, modified
or revoked, and constitute all resolutions adopted with respect to this credit
facility; and (iii) to the title, name and signature of each Person authorized
to sign the Loan Documents. Agent may conclusively rely on this certificate
until it is otherwise notified by the applicable Obligor in writing.

(g) Agent shall have received a written opinion of Fredrikson & Byron, P.A., in
form and substance reasonably satisfactory to Agent.

(h) Agent shall have received copies of the charter documents of each Obligor,
certified by the Secretary of State or other appropriate official of such
Obligor’s jurisdiction of organization. Agent shall have received good standing
certificates for each Obligor, issued by the Secretary of State or other
appropriate official of such Obligor’s jurisdiction of organization and each
jurisdiction where such Obligor’s conduct of business or ownership of Property
necessitates qualification.

 

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(i) to the extent not previously delivered to Agent, Agent shall have received
copies of policies or certificates of insurance for the insurance policies
carried by Borrowers (including certificates naming Agent as lender’s loss payee
or additional insured, as applicable), all in compliance with the Loan
Documents.

(j) No material adverse change, in the opinion of Agent, in the business,
assets, properties, liabilities, operations, condition or prospects of Obligors,
taken as a whole, shall have occurred since March 31, 2016, and no change,
occurrence or development shall have occurred or become known to Agent since
March 31, 2016 that would reasonably be expected to have a Material Adverse
Effect on the Borrowers and their subsidiaries, taken as a whole.

(k) Borrowers shall have paid all fees and expenses to be paid to Agent and
Lenders on the Closing Date.

(l) Agent shall have received a Borrowing Base Report as of October 31, 2016.

(m) There shall have been, since November 7, 2016, an absence of any material
disruption or any material adverse change in the conditions of the financial,
banking and credit markets that Agent, in its sole discretion, deems material in
connection with the syndication of the Obligations hereunder.

6.2 Conditions Precedent to All Credit Extensions. Agent, Issuing Bank and
Lenders shall not be required to fund any Loans, arrange for issuance of any
Letters of Credit or grant any other accommodation to or for the benefit of
Borrowers, unless the following conditions are satisfied:

(a) no Default or Event of Default shall exist at the time of, or result from,
such funding, issuance or grant;

(b) the representations and warranties of each Obligor in the Loan Documents
shall be true and correct in all material respects (except to the extent that
any such representation or warranty is qualified by its terms with respect to
materiality, in which case such representation or warranty shall be true and
correct in all respects) on the date of, and upon giving effect to, such
funding, issuance or grant (except for representations and warranties that
expressly relate to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date);

(c) all conditions precedent in any other Loan Document shall be satisfied or
waived by Agent in writing;

(d) no event shall have occurred or circumstance exist that has or could
reasonably be expected to have a Material Adverse Effect; and

(e) with respect to issuance of a Letter of Credit, the LC Conditions shall be
satisfied.

Each request (or deemed request) by Borrowers for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrowers that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance or grant. As an
additional condition to any funding, issuance or grant, Agent shall have
received such other information, documents, instruments and agreements as it
deems appropriate in connection therewith.

 

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  SECTION 7. COLLATERAL

7.1 Grant of Security Interest. To secure the prompt payment and performance of
its Obligations, each Borrower hereby grants to Agent, for the benefit of
Secured Parties, a continuing security interest in and Lien upon all Property of
such Borrower, including all of the following Property, whether now owned or
hereafter acquired, and wherever located:

(a) all Accounts;

(b) all Chattel Paper, including electronic chattel paper;

(c) all Commercial Tort Claims, including those shown on Schedule 9.1.16(b);

(d) all Deposit Accounts;

(e) all Documents;

(f) all General Intangibles, including Intellectual Property;

(g) all Goods, including Inventory, Equipment and fixtures;

(h) all Instruments;

(i) all Investment Property;

(j) all Letter-of-Credit Rights;

(k) all Supporting Obligations;

(l) all monies, whether or not in the possession or under the control of Agent,
a Lender, or a bailee or Affiliate of Agent or a Lender, including any Cash
Collateral;

(m) all accessions to, substitutions for, and all replacements, products, and
cash and non-cash proceeds of the foregoing, including proceeds of and unearned
premiums with respect to insurance policies, and claims against any Person for
loss, damage or destruction of any Collateral; and

(n) all books and records (including customer lists, files, correspondence,
tapes, computer programs, print-outs and computer records) pertaining to the
foregoing.

Each Borrower hereby reaffirms each and every assignment and grant of security
interest made by such Borrower pursuant to the Original Loan Agreement and the
2013 Loan Agreement and the other Security Documents executed in connection with
either of the foregoing.

7.2 Lien on Deposit Accounts; Cash Collateral.

7.2.1 Deposit Accounts. To further secure the prompt payment and performance of
its Obligations, each Borrower hereby grants to Agent a continuing security
interest in and Lien upon all amounts credited to any Deposit Account of such
Borrower, including sums in any blocked, lockbox, sweep or collection account.
Each Borrower hereby authorizes and directs each bank or other depository to
deliver to Agent, upon request, all balances in any Deposit Account maintained
for such Borrower, without inquiry into the authority or right of Agent to make
such request.

 

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7.2.2 Cash Collateral. Cash Collateral may be invested, at Agent’s discretion
(and with the consent of Borrowers, as long as no Event of Default exists), but
Agent shall have no duty to do so, regardless of any agreement or course of
dealing with any Borrower, and shall have no responsibility for any investment
or loss. As security for its Obligations, each Borrower hereby grants to Agent a
security interest in and Lien upon all Cash Collateral held from time to time
and all proceeds thereof, whether held in a Cash Collateral Account or
otherwise. Agent may apply Cash Collateral to the payment of such Obligations as
they become due, in such order as Agent may elect. Each Cash Collateral Account
and all Cash Collateral shall be under the sole dominion and control of Agent,
and no Borrower or other Person shall have any right to any Cash Collateral,
until Full Payment of the Obligations.

7.3 Real Estate Collateral.

7.3.1 Lien on Real Estate. The Obligations shall also be secured by Mortgages
upon all Real Estate owned by Borrowers, including the Real Estate located in
Thief River Falls, Minnesota; St. Cloud, Minnesota; Island Park, Idaho; and
Bucyrus, Ohio. The Mortgages have been or shall be duly recorded, at Borrowers’
expense, in each office where such recording is required to constitute a fully
perfected Lien on the Real Estate covered thereby. If any Borrower acquires Real
Estate hereafter, Borrowers shall, within thirty (30) days, execute, deliver and
record a Mortgage sufficient to create a first priority Lien in favor of Agent
on such Real Estate, and shall deliver all Real Estate Related Documents.

7.3.2 Collateral Assignment of Leases. To further secure the prompt payment and
performance of its Obligations, each Borrower hereby transfers and assigns to
Agent all of such Borrower’s right, title and interest in, to and under all now
or hereafter existing leases of real Property to which such Borrower is a party,
whether as lessor or lessee, and all extensions, renewals, modifications and
proceeds thereof.

7.4 Investment Property and other Equity Interests.

7.4.1 Delivery of Certificates. All certificates or instruments representing or
evidencing any Investment Property or Equity Interests constituting Collateral
hereunder (“Pledged Interests”) shall be delivered to and held by or on behalf
of Agent pursuant hereto or the Pledge Agreement applicable thereto, shall be in
suitable form for further transfer by delivery, and shall be accompanied by all
necessary instruments of transfer or assignment, duly executed in blank. The
Pledged Interests consisting of Equity Interests have been duly authorized and
validly issued and are fully paid and non-assessable.

7.4.2 Issuer Agreements. Each Borrower that is the issuer of any Pledged
Interests hereby (a) acknowledges the security interest and Lien of Agent in
such Collateral granted by the Borrower owning such Pledged Interests and
(b) agrees that, with respect to any such Pledged Interests, following the
occurrence and during the continuance of an Event of Default, it will comply
with the instructions originated by Agent without further consent of any other
Borrower or any other Person.

7.4.3 Distributions on Investment Property and other Equity Interests. In the
event that any cash dividend or cash distribution (a “Dividend”) paid in
accordance with this Agreement and any applicable Pledge Agreement on any
Pledged Interests of any Borrower at a time when no Event of Default has
occurred and is continuing, such Dividend may be paid directly to the applicable
Borrower. If an Event of Default has occurred and is continuing, then any such
Dividend or payment shall be paid directly to Agent for the benefit of the
Secured Parties.

7.4.4 Waiver of Certain Provisions of Organic Documents. Each Borrower
irrevocably waives any and all of its rights under those provisions of the
Organic Documents or any equity holders

 

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agreement of each of its Subsidiaries that (a) prohibit, restrict, condition, or
otherwise affect the grant hereunder of any Lien on any of the Pledged Interests
or any enforcement action (including the sale or disposition of such Pledged
Interests to a third party) which may be taken in respect of any such Lien or
(b) otherwise conflict with the terms of this Agreement or any applicable Pledge
Agreement. Each Borrower represents and warrants to the Agent that written
waivers of any such restrictions have been executed by all holders of Pledged
Interests that are not Borrowers and that all such written waivers have been
delivered to the Agent. The Borrowers hereby agree that the Agent shall be
deemed to be the “holder of record” with respect the Pledged Interests in the
event that, during the continuance of any Event of Default, it elects to
exercise remedies or otherwise transfer of any Pledged Interests.

7.4.5 Securities Accounts. Each Borrower irrevocably authorizes and directs each
securities intermediary or other Person with which any securities account or
similar investment property is maintained, if any, upon written instruction of
the Agent (with a copy to the Borrower Agent), to dispose of such Collateral at
the direction of the Agent and comply with the instructions originated by Agent
without further consent of any Borrower or any other Person. The Agent agrees
with the Borrowers that such instruction shall not be given by the Agent unless
an Event of Default has occurred and is continuing.

7.5 Miscellaneous Collateral Provisions.

7.5.1 Commercial Tort Claims. Borrowers shall promptly notify Agent in writing
if any Borrower has a Commercial Tort Claim (other than, as long as no Default
or Event of Default exists, a Commercial Tort Claim for less than $100,000),
shall promptly amend Schedule 9.1.16(b) to include such claim, and shall take
such actions as Agent deems appropriate to subject such claim to a duly
perfected, first priority Lien in favor of Agent.

7.5.2 Certain After-Acquired Collateral. Borrowers shall promptly notify Agent
in writing if, after the Closing Date, any Borrower obtains any interest in any
Collateral consisting of Deposit Accounts, Chattel Paper, Documents,
Instruments, Intellectual Property, Investment Property or Letter-of-Credit
Rights and, upon Agent’s request, shall promptly take such actions as Agent
deems appropriate to effect Agent’s duly perfected, first priority Lien upon
such Collateral, including obtaining any appropriate possession, control
agreement or Lien Waiver; provided, however, that (a) Agent’s Lien on the NMTC
Disbursement Account may be second in priority to the Lien securing the NMTC
Loans in favor of the NMTC Lenders, so long as the NMTC Intercreditor Agreement
is in full force and effect and any of the NMTC Loans are outstanding and
(b) Agent shall not require a Deposit Account Control Agreement with respect to
the Deposit Accounts described in clauses (c) and (d) of Section 10.1.10 of this
Agreement, so long as the requirements set forth in such clauses (c) and (d) are
met with respect to such Deposit Accounts. If any Collateral is in the
possession of a third party, at Agent’s request, Borrowers shall obtain an
acknowledgment that such third party holds the Collateral for the benefit of
Agent.

7.5.3 Collateral Assignment of Fund Loan Documents.

(a) Without limiting the generality of the grant of security interest set forth
in this Agreement or the other Loan Documents, including without limitation that
set forth in Section 7.1 of this Agreement, each Obligor hereby assigns,
transfers, and sets over unto Agent, for the benefit of the Secured Parties, as
security for the prompt payment and performance of all Obligations, all of such
Obligor’s right, title, and interest in and under the Fund Loan Documents,
including, without limitation, the right to exercise any and all of such
Obligor’s existing and future rights, remedies, claims, and causes of action
arising under the Fund Loan Documents, including, without limitation, (i) any
and all claims related to any breach of any representations, warranties, or
covenants made by or on behalf of WF Paint

 

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& Assembly or/or any and all other Persons under the Fund Loan Documents,
(ii) all of each Obligor’s rights to indemnification under the Fund Loan
Documents by WF Paint & Assembly and/or any and all other Persons, and (iii) all
rights to enforce any and all covenants contained in the Fund Loan Documents
against WF Paint & Assembly and/or any and all other Persons.

(b) Nothing contained in this Agreement constitutes an assumption by Agent, in
whole or in part, of any obligation of any Obligor under any Fund Loan Document.
Agent will not be liable or responsible in any manner whatsoever to any Obligor,
WF Paint & Assembly or any other Person for any matter or thing connected with
any aspect of any of the Fund Loan Documents, including, without limitation,
performance by any Obligor thereunder. Upon the occurrence and during the
continuance of an Event of Default, Agent may, without further notice to or
consent of any Obligor or any other Person, exercise all rights and remedies of
each Obligor under the Fund Loan Documents and notify WF Paint & Assembly or any
other Person of Agent’s rights and interests hereunder and thereunder.

(c) Each Obligor hereby covenants, represents, and warrants to Agent that
(i) such Obligor has full right to assign its interest in the Fund Loan
Documents and any other documents, agreements or understandings executed in
connection therewith and all rights and benefits thereunder, (ii) the Fund Loan
Documents are in full force and effect and not subject to any defenses, setoffs,
or counterclaims whatsoever, (iii) no other assignment of any interest in any of
the Fund Loan Documents has been made by any Obligor, (iv) without the prior
written consent of Agent, such Obligor shall not do any of the following:
(A) cancel, surrender, or terminate any Fund Loan Document, (B) change, alter,
or modify any Fund Loan Document or (C) consent to the release of any party
liable under any Fund Loan Document; (v) such Obligor shall notify Agent in
writing of the occurrence of any material default by any Person, including an
Obligor, under the terms of any of the Fund Loan Documents; and (vi) such
Obligor shall notify Agent in writing of the exercise by such Obligor of any of
its material rights or remedies under any Fund Loan Document.

7.6 Limitations. The Lien on Collateral granted hereunder is given as security
only and shall not subject Agent or any Lender to, or in any way modify, any
obligation or liability of Borrowers relating to any Collateral. In no event
shall the grant of any Lien under any Loan Document secure an Excluded Swap
Obligation of the granting Obligor.

7.7 Further Assurances. All Liens granted to Agent under the Loan Documents are
for the benefit of Secured Parties. Promptly upon request, Borrowers shall
deliver such instruments and agreements, and shall take such actions, as Agent
deems appropriate under Applicable Law to evidence or perfect its Lien on any
Collateral, or otherwise to give effect to the intent of this Agreement. Each
Borrower authorizes Agent to file any financing statement that describes the
Collateral as “all assets” or “all personal property” of such Borrower, or words
to similar effect, and ratifies any action taken by Agent before the Closing
Date to effect or perfect its Lien on any Collateral.

7.8 Foreign Subsidiary Stock. Notwithstanding Section 7.1, the Collateral shall
include only 65% of the voting stock of any Foreign Subsidiary.

 

  SECTION 8. COLLATERAL ADMINISTRATION

8.1 Borrowing Base Reports. By the fifteenth (15th) day of each month and at
such other times as Agent may request, Borrowers shall deliver to Agent (and
Agent shall promptly deliver same to Lenders) a Borrowing Base Report as of the
close of business of the previous month or calendar week (as applicable). By
Tuesday of each calendar week, Borrowers shall also deliver to Agent (and Agent
shall promptly deliver same to Lenders) a Borrowing Base Report prepared as of
the close of business of the previous calendar week, provided, however that such
weekly Borrowing Base Report shall not be

 

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required when all of the following conditions are true: (a) the sum of
(i) Availability, (ii) Borrowers’ cash on deposit with Agent and pledged to
Agent for the benefit of Lenders and (iii) Borrowers’ Cash Equivalents subject
to Agent’s Lien and control, pursuant to documentation in form and substance
satisfactory to Agent, was equal to or greater than $20,000,000 at all times
during such prior calendar week and (b) no Default or Event of Default then
exists or existed at any time during such prior calendar week. All information
(including calculation of Availability) in a Borrowing Base Report shall be
certified by a Senior Officer of Borrower Agent. Agent may from time to time
adjust any such report (a) to reflect Agent’s reasonable estimate of declines in
value of Collateral, due to collections received in the Dominion Account or
otherwise; (b) to adjust advance rates to reflect changes in dilution, quality,
mix and other factors affecting Collateral; and (c) to the extent any
information or calculation does not comply with this Agreement.

8.2 Accounts.

8.2.1 Records and Schedules of Accounts. Each Borrower shall keep accurate and
complete records of its Accounts, including all payments and collections
thereon, and shall submit to Agent sales, collection, reconciliation and other
reports in form satisfactory to Agent, on such periodic basis as Agent may
request. Each Borrower shall also provide to Agent, on or before the fifteenth
(15th) day of each month, a detailed aged trial balance of all Accounts as of
the end of the preceding month, specifying each Account’s Account Debtor name
and address, amount, invoice date and due date, showing any discount, allowance,
credit, authorized return or dispute, and copies of all new, replacement, or
renewal letters of credit relating to such Accounts (provided, however, that
Borrowers shall not be required to deliver copies of letters of credit to the
extent that such letters of credit have been previously delivered to Agent). At
Agent’s request, each Borrower shall also provide to Agent, on or before the
fifteenth (15th) day of each month for each Account, proof of delivery, copies
of invoices and invoice registers, copies of related documents, repayment
histories, status reports and other information as Agent may reasonably request.
If Accounts in an aggregate face amount of $500,000 or more cease to be Eligible
Accounts, Borrowers shall notify Agent of such occurrence promptly (and in any
event within one Business Day) after any Borrower has knowledge thereof.

8.2.2 Taxes. If an Account of any Borrower includes a charge for any Taxes,
Agent is authorized, in its discretion, to pay the amount thereof to the proper
taxing authority for the account of such Borrower and to charge Borrowers
therefor; provided, however, that neither Agent nor Lenders shall be liable for
any Taxes that may be due from Borrowers or with respect to any Collateral.

8.2.3 Account Verification. Whether or not a Default or Event of Default exists,
Agent shall have the right at any time, in the name of Agent, any designee of
Agent or any Borrower, to verify the validity, amount or any other matter
relating to any Accounts of Borrowers by mail, telephone or otherwise. Borrowers
shall cooperate fully with Agent in an effort to facilitate and promptly
conclude any such verification process.

8.2.4 Maintenance of Dominion Account. Borrowers shall maintain Dominion
Accounts in the United States and in Canada with Bank of America pursuant to
lockbox or other arrangements acceptable to Agent. In the United States and in
Canada, Borrowers shall obtain (to the extent not already obtained) an agreement
(in form and substance satisfactory to Agent) from each lockbox servicer and
Dominion Account bank, establishing Agent’s control over and Lien in the lockbox
or Dominion Account, which may be exercised by Agent during any Cash Dominion
Trigger Period, requiring immediate deposit of all remittances received in the
lockbox to a Dominion Account, and waiving offset rights of such servicer or
bank, except for customary administrative charges. Agent and Lenders assume no
responsibility to Borrowers for any lockbox arrangement or Dominion Account,
including any claim of accord and satisfaction or release with respect to any
Payment Items accepted by any bank.

 

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8.2.5 Proceeds of Collateral. Borrowers shall request in writing and otherwise
take all necessary steps to ensure that all payments on Accounts or otherwise
relating to Collateral are made directly to lockbox relating to a Dominion
Account or, with Agent’s prior written consent, directly to a Dominion Account.
If any Borrower or Subsidiary receives cash or Payment Items with respect to any
Collateral, it shall hold same in trust for Agent and promptly (not later than
the next Business Day) deposit same into a Dominion Account.

8.3 Inventory.

8.3.1 Records and Reports of Inventory. Each Borrower shall keep accurate and
complete records of its Inventory, including costs and daily withdrawals and
additions, and shall submit to Agent inventory and reconciliation reports in
form satisfactory to Agent, on such periodic basis as Agent may request,
including, without limitation, concurrently with the delivery of financial
statements pursuant to Section 10.1.2(b), monthly dealer inventory reports
regarding all-terrain vehicles, snowmobiles, and recreational off-highway
vehicles. Each Borrower shall either conduct a full physical inventory or a full
cycle count of inventory at least once per calendar year (and on a more frequent
basis if requested by Agent when an Event of Default exists) and periodic cycle
counts consistent with historical practices, and shall provide to Agent a report
based on each such inventory and count promptly upon completion thereof,
together with such supporting information as Agent may request. Agent may
participate in and observe each physical count.

8.3.2 Returns of Inventory. No Borrower shall return any Inventory to a
supplier, vendor or other Person, whether for cash, credit or otherwise, unless
(a) such return is in the Ordinary Course of Business; (b) no Default, Event of
Default or Overadvance exists or would result therefrom; (c) Agent is promptly
notified if the aggregate Value of all Inventory returned in any month exceeds
$1,000,000; and (d) any payment received by a Borrower for a return is promptly
remitted to Agent for application to the Obligations.

8.3.3 Acquisition, Sale and Maintenance. No Borrower shall acquire or accept any
Inventory on consignment or approval, and shall take all steps to assure that
all Inventory is produced in accordance with Applicable Law, including the FLSA.
No Borrower shall sell any Inventory on consignment or approval or any other
basis under which the customer may return or require a Borrower to repurchase
such Inventory. Borrowers shall use, store and maintain all Inventory with
reasonable care and caution, in accordance with applicable standards of any
insurance and in conformity with all Applicable Law, and shall make current rent
payments (within applicable grace periods provided for in leases) at all
locations where any Collateral is located.

8.4 Equipment.

8.4.1 Records and Schedules of Equipment. Each Borrower shall keep accurate and
complete records of its Equipment, including kind, quantity, cost, acquisitions
and dispositions thereof, and shall submit to Agent, on such periodic basis as
Agent may request, a current schedule thereof, in form satisfactory to Agent.
Promptly upon request, Borrowers shall deliver to Agent evidence of their
ownership or interests in any Equipment.

8.4.2 Dispositions of Equipment. No Borrower shall sell, lease or otherwise
dispose of any Equipment, without the prior written consent of Agent, other than
(a) a Permitted Asset Disposition; and (b) replacement of Equipment that is
worn, damaged or obsolete with Equipment of like function and value, if the
replacement Equipment is acquired substantially contemporaneously with such
disposition and is free of Liens.

 

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8.4.3 Condition of Equipment. The Equipment is in good operating condition and
repair, and all necessary replacements and repairs have been made so that the
value and operating efficiency of the Equipment is preserved at all times,
reasonable wear and tear excepted. Each Borrower shall ensure that the Equipment
is mechanically and structurally sound, and capable of performing the functions
for which it was designed, in accordance with manufacturer specifications. No
Borrower shall permit any Equipment to become affixed to real Property unless
any landlord or mortgagee delivers a Lien Waiver.

8.5 Deposit Accounts. Schedule 8.5 sets forth all Deposit Accounts maintained by
Borrowers, including all Dominion Accounts. At the request of Agent, each
Borrower shall take all actions necessary to establish Agent’s control of each
such Deposit Account (other than (a) an account exclusively used for payroll,
payroll taxes or employee benefits, (b) an account containing not more than
$10,000 at any time, and (c) the Deposit Accounts described in clauses (c) and
(d) of Section 10.1.10 of this Agreement, so long as the requirements set forth
in such clauses (c) and (d) are met with respect to such Deposit Accounts). A
Borrower shall be the sole account holder of each Deposit Account and shall not
allow any other Person (other than Agent and, with respect to the NMTC
Disbursement Account so long as the NMTC Intercreditor Agreement is in full
force and effect and any of the NMTC Loans are outstanding, Wells Fargo Sub-CDE
and MMCDC Sub-CDE) to have control over a Deposit Account or any Property
deposited therein. Each Borrower shall promptly notify Agent of any opening or
closing of a Deposit Account and, with the consent of Agent, will amend Schedule
8.5 to reflect same.

8.6 General Provisions.

8.6.1 Location of Collateral. All tangible items of Collateral, other than
Inventory in transit, shall at all times be kept by Borrowers at the business
locations set forth in Schedule 8.6.1, except that Borrowers may (a) make sales
or other dispositions of Collateral in accordance with Section 10.2.5; and
(b) move Collateral to another location in the United States, upon thirty
(30) Business Days prior written notice to Agent.

8.6.2 Insurance of Collateral; Condemnation Proceeds.

(a) Each Borrower shall maintain insurance with respect to the Collateral,
covering casualty, hazard, theft, malicious mischief, flood and other risks, in
amounts, with endorsements and with insurers (with a Best rating of at least A+,
unless otherwise approved by Agent in its discretion) satisfactory to Agent. All
proceeds under each policy shall be payable to Agent. From time to time upon
request, Borrowers shall deliver to Agent the originals or certified copies of
its insurance policies and updated flood plain searches. Unless Agent shall
agree otherwise, each policy shall include satisfactory endorsements (i) showing
Agent as loss payee; (ii) requiring thirty (30) days prior written notice to
Agent in the event of cancellation of the policy for any reason whatsoever; and
(iii) specifying that the interest of Agent shall not be impaired or invalidated
by any act or neglect of any Borrower or the owner of the Property, nor by the
occupation of the premises for purposes more hazardous than are permitted by the
policy. If any Borrower fails to provide and pay for any insurance, Agent may,
at its option, but shall not be required to, procure the insurance and charge
Borrowers therefor. Each Borrower agrees to deliver to Agent, promptly as
rendered, copies of all reports made to insurance companies. While no Event of
Default exists, Borrowers may settle, adjust or compromise any insurance claim,
as long as the proceeds are delivered to Agent. If an Event of Default exists,
only Agent shall be authorized to settle, adjust and compromise such claims.

 

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(b) Any proceeds of insurance (other than proceeds from workers’ compensation or
D&O insurance) and any awards arising from condemnation of any Collateral shall
be paid to Agent and, subject to clause (c) below, shall be applied to payment
of the Revolver Loans and then to other Obligations.

(c) If requested by Borrowers in writing within fifteen (15) days after Agent’s
receipt of any insurance proceeds or condemnation awards relating to any loss or
destruction of Equipment or Real Estate, Borrowers may use such proceeds or
awards to repair or replace such Equipment or Real Estate (and until so used,
the proceeds shall be held by Agent as Cash Collateral) as long as (i) no
Default or Event of Default exists; (ii) such repair or replacement is promptly
undertaken and concluded, in accordance with plans satisfactory to Agent;
(iii) replacement buildings are constructed on the sites of the original
casualties and are of comparable size, quality and utility to the destroyed
buildings; (iv) the repaired or replaced Property is free of Liens, other than
Permitted Liens that are not Purchase Money Liens; (v) Borrowers comply with
disbursement procedures for such repair or replacement as Agent may reasonably
require; and (vi) the aggregate amount of such proceeds or awards from any
single casualty or condemnation does not exceed $5,000,000.

8.6.3 Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes payable with respect to any Collateral (including any sale thereof), and
all other payments required to be made by Agent to any Person to realize upon
any Collateral, shall be borne and paid by Borrowers. Agent shall not be liable
or responsible in any way for the safekeeping of any Collateral, for any loss or
damage thereto (except for reasonable care in its custody while Collateral is in
Agent’s actual possession), for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency or other Person
whatsoever, but the same shall be at Borrowers’ sole risk.

8.6.4 Defense of Title. Each Borrower shall defend its title to Collateral and
Agent’s Liens therein against all Persons, claims and demands, except Permitted
Liens.

8.7 Power of Attorney. Each Borrower hereby irrevocably constitutes and appoints
Agent (and all Persons designated by Agent) as such Borrower’s true and lawful
attorney (and agent-in-fact) for the purposes provided in this Section. Agent,
or Agent’s designee, may, without notice and in either its or a Borrower’s name,
but at the cost and expense of Borrowers:

(a) Endorse a Borrower’s name on any Payment Item or other proceeds of
Collateral (including proceeds of insurance) that come into Agent’s possession
or control; and

(b) During an Event of Default, (i) notify any Account Debtors of the assignment
of their Accounts, demand and enforce payment of Accounts by legal proceedings
or otherwise, and generally exercise any rights and remedies with respect to
Accounts; (ii) settle, adjust, modify, compromise, discharge or release any
Accounts or other Collateral, or any legal proceedings brought to collect
Accounts or Collateral; (iii) sell or assign any Accounts and other Collateral
upon such terms, for such amounts and at such times as Agent deems advisable;
(iv) collect, liquidate and receive balances in Deposit Accounts or investment
accounts, and take control, in any manner, of proceeds of Collateral;
(v) prepare, file and sign a Borrower’s name to a proof of claim or other
document in a bankruptcy of an Account Debtor, or to any notice, assignment or
satisfaction of Lien or similar document; (vi) receive, open and dispose of mail
addressed to a Borrower, and notify postal authorities to deliver any such mail
to an address designated by Agent; (vii) endorse any Chattel Paper, Document,
Instrument, bill of lading, or other document or agreement relating to any
Accounts, Inventory or other Collateral; (viii) use a Borrower’s stationery and
sign its name to verifications of Accounts and notices to Account Debtors;
(ix) use information contained in any data processing, electronic or information
systems

 

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relating to Collateral; (x) make and adjust claims under insurance policies;
(xi) take any action as may be necessary or appropriate to obtain payment under
any letter of credit, banker’s acceptance or other instrument for which a
Borrower is a beneficiary; and (xii) take all other actions as Agent deems
appropriate to fulfill any Borrower’s obligations under the Loan Documents.

 

  SECTION 9. REPRESENTATIONS AND WARRANTIES

9.1 General Representations and Warranties. To induce Agent and Lenders to enter
into this Agreement and to make available the Revolver Commitments, Loans and
Letters of Credit, each Borrower represents and warrants that:

9.1.1 Organization and Qualification. Each Borrower and Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each Borrower and Subsidiary is duly
qualified, authorized to do business and in good standing as a foreign
corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.

9.1.2 Power and Authority. Each Obligor is duly authorized to execute, deliver
and perform its Loan Documents. The execution, delivery and performance of the
Loan Documents have been duly authorized by all necessary action, and do not
(a) require any consent or approval of any holders of Equity Interests of any
Obligor, except those already obtained; (b) contravene the Organic Documents of
any Obligor; (c) violate or cause a default under any Applicable Law or Material
Contract; or (d) result in or require imposition of a Lien (other than Permitted
Liens) on any Obligor’s Property.

9.1.3 Enforceability. Each Loan Document is a legal, valid and binding
obligation of each Obligor party thereto, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally.

9.1.4 Capital Structure. Schedule 9.1.4 shows, for each Borrower and Subsidiary,
its name, jurisdiction of organization, authorized and issued Equity Interests,
holders of its Equity Interests, and agreements binding on such holders with
respect to such Equity Interests. Except as disclosed on Schedule 9.1.4, in the
five years preceding the Closing Date, no Borrower or Subsidiary has acquired
any substantial assets from any other Person nor been the surviving entity in a
merger or combination. Each Borrower has good title to its Equity Interests in
its Subsidiaries, subject only to Agent’s Lien, and all such Equity Interests
are duly issued, fully paid and non-assessable. There are no outstanding
purchase options, warrants, subscription rights, agreements to issue or sell,
convertible interests, phantom rights or powers of attorney relating to Equity
Interests of any Borrower or Subsidiary.

9.1.5 Title to Properties; Priority of Liens. Each Borrower and Subsidiary has
good and marketable title to (or valid leasehold interests in) all of its Real
Estate, and good title to all of its personal Property, including all Property
reflected in any financial statements delivered to Agent or Lenders, in each
case free of Liens except Permitted Liens. Each Borrower and Subsidiary has paid
and discharged all lawful claims that, if unpaid, could become a Lien on its
Properties, other than Permitted Liens. All Liens of Agent in the Collateral are
duly perfected, first priority Liens, subject only to Permitted Liens that are
expressly allowed to have priority over Agent’s Liens.

9.1.6 Accounts. Agent may rely, in determining which Accounts are Eligible
Accounts, on all statements and representations made by Borrowers with respect
thereto. Borrowers represent and warrant, with respect to each Account shown as
an Eligible Account in a Borrowing Base Report, that:

 

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(a) it is genuine and in all respects what it purports to be;

(b) it arises out of a completed, bona fide sale and delivery of goods or
rendition of services in the Ordinary Course of Business, and substantially in
accordance with any purchase order, contract or other document relating thereto;

(c) it is for a sum certain, maturing as stated in the applicable invoice, a
copy of which has been furnished or is available to Agent on request;

(d) it is not subject to any offset, Lien (other than Agent’s Lien), deduction,
defense, dispute, counterclaim or other adverse condition except as arising in
the Ordinary Course of Business and disclosed to Agent; and it is absolutely
owing by the Account Debtor, without contingency in any respect;

(e) no purchase order, agreement, document or Applicable Law restricts
assignment of the Account to Agent (regardless of whether, under the UCC, the
restriction is ineffective), and the applicable Borrower is the sole payee or
remittance party shown on the invoice;

(f) no extension, compromise, settlement, modification, credit, deduction or
return has been authorized or is in process with respect to the Account, except
discounts or allowances granted in the Ordinary Course of Business for prompt
payment that are reflected on the face of the invoice related thereto and in the
reports submitted to Agent hereunder; and

(g) to the best of Borrowers’ knowledge, (i) there are no facts or circumstances
that are reasonably likely to impair the enforceability or collectability of
such Account; (ii) the Account Debtor had the capacity to contract when the
Account arose, continues to meet the applicable Borrower’s customary credit
standards, is not contemplating or subject to an Insolvency Proceeding, and has
not failed, or suspended or ceased doing business; and (iii) there are no
proceedings or actions threatened or pending against any Account Debtor that
could reasonably be expected to have a material adverse effect on the Account
Debtor’s financial condition.

9.1.7 Financial Statements. The consolidated balance sheets, and related
statements of income, cash flow and shareholders equity, of Borrowers and
Subsidiaries that have been and are hereafter delivered to Agent and Lenders,
are prepared in accordance with GAAP, and fairly present the financial positions
and results of operations of Borrowers and Subsidiaries at the dates and for the
periods indicated. The consolidating balance sheets of Borrowers and
Subsidiaries that have been and are hereafter delivered to Agent and Lenders,
are prepared on a basis consistent with the most recent consolidating financial
statements of Borrowers delivered to Agent before the Closing Date and using the
same inventory valuation method as used in such financial statements, and fairly
present the financial positions and results of operations of Borrowers and
Subsidiaries at the dates and for the periods indicated. All projections
delivered from time to time to Agent and Lenders have been prepared in good
faith, based on reasonable assumptions in light of the circumstances at such
time. Since March 31, 2016, there has been no change in the condition, financial
or otherwise, of any Borrower or Subsidiary that could reasonably be expected to
have a Material Adverse Effect. No financial statement delivered to Agent or
Lenders at any time contains any untrue statement of a material fact, nor fails
to disclose any material fact necessary to make such statement not materially
misleading. Each Borrower and Subsidiary is Solvent.

9.1.8 Surety Obligations. No Borrower or Subsidiary is obligated as surety or
indemnitor under any bond or other contract that assures payment or performance
of any obligation of any Person, except as permitted hereunder.

 

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9.1.9 Taxes. Each Borrower and Subsidiary has filed all federal, state and local
tax returns and other reports that it is required by law to file, and has paid,
or made provision for the payment of, all Taxes upon it, its income and its
Properties that are due and payable, except to the extent being Properly
Contested. The provision for Taxes on the books of each Borrower and Subsidiary
is adequate for all years not closed by applicable statutes, and for its current
Fiscal Year.

9.1.10 Brokers. Except as shown on Schedule 9.1.10, there are no brokerage
commissions, finder’s fees or investment banking fees payable in connection with
any transactions contemplated by the Loan Documents.

9.1.11 Intellectual Property. Each Borrower and Subsidiary owns or has the
lawful right to use all Intellectual Property necessary for the conduct of its
business, without conflict with any rights of others. There is no pending or, to
any Borrower’s knowledge, threatened Intellectual Property Claim with respect to
any Borrower, any Subsidiary or any of their Property (including any
Intellectual Property). Except as disclosed on Schedule 9.1.11, no Borrower or
Subsidiary pays or owes any Royalty or other compensation to any Person with
respect to any Intellectual Property. All Intellectual Property owned, used or
licensed by, or otherwise subject to any interests of, any Borrower or
Subsidiary is shown on Schedule 9.1.11.

9.1.12 Governmental Approvals. Each Borrower and Subsidiary has, is in
compliance with, and is in good standing with respect to, all Governmental
Approvals necessary to conduct its business and to own, lease and operate its
Properties. All necessary import, export or other licenses, permits or
certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Borrowers and Subsidiaries have complied
with all foreign and domestic laws with respect to the shipment and importation
of any goods or Collateral, except where noncompliance could not reasonably be
expected to have a Material Adverse Effect.

9.1.13 Compliance with Laws. Each Borrower and Subsidiary has duly complied, and
its Properties and business operations are in compliance, in all material
respects with all Applicable Law, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect. There have been no
citations, notices or orders of material noncompliance issued to any Borrower or
Subsidiary under any Applicable Law. No Inventory has been produced in violation
of the FLSA.

9.1.14 Compliance with Environmental Laws. Except as disclosed on Schedule
9.1.14, no Borrower’s or Subsidiary’s past or present operations, Real Estate or
other Properties are subject to any federal, state or local investigation to
determine whether any remedial action is needed to address any environmental
pollution, hazardous material or environmental clean-up. No Borrower or
Subsidiary has received any Environmental Notice. No Borrower or Subsidiary has
any contingent liability with respect to any Environmental Release,
environmental pollution or hazardous material on any Real Estate now or
previously owned, leased or operated by it.

9.1.15 Burdensome Contracts. No Borrower or Subsidiary is a party or subject to
any contract, agreement or charter restriction that could reasonably be expected
to have a Material Adverse Effect. No Borrower or Subsidiary is party or subject
to any Restrictive Agreement, except as shown on Schedule 9.1.15. No such
Restrictive Agreement prohibits the execution, delivery or performance of any
Loan Document by an Obligor.

9.1.16 Litigation. Except as shown on Schedule 9.1.16(a), there are no
proceedings or investigations pending or, to any Borrower’s knowledge,
threatened against any Borrower or Subsidiary, or any of their businesses,
operations, Properties, prospects or conditions, that (a) relate to any Loan
Documents or transactions contemplated thereby; or (b) could reasonably be
expected to have a Material

 

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Adverse Effect if determined adversely. Except as shown on Schedule 9.1.16(b),
no Obligor is a plaintiff with respect to a Commercial Tort Claim (other than,
as long as no Default or Event of Default exists, a Commercial Tort Claim for
less than $100,000). No Borrower or Subsidiary is in default with respect to any
order, injunction or judgment of any Governmental Authority.

9.1.17 No Defaults. No event or circumstance has occurred or exists that
constitutes a Default or Event of Default. No Borrower or Subsidiary is in
default, and no event or circumstance has occurred or exists that with the
passage of time or giving of notice would constitute a default, under any
Material Contract or in the payment of any Borrowed Money. There is no basis
upon which any party (other than a Borrower or Subsidiary) could terminate a
Material Contract prior to its scheduled termination date.

9.1.18 ERISA. Except as disclosed on Schedule 9.1.18:

(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code, and other federal and state laws. Each Plan that
is intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS with respect thereto and, to the knowledge
of Borrowers, nothing has occurred which would prevent, or cause the loss of,
such qualification. Each Obligor and ERISA Affiliate has met all applicable
requirements under the Code, ERISA and the Pension Protection Act of 2006, and
no application for a waiver of the minimum funding standards or an extension of
any amortization period has been made with respect to any Plan.

(b) There are no pending or, to the knowledge of Borrowers, threatened claims,
actions or lawsuits, or action by any Governmental Authority, with respect to
any Plan that could reasonably be expected to have a Material Adverse Effect.
There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that has resulted in or could
reasonably be expected to have a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) as
of the most recent valuation date for any Pension Plan, the funding target
attainment percentage (as defined in Section 430(d)(2) of the Code) is at least
60%, and no Obligor or ERISA Affiliate knows of any reason that the funding
target attainment percentage could reasonably be expected to drop below 60%;
(iii) no Obligor or ERISA Affiliate has incurred any liability to the PBGC
except for the payment of premiums, and no premium payments are due and unpaid;
(iv) no Obligor or ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA; and (v) no Pension Plan has been
terminated by its plan administrator or the PBGC, and no fact or circumstance
exists that could reasonably be expected to cause the PBGC to institute
proceedings to terminate a Pension Plan.

(d) With respect to any Foreign Plan relating to Canada or employees therein,
(i) all employer and employee contributions required by law or by the terms of
the Foreign Plan have been made, or, if applicable, accrued, in accordance with
normal accounting practices; (ii) the fair market value of the assets of each
funded Foreign Plan, the liability of each insurer for any Foreign Plan funded
through insurance, or the book reserve established for any Foreign Plan,
together with any accrued contributions, is sufficient to procure or provide for
the accrued benefit obligations with respect to all current and former
participants in such Foreign Plan according to the actuarial assumptions and
valuations most recently used to account for such obligations in accordance with
applicable generally accepted accounting principles (provided that this clause
(ii) shall be to the knowledge of Borrowers with respect to any defined benefit
Foreign Plans); and (iii) it has been registered as required and has been
maintained in good standing with applicable regulatory authorities. With respect
to any Foreign Plan relating to any country other than Canada or employees
located therein, (i) such Foreign Plan is in compliance in all

 

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material respects with all applicable laws and terms of applicable plan
documents and (ii) to the knowledge of Borrowers, the fair market value of the
assets of any funded Foreign Plan (if any), the liability of each insurer for
any Foreign Plan funded through insurance, or the book reserve established for
any Foreign Plan, together with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations with respect to all
current and former participants in such Foreign Plan according to the actuarial
assumptions and valuations most recently used to account for such obligations in
accordance with applicable generally accepted accounting principles.

9.1.19 Trade Relations. There exists no actual or threatened termination,
limitation or modification of any business relationship between any of Arctic
Cat, Arctic Cat Sales Inc., or the Borrowers and Subsidiaries taken as a whole,
on one hand, and any customer or supplier, or any group of customers or
suppliers, on the other hand, who individually or in the aggregate are material
to the business of Arctic Cat, Arctic Cat Sales Inc., or the Borrowers and
Subsidiaries taken as a whole. There exists no condition or circumstance that
could reasonably be expected to impair the ability of any Borrower or Subsidiary
to conduct its business at any time hereafter in substantially the same manner
as conducted on the Closing Date.

9.1.20 Labor Relations. Except as described on Schedule 9.1.20, no Borrower or
Subsidiary is party to or bound by any collective bargaining agreement,
management agreement or material consulting agreement. There are no material
grievances, disputes or controversies with any union or other organization of
any of Arctic Cat’s employees, Arctic Cat Sales Inc.’s employees, or the
employees of Borrowers and Subsidiaries as a whole, or, to any Borrower’s
knowledge, any asserted or threatened strikes, work stoppages or demands for
collective bargaining.

9.1.21 Payable Practices. No Borrower or Subsidiary has made any material change
in its historical accounts payable practices from those in effect on the Closing
Date.

9.1.22 Not a Regulated Entity. No Obligor is (a) an “investment company” or a
“person directly or indirectly controlled by or acting on behalf of an
investment company” within the meaning of the Investment Company Act of 1940; or
(b) subject to regulation under the Federal Power Act, the Interstate Commerce
Act, any public utilities code or any other Applicable Law regarding its
authority to incur Debt.

9.1.23 Margin Stock. No Borrower or Subsidiary is engaged, principally or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying any Margin Stock. No Loan proceeds or Letters of
Credit will be used by Borrowers to purchase or carry, or to reduce or refinance
any Debt incurred to purchase or carry, any Margin Stock or for any related
purpose governed by Regulations T, U or X of the Board of Governors.

9.1.24 OFAC. No Borrower, Subsidiary or, to the knowledge of any Borrower or
Subsidiary, any director, officer, employee, agent, affiliate or representative
thereof, is or is owned or controlled by any individual or entity that is
currently the subject or target of any Sanction or is located, organized or
resident in a Designated Jurisdiction.

9.1.25 Anti-Corruption Laws. Each Borrower and Subsidiary has conducted its
business in accordance with applicable anti-corruption laws and has instituted
and maintained policies and procedures designed to promote and achieve
compliance with such laws.

9.1.26 EEA Financial Institution. No Obligor is an EEA Financial Institution.

 

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9.1.27 NMTC Financing. No Obligor or Subsidiary is party to, bound by, or the
beneficiary of any NMTC Financing Document and no NMTC Financing Document has
been modified or otherwise amended, other than pursuant to documents of which
final executed copies have been provided by the Obligors to the Agent.

9.1.28 Other Borrowing Base Report Matters. Agent may rely, in determining which
Inventory is Eligible Inventory or Eligible In-Transit Inventory, which
Equipment is Eligible Equipment, and which Real Estate is Eligible Real Estate,
on all statements and representations made by Borrowers with respect thereto.
With respect to Equipment and Real Estate shown as Eligible Equipment or
Eligible Real Estate, respectively, in a Borrowing Base Report, no Borrower is
aware of any actual, threatened, or imminent condemnation, tax or mechanic’s
lien, taking, loss, casualty, damage, recall, fault, obsolescence or other issue
that could reasonably be expected to reduce the value thereof below the Value of
any such Eligible Equipment or the Fair Market Value of any such Eligible Real
Estate used in calculating the Borrowing Base in such Borrowing Base Report.
With respect to each Borrowing Base Report, as of the date of such Borrowing
Base Report, (a) all Accounts shown thereon as Eligible Accounts conform in all
respects to the requirements of such classification set forth in the definition
of “Eligible Account” as set forth in this Agreement; (b) all Inventory shown
thereon as Eligible Inventory conforms in all respects to the requirements of
such classification as set forth in the definition of “Eligible Inventory” as
set forth in this Agreement; (c) all Inventory shown thereon as Eligible
In-Transit Inventory conforms in all respects to the requirements of such
classification as set forth in the definition of “Eligible In-Transit Inventory”
as set forth in this Agreement; (d) all Equipment shown thereon as Eligible
Equipment conforms in all respects to the requirements of such classification as
set forth in the definition of “Eligible Equipment” as set forth in this
Agreement; and (e) all Real Estate shown thereon as Eligible Real Estate
conforms in all respects to the requirements of such classification as set forth
in the definition of “Eligible Real Estate” as set forth in this Agreement.

9.2 Complete Disclosure. No Loan Document contains any untrue statement of a
material fact, nor fails to disclose any material fact necessary to make the
statements contained therein not materially misleading. There is no fact or
circumstance that any Obligor has failed to disclose to Agent in writing that
could reasonably be expected to have a Material Adverse Effect.

 

  SECTION 10. COVENANTS AND CONTINUING AGREEMENTS

10.1 Affirmative Covenants. As long as any of the Revolver Commitments or
Obligations is outstanding, each Borrower shall, and shall cause each Subsidiary
to:

10.1.1 Inspections; Appraisals.

(a) Permit Agent from time to time, subject (except when a Default or Event of
Default exists) to reasonable notice and normal business hours, to visit and
inspect the Properties of any Borrower or Subsidiary, inspect, audit and make
extracts from any Borrower’s or Subsidiary’s books and records, and discuss with
its officers, employees, agents, advisors and independent accountants such
Borrower’s or Subsidiary’s business, financial condition, assets, prospects and
results of operations. Lenders may participate in any such visit or inspection,
at their own expense. Neither Agent nor any Lender shall have any duty to any
Borrower to make any inspection, nor to share any results of any inspection,
appraisal or report with any Borrower. Borrowers acknowledge that all
inspections, appraisals and reports are prepared by Agent and Lenders for their
purposes, and Borrowers shall not be entitled to rely upon them.

(b) Reimburse Agent for all charges, costs and expenses of Agent in connection
with (i) examinations of any Obligor’s books and records or any other financial
or Collateral

 

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matters as Agent deems appropriate; and (ii) appraisals of Inventory and, if
requested by Agent, appraisals of trade names, Equipment and Real Estate, which
examinations and appraisals shall occur at least twice in every Examination
Trigger Year and at least once in any calendar year that is not an Examination
Trigger Year; provided that that such examinations and appraisals may occur less
frequently if approved by the Agent and Required Lenders. Borrowers shall pay
Agent’s then-standard charges for examination activities, including the charges
of Agent’s internal examination and appraisal groups, as well as the charges of
any third party used for such purposes. Notwithstanding the foregoing provisions
of this Section 10.1.1(b), Borrowers shall not be required pursuant to this
Section 10.1.1(b) to reimburse Agent (i) for appraisals of Equipment owned by
Borrowers on the Closing Date more than once after the Closing Date or (ii) for
appraisals of Real Estate owned by Borrowers on the Closing Date more than once
after the Closing Date. No Borrowing Base calculation shall include Collateral
acquired in an Acquisition or otherwise outside the Ordinary Course of Business
until completion of applicable field examinations and appraisals (which shall
not be included in the limits provided above) satisfactory to Agent; provided,
however, that Agent will use best efforts to complete such field examinations
and appraisals, as applicable, within sixty (60) days of the date Borrower Agent
notifies Agent of such Collateral being acquired. The appraisals required to be
delivered pursuant to Section 10.1.12 shall not be included in the limits
provided above.

10.1.2 Financial and Other Information. Keep adequate records and books of
account with respect to its business activities, in which proper entries are
made in accordance with GAAP reflecting all financial transactions; and furnish
to Agent and Lenders:

(a) as soon as available, and in any event within ninety (90) days after the
close of each Fiscal Year, balance sheets as of the end of such Fiscal Year and
the related statements of income, cash flow and shareholders equity for such
Fiscal Year, on consolidated and (upon request by Agent) consolidating bases for
Borrowers and Subsidiaries (together with any related statements of income, cash
flows, and shareholders equity), which consolidated statements shall be audited
and certified (without qualification) by a firm of independent certified public
accountants of recognized standing selected by Borrowers and acceptable to
Agent, and shall set forth in comparative form corresponding figures for the
preceding Fiscal Year and other information acceptable to Agent (provided,
however, that any financial statements required to be delivered pursuant to this
Section 10.1.2(a) (to the extent such statements are included in materials
otherwise filed with the Securities and Exchange Commission) may be delivered
electronically and, if so delivered, shall be deemed to have been delivered on
the date on which the Borrowers post such documents on www.sec.gov, or provide a
link thereto on the Borrowers’ website at www.arcticcatinc.com, so long as,
concurrent therewith, the Borrowers provide each Lender and Agent with notice
alerting them to such posting, together with any additional materials required
to be delivered therewith, including but not limited to any Compliance
Certificate required to be provided at such time; provided that the Borrowers
shall deliver paper copies of such documents to any Lender that requests the
Borrowers to deliver such paper copies);

(b) as soon as available, and in any event within thirty (30) days after the end
of each month (but within sixty (60) days after the last month in a Fiscal
Year), unaudited balance sheets as of the end of such month and the related
statements of income and cash flow for such month and for the portion of the
Fiscal Year then elapsed, on consolidated and, upon request by Agent with
respect to a month ending on the last day of a Fiscal Quarter, consolidating
bases for Borrowers and Subsidiaries (together with any related statements of
income and cash flow), setting forth in comparative form corresponding figures
for the preceding Fiscal Year and certified by the chief financial officer of
Borrower Agent as prepared in accordance with GAAP (or, with respect to
consolidating financial statements, on a basis consistent with the most recent
consolidating financial statements of Borrowers delivered to Agent before the
Closing Date and using the same inventory valuation method as used in such
financial statements) and fairly presenting the financial position and results
of operations for such month and period, subject to normal year-end adjustments
and the absence of footnotes;

 

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(c) concurrently with delivery of financial statements under clauses (a) and
(b) above, or more frequently if requested by Agent while a Default or Event of
Default exists, a Compliance Certificate executed by the chief financial officer
of Borrower Agent;

(d) concurrently with delivery of financial statements under clause (a) above,
copies of all management letters and other material reports submitted to
Borrowers by their accountants in connection with such financial statements;

(e) not later than thirty (30) days after the beginning of each Fiscal Year,
projections of Borrowers’ consolidated balance sheets, results of operations,
cash flow and Availability for the next Fiscal Year, month by month;

(f) at Agent’s request, a listing of each Borrower’s trade payables, specifying
the trade creditor and balance due, and a detailed trade payable aging, all in
form satisfactory to Agent;

(g) promptly after the sending or filing thereof, copies of any proxy
statements, financial statements or reports that any Borrower has made generally
available to its shareholders; copies of any regular, periodic and special
reports or registration statements or prospectuses that any Borrower files with
the Securities and Exchange Commission or any other Governmental Authority, or
any securities exchange; and copies of any press releases or other statements
made available by a Borrower to the public concerning material changes to or
developments in the business of such Borrower;

(h) promptly after the sending or filing thereof, copies of any annual report to
be filed in connection with each Plan or Foreign Plan;

(i) promptly upon entering any amendment to or modification of any Dealer
Finance Agreement or Organic Document, a copy of such amendment or modification;

(j) as soon as available, and in any event within ninety (90) days after the
close of each Fiscal Year, financial statements for each Guarantor, in form and
substance satisfactory to Agent; and

(k) promptly after the same are available and delivered to the required
recipients thereof, copies of each report or financial statement delivered to
any Obligor or Subsidiary, or by any Obligor or Subsidiary to WF Paint &
Assembly, Wells Fargo Holdings, Wells Fargo Sub-CDE, MMCDC Sub-CDE and/or any
other Person, in connection with the NMTC Financing;

(l) promptly upon execution thereof, a copy of each NMTC Financing Document and
each amendment to or modification of an NMTC Financing Document, in each case
together with all items delivered to any Obligor or any Subsidiary, or by any
Obligor or Subsidiary to WF Paint & Assembly, Wells Fargo Holdings, Wells Fargo
Sub-CDE, MMCDC Sub-CDE and/or any other Person, in connection therewith; and

(m) such other reports and information (financial or otherwise) as Agent may
request from time to time in connection with any Collateral or any Borrower’s,
Subsidiary’s or other Obligor’s financial condition or business.

 

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10.1.3 Notices. Notify Agent and Lenders in writing, promptly after a Borrower’s
obtaining knowledge thereof, of any of the following that affects an Obligor:
(a) the threat or commencement of any proceeding or investigation, whether or
not covered by insurance, if an adverse determination could have a Material
Adverse Effect; (b) any pending or threatened labor dispute, strike or walkout,
or the expiration of any material labor contract; (c) any default under or
termination of a Material Contract or an NMTC Financing Document; (d) the
existence of any Default or Event of Default; (e) any judgment in an amount
exceeding $2,000,000; (f) the assertion of any Intellectual Property Claim, if
an adverse resolution could have a Material Adverse Effect; (g) any violation or
asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any
Environmental Laws), if an adverse resolution could have a Material Adverse
Effect; (h) any Environmental Release by an Obligor or on any Property owned,
leased or occupied by an Obligor; or receipt of any Environmental Notice;
(i) the occurrence of any ERISA Event; (j) the discharge of or any withdrawal or
resignation by Borrowers’ independent accountants; or (k) any opening of a new
office or place of business, at least 30 days prior to such opening.

10.1.4 Landlord and Storage Agreements. Upon request, provide Agent with copies
of all existing agreements, and promptly after execution thereof provide Agent
with copies of all future agreements, between an Obligor and any landlord,
warehouseman, processor, shipper, bailee or other Person that owns any premises
at which any Collateral may be kept or that otherwise may possess or handle any
Collateral.

10.1.5 Compliance with Laws. Comply with all Applicable Laws, including ERISA,
Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding
collection and payment of Taxes, and maintain all Governmental Approvals
necessary to the ownership of its Properties or conduct of its business, unless
failure to comply (other than failure to comply with Anti-Terrorism Laws) or
maintain could not reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, if any Environmental Release
occurs at or on any Properties of any Borrower or Subsidiary, it shall act
promptly and diligently to investigate and report to Agent and all appropriate
Governmental Authorities the extent of, and to make appropriate remedial action
to eliminate, such Environmental Release, whether or not directed to do so by
any Governmental Authority.

10.1.6 Taxes. Pay and discharge all Taxes prior to the date on which they become
delinquent or penalties attach, unless such Taxes are being Properly Contested.

10.1.7 Insurance. In addition to the insurance required hereunder with respect
to Collateral, maintain insurance with insurers (with a Best rating of at least
A+, unless otherwise approved by Agent in its discretion) satisfactory to Agent,
(a) with respect to the Properties and business of Borrowers and Subsidiaries of
such type (including product liability, workers’ compensation, larceny,
embezzlement, or other criminal misappropriation insurance), in such amounts,
and with such coverages, endorsements, and deductibles as are customary for
companies similarly situated and otherwise acceptable to Agent; and (b) business
interruption insurance in an amount not less than $100,000,000, with deductibles
and subject to an Insurance Assignment satisfactory to Agent.

10.1.8 Licenses. Keep each License affecting any Collateral (including the
manufacture, distribution or disposition of Inventory) or any other material
Property of Borrowers and Subsidiaries in full force and effect; promptly notify
Agent of any proposed modification to any such License, or entry into any new
License, in each case at least thirty (30) days prior to its effective date; pay
all Royalties when due; and notify Agent of any default or breach asserted by
any Person to have occurred under any License.

 

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10.1.9 Future Subsidiaries. Promptly notify Agent upon any Person becoming a
Subsidiary and, if such Person is not a Foreign Subsidiary, cause it to become a
Borrower hereunder or to guaranty the Obligations, in Agent’s discretion in a
manner satisfactory to Agent, and to execute and deliver such documents,
instruments and agreements and to take such other actions as Agent shall require
to evidence and perfect a Lien in favor of Agent on all assets of such Person,
including delivery of such legal opinions, in form and substance satisfactory to
Agent, as it shall deem appropriate.

10.1.10 Bank Accounts. Maintain all operating, administrative, cash management,
collection or lockbox activity and other deposit accounts and all other bank
products for the conduct of the Borrowers’ business with Bank of America;
provided, however, that (a) Borrowers may engage and contract with other
entities for funds transfer, information reporting services and other treasury
management services; (b) the following bank accounts may be maintained with
Wells Fargo Bank, National Association, so long as such accounts are used solely
for the purposes indicated in this clause (b): general account (operating)
4121880629, self-insured workers’ compensation account #1107336, general account
#1107213, lockbox account #4121880629, accounts payable account #20126, general
account (for corporate credit cards) #4092545870, general account #8755057281
(for corporate credit cards), general account #8755057307 (for corporate credit
cards) and, so long as the NMTC Intercreditor Agreement is in full force and
effect and any of the NMTC Loans remain outstanding, the NMTC Disbursement
Account; (c) Arctic Cat Sales’ operating account number 4129-385837 may be
maintained with Wells Fargo Bank, National Association, so long as (i) such
account is used solely to receive interest payments paid to Arctic Cat Sales
pursuant to the NMTC Financing Documents and to pay banking fees and expenses
associated with such account, (ii) within ten Business Days of the date that any
amount is deposited into such account, the Borrowers shall cause the balance of
such account that is in excess of $10,000 to be transferred to a deposit account
of a Borrower maintained with Bank of America, and (iii) no Event of Default
exists as a result of a breach of or failure to perform any covenant contained
in Section 10.2.20 of this Agreement; and (d) ACPS’s operating account number
4129-385860 may be maintained with Wells Fargo Bank, National Association, so
long as (i) such account is used solely to make regularly scheduled debt service
payments payable by ACPS pursuant to the NMTC Financing Documents and to pay
banking fees and expenses associated with such account, and (ii) no Event of
Default exists as a result of a breach of or failure to perform any covenant
contained in Section 10.2.20 of this Agreement.

10.1.11 Anti-Corruption Laws. Conduct its business in compliance with applicable
anti-corruption laws and maintain policies and procedures designed to promote
and achieve compliance with such laws.

10.1.12 Post-Closing Obligations. Deliver, or cause to be delivered, the
following items to Agent, in each case in form and substance satisfactory to
Agent and its counsel, and/or cause the following to occur, in each case on or
before expiration of the respective specified time periods:

(a) on or before February 27, 2017, as such deadline may be extended in writing
by Agent from time to time, appraisals of Borrowers’ Real Estate, Equipment, and
trade names, performed by an appraiser satisfactory to Agent in its sole
discretion and with results satisfactory to Agent in its sole discretion, and
pay or reimburse Agent with respect thereto in accordance with Section 10.1.1
(provided, however, that unless otherwise expressly agreed to by Agent in
writing, delivery of any appraisal required pursuant to clause (b) below shall
not satisfy any requirement of this clause (a));

(b) on or before the date that the same are required by Agent pursuant to the
Agent Fee Letter, an additional appraisal of Borrowers’ Real Estate and/or
Equipment, as is required by Agent pursuant to the Agent Fee Letter, performed
by an appraiser satisfactory to Agent in its sole discretion and with results
satisfactory to Agent in its sole discretion, and pay or reimburse Agent with

 

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respect thereto in accordance with Section 10.1.1 (provided, however, that
unless otherwise expressly agreed to by Agent in writing, delivery of any
appraisal required pursuant to clause (a) above shall not satisfy any
requirement of this clause (b));

(c) on or before December 14, 2016, as such deadline may be extended in writing
by Agent from time to time, an IP Assignment, or an amendment to or amendment
and restatement of the applicable existing IP Assignment(s), as determined by
Agent, with respect to all of the Intellectual Property of the Obligors that is
not described in detail in an IP Assignment in effect on the Closing Date;

(d) on or before December 29, 2016, as such deadline may be extended in writing
by Agent from time to time, (i) a Lien Waiver with respect to 19401 Rogers
Drive, Rogers, Minnesota 55374; 500 North 3rd Street, Minneapolis, Minnesota
55401; 1110 Pennington Ave S – Hydra Mac, Thief River Falls, Minnesota 56701;
Hwy 32 South, Thief River Falls, Minnesota 56701; 2645 Clearwater Road (Bay A &
B), St. Cloud, Minnesota 56301; Dawn Ave #1 and #2, Thief River Falls, Minnesota
56701; 6701 Queens Ave. NE, Otsego, MN 55330; 3501 Broadway. St. NE,
Minneapolis, MN 55413; and Keystone Western, Keystone Bernat Road, Grande
Pointe, MB R5A 1H5; (ii) a Deposit Account Control Agreement with respect to
each of the following deposit accounts of the Obligors with Bank of America,
N.A.: 8670908928, 8765118034, 711452579200, and 8670710021; (iii) evidence of
the termination in the United States patent records of that certain patent
agreement between Arctic Cat and Wells Fargo Bank, National Association, dated
as of March 31, 2009 and recorded with the United States Patent and Trademark
Office on April 14, 20019 at Reel/Frame: 022542/0308; and (iv) with respect to
each of the Real Estate commonly known as 601 Brooks Avenue South, Thief River
Falls, Minnesota and the Real Estate commonly known as 6801 Glenn Carlson Drive,
St. Cloud, Minnesota, (1) an endorsement to the Agent’s mortgagee title policy
with respect to the Mortgage on record with respect to such Real Estate, and
(2) a current, as-built survey of such Real Estate, containing a
metes-and-bounds property description and certified by a licensed surveyor
acceptable to Agent and, if requested by Agent, a zoning report with respect to
such Real Estate; and

(e) as and when the same are due, evidence that the fees disclosed on Schedule
9.1.10 have been paid in full.

10.2 Negative Covenants. As long as any of the Revolver Commitments or
Obligations is outstanding, each Borrower shall not, and shall cause each
Subsidiary not to:

10.2.1 Permitted Debt. Create, incur, guarantee or suffer to exist any Debt,
except:

(a) the Obligations;

(b) Subordinated Debt;

(c) Permitted Purchase Money Debt;

(d) Borrowed Money (other than the Obligations, Subordinated Debt, Permitted
Purchase Money Debt, the Permitted Term Loan, and Debt permitted by clause
(j) of this Section 10.2.1), but only to the extent outstanding on the Closing
Date and not satisfied with proceeds of the initial Loans (including, without
limitation, Borrowed Money from the City of St. Cloud, Minnesota; provided,
however, that the amount of such Borrowed Money shall not be increased without
the consent of Agent);

 

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(e) Debt with respect to Bank Products incurred in the Ordinary Course of
Business, as long as the aggregate negative mark-to-market obligations under
Hedging Agreements do not exceed $10,000,000 at any time;

(f) Debt that is in existence when a Person becomes a Subsidiary or that is
secured by an asset when acquired by a Borrower or Subsidiary, as long as such
Debt was not incurred in contemplation of such Person becoming a Subsidiary or
such acquisition, and does not exceed $1,000,000 in the aggregate at any time;

(g) Permitted Contingent Obligations;

(h) Refinancing Debt as long as each Refinancing Condition is satisfied;

(i) Obligations of the Borrowers under the Dealer Finance Agreements;

(j) Debt of ACPS in connection with the NMTC Financing in an aggregate principal
amount not to exceed $15,520,000, so long as such Debt remains subject to the
NMTC Intercreditor Agreement;

(k) the Permitted Term Loan; and

(l) Debt that is not included in any of the preceding clauses of this Section,
is not secured by a Lien and does not exceed $5,000,000 in the aggregate at any
time.

10.2.2 Permitted Liens. Create or suffer to exist any Lien upon any of its
Property, except the following (collectively, “Permitted Liens”):

(a) Liens in favor of Agent;

(b) Purchase Money Liens securing Permitted Purchase Money Debt;

(c) Liens for Taxes not yet due or being Properly Contested;

(d) statutory Liens (other than Liens for Taxes or imposed under ERISA) arising
in the Ordinary Course of Business, but only if (i) payment of the obligations
secured thereby is not yet due or is being Properly Contested, and (ii) such
Liens do not materially impair the value or use of the Property or materially
impair operation of the business of any Borrower or Subsidiary;

(e) Liens incurred or deposits made in the Ordinary Course of Business to secure
the performance of government tenders, bids, contracts, statutory obligations
and other similar obligations, as long as such Liens are at all times junior to
Agent’s Liens and are required or provided by law;

(f) Liens arising in the Ordinary Course of Business that are subject to Lien
Waivers;

(g) Liens arising by virtue of a judgment or judicial order against any Borrower
or Subsidiary, or any Property of a Borrower or Subsidiary, as long as such
Liens are (i) in existence for less than twenty (20) consecutive days or being
Properly Contested, and (ii) at all times junior to Agent’s Liens;

 

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(h) easements, rights-of-way, restrictions, covenants or other agreements of
record, and other similar charges or encumbrances on Real Estate, that do not
secure any monetary obligation and do not interfere with the Ordinary Course of
Business;

(i) normal and customary rights of setoff upon deposits in favor of depository
institutions, and Liens of a collecting bank on Payment Items in the course of
collection;

(j) Liens on assets (other than Accounts and Inventory) acquired in an
Acquisition permitted pursuant to Section 10.2.4, securing Debt permitted by
Section 10.2.1(f);

(k) Liens existing on the Original Closing Date and shown on Schedule 10.2.2;

(l) Liens on the NMTC Equipment and the NMTC Disbursement Account securing the
Debt permitted by Section 10.2.1(j), which Liens may have priority over Agent’s
Liens so long as such Liens securing such Debt permitted by Section 10.2.1(j)
are subject to the NMTC Intercreditor Agreement; and

(m) Liens on trade names and/or Real Estate (but not, in any event, on any of
the NMTC Equipment) securing the Permitted Term Loan, but only if such trade
names and/or Real Estate, as applicable, do not at such time constitute
Collateral.

10.2.3 Distributions; Upstream Payments.

(a) Declare or make any Distribution, unless the Average Availability as of the
date of such Distribution is at least the greater of (i) $26,000,000 or (ii) 20%
of the aggregate Revolver Commitments, in either case both before and after
giving effect to such Distribution (including the date of such Distribution).

(b) Create or suffer to exist any encumbrance or restriction on the ability of a
Subsidiary to make any Upstream Payment, except for restrictions under the Loan
Documents, under Applicable Law or in effect on the Closing Date as shown on
Schedule 9.1.15.

10.2.4 Restricted Investments. Make any Restricted Investment, unless:

(a) (i) Average Availability is at least the greater of (A) $19,500,000 or
(B) 15% of the aggregate Revolver Commitments, in either case both before and
after giving effect to such Restricted Investment (including as of the date of
such Restricted Investment), (ii) the Borrowers shall have delivered to Agent a
certificate from the Borrower Agent showing that all of their account payables
are current in all material respects as of the date of such Restricted
Investment, and (iii) no Default or Event of Default exists as of the date of
such Restricted Investment, either before or after giving effect thereto; or

(b) solely with regard to any Restricted Investment that is an Acquisition,
(i) after giving effect thereto, the total consideration for Acquisitions does
not exceed $10,000,000 in any one Fiscal Year and the total consideration for
all Acquisitions made on or after the Closing Date does not exceed $20,000,000
in the aggregate, (ii) Average Availability is at least the greater of
(A) $15,275,000 or (B) 11.75% of the aggregate Revolver Commitments, in either
case both before and after giving effect to such Acquisition (including the date
of such Acquisition) and (iii) no Default or Event of Default exists as of the
date of such Acquisition, either before or after giving effect thereto.

 

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10.2.5 Disposition of Assets. Make any Asset Disposition, except a Permitted
Asset Disposition, a disposition of Equipment under Section 8.4.2, or a transfer
of Property by a Subsidiary or Obligor to a Borrower; provided that any transfer
of Property from any Obligor to ACPS must be for cash and for the fair market
value of the transferred Property.

10.2.6 Loans. Make any loans or other advances of money to any Person, except
(a) advances to an officer or employee for salary, travel expenses, commissions
and similar items in the Ordinary Course of Business; (b) prepaid expenses and
extensions of trade credit made in the Ordinary Course of Business; (c) deposits
with financial institutions permitted hereunder; (d) as long as no Default or
Event of Default exists, intercompany loans by a Borrower to another Borrower
(other than to ACPS); (e) the NMTC Investment; and (f) the reimbursement of the
transferring Obligor by ACPS, using the proceeds of the NMTC Loans, in cash in
an amount equal to the fair market value of the NMTC Equipment transferred to
ACPS by such transferring Obligor.

10.2.7 Restrictions on Payment of Certain Debt. Make any payment (whether
voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or
acquisition) with respect to any (a) Subordinated Debt or Debt permitted under
Section 10.2.1(j), in each case except regularly scheduled payments of
principal, interest and fees, but only to the extent permitted under any
intercreditor or subordination agreement relating to such Debt (and, with
respect to Subordinated Debt, a Senior Officer of Borrower Agent shall certify
to Agent, not less than five Business Days prior to the date of payment, that
all conditions under such agreement have been satisfied); or (b) Borrowed Money
(other than the Obligations, Subordinated Debt, and Debt permitted under
Section 10.2.1(j)) prior to its due date under the agreements evidencing such
Debt as in effect on the Closing Date (or as amended thereafter with the consent
of Agent).

10.2.8 Fundamental Changes. Change its name or conduct business under any
fictitious name; change its tax, charter or other organizational identification
number; change its form or state of organization; liquidate, wind up its affairs
or dissolve itself; or merge, combine or consolidate with any Person, whether in
a single transaction or in a series of related transactions, except for
(a) mergers or consolidations of a wholly-owned Subsidiary with another
wholly-owned Subsidiary or into a Borrower (other than mergers or consolidations
of a wholly-owned Subsidiary with or into ACPS); or (b) Acquisitions permitted
pursuant to Section 10.2.4.

10.2.9 Subsidiaries. Form or acquire any Subsidiary after the Closing Date,
except in accordance with Sections 10.1.9, 10.2.4 and 10.2.8.

10.2.10 Organic Documents. Amend, modify or otherwise change any of its Organic
Documents in a manner that could reasonably be expected to have a Material
Adverse Effect or otherwise be materially adverse to any Secured Party, except
in connection with a transaction permitted under Section 10.2.8.

10.2.11 Tax Consolidation. File or consent to the filing of any consolidated
income tax return with any Person other than Borrowers and Subsidiaries.

10.2.12 Accounting Changes. Make any material change in accounting treatment or
reporting practices, except as required by GAAP and in accordance with
Section 1.2; or change its Fiscal Year.

10.2.13 Restrictive Agreements. Become a party to any Restrictive Agreement,
except a Restrictive Agreement (a) in effect on the Closing Date; (b) relating
to secured Debt permitted hereunder, as long as the restrictions apply only to
collateral for such Debt; or (c) constituting customary restrictions on
assignment in leases and other contracts.

 

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10.2.14 Hedging Agreements. Enter into any Hedging Agreement, except to hedge
risks arising in the Ordinary Course of Business and not for speculative
purposes.

10.2.15 Conduct of Business. Engage in any business, other than its business as
conducted on the Closing Date and any activities incidental thereto.

10.2.16 Affiliate Transactions. Enter into or be party to any transaction with
an Affiliate, except (a) transactions expressly permitted by the Loan Documents;
(b) payment of reasonable compensation to officers and employees for services
actually rendered, and payment of customary directors’ fees and indemnities;
(c) transactions solely among Borrowers (subject to Section 10.2.5);
(d) transactions with Affiliates consummated prior to the Closing Date, as shown
on Schedule 10.2.16; and (e) transactions with Affiliates in the Ordinary Course
of Business, upon fair and reasonable terms fully disclosed to Agent and no less
favorable than would be obtained in a comparable arm’s-length transaction with a
non-Affiliate.

10.2.17 Plans. Become party to any Multiemployer Plan or Foreign Plan, other
than any in existence on the Closing Date.

10.2.18 Amendments to Subordinated Debt, Dealer Finance Agreements, and NMTC
Financing Documents. Amend, supplement or otherwise modify any NMTC Financing
Document or any document, instrument or agreement relating to any Subordinated
Debt or to the Dealer Finance Agreements, if such modification (a) increases the
principal balance of such Debt, or increases any required payment of principal
or interest; (b) accelerates the date on which any installment of principal or
any interest is due, or adds any additional redemption, put or prepayment
provisions; (c) shortens the final maturity date or otherwise accelerates
amortization; (d) increases the interest rate; (e) increases or adds any fees or
charges; (f) modifies any covenant in a manner or adds any representation,
covenant or default that is more onerous or restrictive in any material respect
for any Borrower or Subsidiary, or that is otherwise materially adverse to any
Borrower, any Subsidiary or Lenders; (g) in the case of Subordinated Debt,
results in the Obligations and/or the Liens securing the Obligations not being
fully benefited by the subordination and/or intercreditor provisions applicable
thereto; or (h) in the case of a NMTC Financing Document, results in the
Obligations and/or the Liens securing the Obligations not being fully benefitted
by the NMTC Intercreditor Agreement.

10.2.19 Payments Under Dealer Finance Agreements. Make any payments on account
of repurchase or similar obligations or liabilities under Dealer Finance
Agreements, after deducting any payments received during such month on account
of returned and repossessed goods that have been the subject of such obligations
or liabilities, in an aggregate amount for all Borrowers in excess of $8,000,000
in any single calendar month.

10.2.20 NMTC Deposit Accounts.

(a) Permit any funds to be deposited into or otherwise held in the NMTC
Disbursement Account at any time, other than the proceeds of the NMTC Loans, or
permit any funds to be removed from the NMTC Disbursement Account, other than
funds used by ACPS to purchase NMTC Equipment and funds foreclosed upon by the
NMTC Lenders and/or the Agent in accordance with the NMTC Financing Documents
and the Loan Documents.

 

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(b) Permit the balance of Arctic Cat Sales’ operating account number 4129-385837
maintained with Wells Fargo Bank, National Association, to exceed $10,000 for a
period of time exceeding ten consecutive Business Days.

(c) Permit the balance of ACPS’s operating account number 4129-385860 maintained
with Wells Fargo Bank, National Association, to exceed the amount of the next
scheduled debt service payment with respect to the NMTC Loans plus $10,000 for a
period of time exceeding ten consecutive Business Days.

10.3 Financial Covenants. As long as any Revolver Commitments or Obligations are
outstanding, Borrowers shall:

10.3.1 Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio for
each twelve (12) month period of at least 1.00 to 1.00 while a Fixed Charge
Trigger Period is in effect, measured for the most recent period for which
financial statements were delivered hereunder prior to the Fixed Charge Trigger
Period and each twelve (12) month period ending thereafter.

 

  SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT

11.1 Events of Default. Each of the following shall be an “Event of Default” if
it occurs for any reason whatsoever, whether voluntary or involuntary, by
operation of law or otherwise:

(a) Any Borrower fails to pay its Obligations when due (whether at stated
maturity, on demand, upon acceleration or otherwise);

(b) Any representation, warranty or other written statement of an Obligor made
in connection with any Loan Documents or transactions contemplated thereby is
incorrect or misleading in any material respect when given;

(c) A Borrower breaches or fail to perform any covenant contained in
Section 7.2, 7.3, 7.4, 7.6, 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1, 10.1.2, 10.2 or
10.3;

(d) An Obligor breaches or fails to perform any other covenant contained in any
Loan Documents, and such breach or failure is not cured within thirty (30) days
after a Senior Officer of such Obligor has knowledge thereof or receives notice
thereof from Agent, whichever is sooner; provided, however, that such notice and
opportunity to cure shall not apply if the breach or failure to perform is not
capable of being cured within such period or is a willful breach by an Obligor;

(e) A Guarantor repudiates, revokes or attempts to revoke its Guaranty; an
Obligor or third party denies or contests the validity or enforceability of any
Loan Documents or Obligations, or the perfection or priority of any Lien granted
to Agent; or any Loan Document ceases to be in full force or effect for any
reason (other than a waiver or release by Agent and Lenders);

(f) Any breach or default of an Obligor occurs under (i) any Hedging Agreement;
or (ii) any instrument or agreement to which it is a party or by which it or any
of its Properties is bound, relating to any Debt (other than the Obligations) in
excess of $1,000,000 (including, without limitation, all Dealer Financing
Agreements), if the maturity of or any payment with respect to such Debt may be
accelerated or demanded due to such breach;

(g) Any judgment or order for the payment of money is entered against an Obligor
in an amount that exceeds, individually or cumulatively with all unsatisfied
judgments or orders against all Obligors, $3,500,000 (net of insurance coverage
therefor that has not been denied by the insurer), unless a stay of enforcement
of such judgment or order is in effect;

 

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(h) A loss, theft, damage or destruction occurs with respect to any Collateral
if the amount not covered by insurance exceeds $5,000,000;

(i) An Obligor is enjoined, restrained or in any way prevented by any
Governmental Authority from conducting any material part of its business; an
Obligor suffers the loss, revocation or termination of any material license,
permit, lease or agreement necessary to its business; there is a cessation of
any material part of an Obligor’s business for a material period of time; any
material Collateral or Property of an Obligor is taken or impaired through
condemnation; an Obligor agrees to or commences any liquidation, dissolution or
winding up of its affairs; or an Obligor is not Solvent;

(j) An Insolvency Proceeding is commenced by an Obligor; an Obligor makes an
offer of settlement, extension or composition to its unsecured creditors
generally; a trustee is appointed to take possession of any substantial Property
of or to operate any of the business of an Obligor; or an Insolvency Proceeding
is commenced against an Obligor and: the Obligor consents to institution of the
proceeding, the petition commencing the proceeding is not timely contested by
the Obligor, the petition is not dismissed within thirty (30) days after filing,
or an order for relief is entered in the proceeding;

(k) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan
that has resulted or could reasonably be expected to result in liability of an
Obligor to a Pension Plan, Multiemployer Plan or PBGC, or that constitutes
grounds for appointment of a trustee for or termination by the PBGC of any
Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate fails to pay
when due any installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan; or any event similar to the
foregoing occurs or exists with respect to a Foreign Plan;

(l) An Obligor or any of its Senior Officers is criminally indicted or convicted
for (i) a felony committed in the conduct of the Obligor’s business, or
(ii) violating any state or federal law (including the Controlled Substances
Act, Money Laundering Control Act of 1986 and Illegal Exportation of War
Materials Act) that could lead to forfeiture of any material Property or any
Collateral;

(m) A Change of Control occurs, or any event occurs or condition exists that has
a Material Adverse Effect; or

(n) (i) the occurrence of a default or event of default, however defined, under
any NMTC Financing Document, (ii) the occurrence of an event that has resulted
in, or may reasonably be expected to result in, a recapture (as defined in
Section 45D(g) of the Tax Code (as defined in the NMTC Loan Agreement) and
Treasury Regulation Section 1.45D-1(e)) of the New Markets Tax Credits (as
defined in the NMTC Loan Agreement), or (iii) the exercise of any put or call
right pursuant to that certain Investment Fund Put and Call Agreement, dated as
of the NMTC Closing Date, by and between Wells Fargo Community Investment
Holdings, LLC, a Delaware limited liability company, and Arctic Cat, as amended,
restated, supplemented, or otherwise modified from time to time.

11.2 Remedies upon Default. If an Event of Default described in Section 11.1(j)
occurs with respect to any Borrower, then to the extent permitted by Applicable
Law, all Obligations (other than Secured Bank Product Obligations) shall become
automatically due and payable and all Revolver Commitments shall terminate,
without any action by Agent or notice of any kind. In addition, or if any other
Event of Default exists, Agent may in its discretion (and shall upon written
direction of Required Lenders) do any one or more of the following from time to
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(a) declare any Obligations (other than Secured Bank Product Obligations)
immediately due and payable, whereupon they shall be due and payable without
diligence, presentment, demand, protest or notice of any kind, all of which are
hereby waived by Borrowers to the fullest extent permitted by law;

(b) terminate, reduce or condition any Revolver Commitment, or make any
adjustment to the Borrowing Base;

(c) require Obligors to Cash Collateralize their LC Obligations, Secured Bank
Product Obligations and other Obligations that are contingent or not yet due and
payable, and if Obligors fail to deposit such Cash Collateral, Agent may (and
shall upon the direction of Required Lenders) advance the required Cash
Collateral as Revolver Loans (whether or not an Overadvance exists or is created
thereby, or the conditions in Section 6 are satisfied); and

(d) exercise any other rights or remedies afforded under any agreement, by law,
at equity or otherwise, including the rights and remedies of a secured party
under the UCC. Such rights and remedies include the rights to (i) take
possession of any Collateral; (ii) require Borrowers to assemble Collateral, at
Borrowers’ expense, and make it available to Agent at a place designated by
Agent; (iii) enter any premises where Collateral is located and store Collateral
on such premises until sold (and if the premises are owned or leased by a
Borrower, Borrowers agree not to charge for such storage); and (iv) sell or
otherwise dispose of any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale, with such notice
as may be required by Applicable Law, in lots or in bulk, at such locations, all
as Agent, in its discretion, deems advisable. Each Borrower agrees that ten
(10) days’ notice of any proposed sale or other disposition of Collateral by
Agent shall be reasonable, and that any sale conducted on the internet or to a
licensor of Intellectual Property shall be commercially reasonable. Agent may
conduct sales on any Obligor’s premises, without charge, and any sale may be
adjourned from time to time in accordance with Applicable Law. Agent shall have
the right to sell, lease or otherwise dispose of any Collateral for cash, credit
or any combination thereof, and Agent may purchase any Collateral at public or,
if permitted by law, private sale and, in lieu of actual payment of the purchase
price, may credit bid and set off the amount of such price against the
Obligations.

11.3 License. Agent is hereby granted an irrevocable, non-exclusive license or
other right to use, license or sub-license (without payment of royalty or other
compensation to any Person) any or all Intellectual Property of Borrowers,
computer hardware and software, trade secrets, brochures, customer lists,
promotional and advertising materials, labels, packaging materials and other
Property, in advertising for sale, marketing, selling, collecting, completing
manufacture of, or otherwise exercising any rights or remedies with respect to,
any Collateral. Each Borrower’s rights and interests under Intellectual Property
shall inure to Agent’s benefit.

11.4 Setoff. At any time during an Event of Default, Agent, Issuing Bank,
Lenders, and any of their Affiliates are authorized, to the fullest extent
permitted by Applicable Law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final, in whatever currency) at any
time held and other obligations (in whatever currency) at any time owing by
Agent, Issuing Bank, such Lender or such Affiliate to or for the credit or the
account of an Obligor against its Obligations, whether or not Agent, Issuing
Bank, such Lender or such Affiliate shall have made any demand under this
Agreement or any other Loan Document and although such Obligations may be
contingent or unmatured or are owed to a branch or office of Agent, Issuing
Bank, such Lender or such Affiliate different from the

 

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branch or office holding such deposit or obligated on such indebtedness. The
rights of Agent, Issuing Bank, each Lender and each such Affiliate under this
Section are in addition to other rights and remedies (including other rights of
setoff) that such Person may have.

11.5 Remedies Cumulative; No Waiver.

11.5.1 Cumulative Rights. All agreements, warranties, guaranties, indemnities
and other undertakings of Obligors under the Loan Documents are cumulative and
not in derogation of each other. The rights and remedies of Agent and Lenders
under the Loan Documents are cumulative, may be exercised at any time and from
time to time, concurrently or in any order, and are not exclusive of any other
rights or remedies available by agreement, by law, at equity or otherwise. All
such rights and remedies shall continue in full force and effect until Full
Payment of all Obligations.

11.5.2 Waivers. No waiver or course of dealing shall be established by (a) the
failure or delay of Agent or any Lender to require strict performance by any
Obligor under any Loan Document, or to exercise any rights or remedies with
respect to Collateral or otherwise; (b) the making of any Loan or issuance of
any Letter of Credit during a Default, Event of Default or other failure to
satisfy any conditions precedent; or (c) acceptance by Agent or any Lender of
any payment or performance by an Obligor under any Loan Documents in a manner
other than that specified therein. Any failure to satisfy a financial covenant
on a measurement date shall not be cured or remedied by satisfaction of such
covenant on a subsequent date.

 

  SECTION 12. AGENT

12.1 Appointment, Authority and Duties of Agent.

12.1.1 Appointment and Authority. Each Secured Party appoints and designates
Bank of America as Agent under all Loan Documents. Agent may, and each Secured
Party authorizes Agent to, enter into all Loan Documents to which Agent is
intended to be a party and accept all Security Documents. Any action taken by
Agent in accordance with the provisions of the Loan Documents, and the exercise
by Agent of any rights or remedies set forth therein, together with all other
powers reasonably incidental thereto, shall be authorized by and binding upon
all Secured Parties. Without limiting the generality of the foregoing, Agent
shall have the sole and exclusive authority to (a) act as the disbursing and
collecting agent for Lenders with respect to all payments and collections
arising in connection with the Loan Documents; (b) execute and deliver as Agent
each Loan Document, including any intercreditor or subordination agreement, and
accept delivery of each Loan Document; (c) act as collateral agent for Secured
Parties for purposes of perfecting and administering Liens under the Loan
Documents, and for all other purposes stated therein; (d) manage, supervise or
otherwise deal with Collateral; and (e) take any Enforcement Action or otherwise
exercise any rights or remedies with respect to any Collateral or under any Loan
Documents, Applicable Law or otherwise. Agent alone shall be authorized to
determine eligibility and applicable advance rates under the Borrowing Base,
whether to impose or release any reserve, or whether any conditions to funding
or issuance of a Letter of Credit have been satisfied, which determinations and
judgments, if exercised in good faith, shall exonerate Agent from liability to
any Secured Party or other Person for any error in judgment.

12.1.2 Duties. The title of “Agent” is used solely as a matter of market custom
and the duties of Agent are administrative in nature only. Agent has no duties
except those expressly set forth in the Loan Documents, and in no event does
Agent have any agency, fiduciary or implied duty to or relationship with any
Secured Party or other Person by reason of any Loan Document or related
transaction. The conferral upon Agent of any right shall not imply a duty to
exercise such right, unless instructed to do so by Lenders in accordance with
this Agreement.

 

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12.1.3 Agent Professionals. Agent may perform its duties through agents and
employees. Agent may consult with and employ Agent Professionals, and shall be
entitled to act upon, and shall be fully protected in any action taken in good
faith reliance upon, any advice given by an Agent Professional. Agent shall not
be responsible for the negligence or misconduct of any agents, employees or
Agent Professionals selected by it with reasonable care.

12.1.4 Instructions of Required Lenders. The rights and remedies conferred upon
Agent under the Loan Documents may be exercised without the necessity of joining
any other party, unless required by Applicable Law. In determining compliance
with a condition for any action hereunder, including satisfaction of any
condition in Section 6, Agent may presume that the condition is satisfactory to
a Secured Party unless Agent has received notice to the contrary from such
Secured Party before Agent takes the action. Agent may request instructions from
Required Lenders or other Secured Parties with respect to any act (including the
failure to act) in connection with any Loan Documents or Collateral, and may
seek assurances to its satisfaction from Secured Parties of their
indemnification obligations against Claims that could be incurred by Agent.
Agent may refrain from any act until it has received such instructions or
assurances, and shall not incur liability to any Person by reason of so
refraining. Instructions of Required Lenders shall be binding upon all Secured
Parties, and no Secured Party shall have any right of action whatsoever against
Agent as a result of Agent acting or refraining from acting pursuant to
instructions of Required Lenders. Notwithstanding the foregoing, instructions by
and consent of specific parties shall be required to the extent provided in
Section 14.1.1. In no event shall Agent be required to take any action that it
determines in its discretion is contrary to Applicable Law or any Loan Documents
or could subject any Agent Indemnitee to liability.

12.2 Agreements Regarding Collateral and Borrower Materials.

12.2.1 Lien Releases; Care of Collateral. Secured Parties authorize Agent to
release any Lien with respect to any Collateral (a) upon Full Payment of the
Obligations; (b) that is the subject of a disposition or Lien that Borrower
Agent certifies in writing is a Permitted Asset Disposition or a Permitted Lien
entitled to priority over Agent’s Liens (and Agent may rely conclusively on any
such certificate without further inquiry); (c) that does not constitute a
material part of the Collateral; or (d) subject to Section 14.1, with the
consent of Required Lenders. Secured Parties authorize Agent to subordinate its
Liens to any Purchase Money Lien or other Lien entitled to priority hereunder.
Agent has no obligation to assure that any Collateral exists or is owned by an
Obligor, or is cared for, protected or insured, nor to assure that Agent’s Liens
have been properly created, perfected or enforced, or are entitled to any
particular priority, nor to exercise any duty of care with respect to any
Collateral.

12.2.2 Possession of Collateral. Agent and Secured Parties appoint each Lender
as agent (for the benefit of Secured Parties) for the purpose of perfecting
Liens in any Collateral held or controlled by such Lender, to the extent such
Liens are perfected by possession or control. If any Lender obtains possession
or control of any Collateral, it shall notify Agent thereof and, promptly upon
Agent’s request, deliver such Collateral to Agent or otherwise deal with it in
accordance with Agent’s instructions.

12.2.3 Reports. Agent shall promptly provide to Lenders, when complete, any
field examination, audit or appraisal report prepared for Agent with respect to
any Obligor or Collateral (“Report”). Reports and other Borrower Materials may
be made available to Lenders by providing access to them on the Platform, but
Agent shall not be responsible for system failures or access issues that may
occur from time to time. Each Lender agrees (a) that Reports are not intended to
be comprehensive audits or examinations, and that Agent or any other Person
performing an audit or examination will inspect only limited information and
will rely significantly upon Borrowers’ books, records and representations;
(b) that Agent makes no representation or warranty as to the accuracy or
completeness of any Borrower Materials and shall not be liable for any
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Materials, including any Report; and (c) to keep all Borrower Materials
confidential and strictly for such Lender’s internal use, not to distribute any
Report or other Borrower Materials (or the contents thereof) to any Person
(except to such Lender’s Participants, attorneys and accountants), and to use
all Borrower Materials solely for administration of the Obligations. Each Lender
shall indemnify and hold harmless Agent and any other Person preparing a Report
from any action such Lender may take as a result of or any conclusion it may
draw from any Borrower Materials, as well as from any Claims arising as a direct
or indirect result of Agent furnishing same to such Lender, via the Platform or
otherwise.

12.3 Reliance By Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any certification, notice or other communication
(including those by telephone, telex, telegram, telecopy or e-mail) believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person. Agent shall have a reasonable and practicable amount of time to act upon
any instruction, notice or other communication under any Loan Document, and
shall not be liable for any delay in acting.

12.4 Action Upon Default. Agent shall not be deemed to have knowledge of any
Default or Event of Default, or of any failure to satisfy any conditions in
Section 6, unless it has received written notice from a Borrower or Required
Lenders specifying the occurrence and nature thereof. If any Lender acquires
knowledge of a Default, Event of Default or failure of such conditions, it shall
promptly notify Agent and the other Lenders thereof in writing. Each Secured
Party agrees that, except as otherwise provided in any Loan Documents or with
the written consent of Agent and Required Lenders, it will not take any
Enforcement Action, accelerate Obligations (other than Secured Bank Product
Obligations) or assert any rights relating to any Collateral.

12.5 Ratable Sharing. If any Lender obtains any payment or reduction of any
Obligation, whether through set-off or otherwise, in excess of its ratable share
of such Obligation, such Lender shall forthwith purchase from Secured Parties
participations in the affected Obligation as are necessary to share the excess
payment or reduction on a Pro Rata basis or in accordance with Section 5.5.2, as
applicable. If any of such payment or reduction is thereafter recovered from the
purchasing Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest. Notwithstanding
the foregoing, if a Defaulting Lender obtains a payment or reduction of any
Obligation, it shall immediately turn over the full amount thereof to Agent for
application under Section 4.2.2 and it shall provide a written statement to
Agent describing the Obligation affected by such payment or reduction. No Lender
shall set off against a Dominion Account without Agent’s prior consent.

12.6 Indemnification. EACH SECURED PARTY SHALL INDEMNIFY AND HOLD HARMLESS AGENT
INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THE EXTENT NOT REIMBURSED BY
OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE INCURRED BY OR
ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST AN AGENT
INDEMNITEE RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY
OF AGENT). In Agent’s discretion, it may reserve for any Claims made against an
Agent Indemnitee or Issuing Bank Indemnitee, and may satisfy any judgment, order
or settlement relating thereto, from proceeds of Collateral prior to making any
distribution of Collateral proceeds to Secured Parties. If Agent is sued by any
receiver, trustee or other Person for any alleged preference or fraudulent
transfer, then any monies paid by Agent in settlement or satisfaction of such
proceeding, together with all interest, costs and expenses (including attorneys’
fees) incurred in the defense of same, shall be promptly reimbursed to Agent by
each Secured Party to the extent of its Pro Rata share.

12.7 Limitation on Responsibilities of Agent. Agent shall not be liable to any
Secured Party for any action taken or omitted to be taken under the Loan
Documents, except for losses directly and

 

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solely caused by Agent’s gross negligence or willful misconduct. Agent does not
assume any responsibility for any failure or delay in performance or any breach
by any Obligor, Lender or other Secured Party of any obligations under the Loan
Documents. Agent does not make any express or implied representation, warranty
or guarantee to Secured Parties with respect to any Obligations, Collateral,
Liens, Loan Documents or Obligor. No Agent Indemnitee shall be responsible to
Secured Parties for any recitals, statements, information, representations or
warranties contained in any Loan Documents or Borrower Materials; the execution,
validity, genuineness, effectiveness or enforceability of any Loan Documents;
the genuineness, enforceability, collectability, value, sufficiency, location or
existence of any Collateral, or the validity, extent, perfection or priority of
any Lien therein; the validity, enforceability or collectability of any
Obligations; or the assets, liabilities, financial condition, results of
operations, business, creditworthiness or legal status of any Obligor or Account
Debtor. No Agent Indemnitee shall have any obligation to any Secured Party to
ascertain or inquire into the existence of any Default or Event of Default, the
observance by any Obligor of any terms of the Loan Documents, or the
satisfaction of any conditions precedent contained in any Loan Documents.

12.8 Successor Agent and Co-Agents.

12.8.1 Resignation; Successor Agent. Agent may resign at any time by giving at
least 30 days written notice thereof to Lenders and Borrowers. Required Lenders
may appoint a successor to replace the resigning Agent, which successor shall be
(a) a Lender or an Affiliate of a Lender; or (b) a financial institution
reasonably acceptable to Required Lenders and (provided no Default or Event of
Default exists) Borrowers. If no successor agent is appointed prior to the
effective date of Agent’s resignation, then Agent may appoint a successor agent
that is a financial institution acceptable to it (which shall be a Lender unless
no Lender accepts the role) or in the absence of such appointment, Required
Lenders shall on such date assume all rights and duties of Agent hereunder. Upon
acceptance by any successor Agent of its appointment hereunder, such successor
Agent shall thereupon succeed to and become vested with all the powers and
duties of the retiring Agent without further act. On the effective date of its
resignation, the retiring Agent shall be discharged from its duties and
obligations hereunder but shall continue to have all rights and protections
under the Loan Documents with respect to actions taken or omitted to be taken by
it while Agent, including the indemnification set forth in Sections 12.6 and
14.2, and all rights and protections under this Section 12. Any successor to
Bank of America by merger or acquisition of stock or this loan shall continue to
be Agent hereunder without further act on the part of any Secured Party or
Obligor.

12.8.2 Co-Collateral Agent. If appropriate under Applicable Law, Agent may
appoint a Person to serve as a co-collateral agent or separate collateral agent
under any Loan Document. Each right, remedy and protection intended to be
available to Agent under the Loan Documents shall also be vested in such agent.
Secured Parties shall execute and deliver any instrument or agreement that Agent
may request to effect such appointment. If any such agent shall die, dissolve,
become incapable of acting, resign or be removed, then all the rights and
remedies of the agent, to the extent permitted by Applicable Law, shall vest in
and be exercised by Agent until appointment of a new agent.

12.9 Due Diligence and Non-Reliance. Each Lender acknowledges and agrees that it
has, independently and without reliance upon Agent or any other Lenders, and
based upon such documents, information and analyses as it has deemed
appropriate, made its own credit analysis of each Obligor and its own decision
to enter into this Agreement and to fund Loans and participate in LC Obligations
hereunder. Each Secured Party has made such inquiries as it feels necessary
concerning the Loan Documents, Collateral and Obligors. Each Secured Party
acknowledges and agrees that the other Secured Parties have made no
representations or warranties concerning any Obligor, any Collateral or the
legality, validity, sufficiency or enforceability of any Loan Documents or
Obligations. Each Secured Party will, independently and without reliance upon
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statements, documents and information as it deems appropriate at the time,
continue to make and rely upon its own credit decisions in making Loans and
participating in LC Obligations, and in taking or refraining from any action
under any Loan Documents. Except for notices, reports and other information
expressly requested by a Lender, Agent shall have no duty or responsibility to
provide any Secured Party with any notices, reports or certificates furnished to
Agent by any Obligor or any credit or other information concerning the affairs,
financial condition, business or Properties of any Obligor (or any of its
Affiliates) which may come into possession of Agent or its Affiliates.

12.10 Remittance of Payments and Collections.

12.10.1 Remittances Generally. All payments by any Lender to Agent shall be made
by the time and on the day set forth in this Agreement, in immediately available
funds. If no time for payment is specified or if payment is due on demand by
Agent and request for payment is made by Agent by 1:00 p.m. on a Business Day,
payment shall be made by Lender not later than 3:00 p.m. on such day, and if
request is made after 1:00 p.m., then payment shall be made by 11:00 a.m. on the
next Business Day. Payment by Agent to any Secured Party shall be made by wire
transfer, in the type of funds received by Agent. Any such payment shall be
subject to Agent’s right of offset for any amounts due from such payee under the
Loan Documents.

12.10.2 Failure to Pay. If any Secured Party fails to pay any amount when due by
it to Agent pursuant to the terms hereof, such amount shall bear interest, from
the due date until paid in full, at the greater of the Federal Funds Rate or the
rate determined by Agent as customary for interbank compensation for two
Business Days and thereafter at the Default Rate for Base Rate Loans. In no
event shall Borrowers be entitled to credit for any interest paid by a Secured
Party to Agent, nor shall a Defaulting Lender be entitled to interest on amounts
held by Agent pursuant to Section 4.2.

12.10.3 Recovery of Payments. If Agent pays an amount to a Secured Party in the
expectation that a related payment will be received by Agent from an Obligor and
such related payment is not received, then Agent may recover such amount from
the Secured Party. If Agent determines that an amount received by it must be
returned or paid to an Obligor or other Person pursuant to Applicable Law or
otherwise, then Agent shall not be required to distribute such amount to any
Secured Party. If any amounts received and applied by Agent to Obligations held
by a Secured Party are later required to be returned by Agent pursuant to
Applicable Law, such Secured Party shall pay to Agent, on demand, its share of
the amounts required to be returned.

12.11 Individual Capacities. As a Lender, Bank of America shall have the same
rights and remedies under the Loan Documents as any other Lender, and the terms
“Lenders,” “Required Lenders” or any similar term shall include Bank of America
in its capacity as a Lender. Agent, Lenders and their Affiliates may accept
deposits from, lend money to, provide Bank Products to, act as financial or
other advisor to, and generally engage in any kind of business with, Obligors
and their Affiliates, as if they were not Agent or Lenders hereunder, without
any duty to account therefor to any Secured Party. In their individual
capacities, Agent, Lenders and their Affiliates may receive information
regarding Obligors, their Affiliates and their Account Debtors (including
information subject to confidentiality obligations), and shall have no
obligation to provide such information to any Secured Party.

12.12 Titles. Each Lender, other than Bank of America, that is designated in
connection with this credit facility as an “Arranger,” “Bookrunner” or “Agent”
of any kind shall have no right or duty under any Loan Documents other than
those applicable to all Lenders, and shall in no event have any fiduciary duty
to any Secured Party.

 

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12.13 Bank Product Providers. Each Secured Bank Product Provider, by delivery of
a notice to Agent of a Bank Product, agrees to be bound by the Loan Documents,
including Sections 5.5, 14.3.3 and 12. Each Secured Bank Product Provider shall
indemnify and hold harmless Agent Indemnitees, to the extent not reimbursed by
Obligors, against all Claims that may be incurred by or asserted against any
Agent Indemnitee in connection with such provider’s Secured Bank Product
Obligations.

12.14 No Third Party Beneficiaries. This Section 12 is an agreement solely among
Secured Parties and Agent, and shall survive Full Payment of the Obligations.
This Section 12 does not confer any rights or benefits upon Borrowers or any
other Person. As between Borrowers and Agent, any action that Agent may take
under any Loan Documents or with respect to any Obligations shall be
conclusively presumed to have been authorized and directed by Secured Parties.

 

  SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS

13.1 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of Borrowers, Agent, Lenders, Secured Parties, and their respective
successors and assigns, except that (a) no Borrower shall have the right to
assign its rights or delegate its obligations under any Loan Documents; and
(b) any assignment by a Lender must be made in compliance with Section 13.3.
Agent may treat the Person which made any Loan as the owner thereof for all
purposes until such Person makes an assignment in accordance with Section 13.3.
Any authorization or consent of a Lender shall be conclusive and binding on any
subsequent transferee or assignee of such Lender.

13.2 Participations.

13.2.1 Permitted Participants; Effect. Subject to Section 13.3.3, any Lender may
sell to a financial institution (“Participant”) a participating interest in the
rights and obligations of such Lender under any Loan Documents. Despite any sale
by a Lender of participating interests to a Participant, such Lender’s
obligations under the Loan Documents shall remain unchanged, it shall remain
solely responsible to the other parties hereto for performance of such
obligations, it shall remain the holder of its Loans and Revolver Commitments
for all purposes, all amounts payable by Borrowers shall be determined as if it
had not sold such participating interests, and Borrowers and Agent shall
continue to deal solely and directly with such Lender in connection with the
Loan Documents. Each Lender shall be solely responsible for notifying its
Participants of any matters under the Loan Documents, and Agent and the other
Lenders shall not have any obligation or liability to any such Participant. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 5.8 unless Borrowers agree otherwise in
writing.

13.2.2 Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, waiver or other
modification of a Loan Document other than that which forgives principal,
interest or fees, reduces the stated interest rate or fees payable with respect
to any Loan or Revolver Commitment in which such Participant has an interest,
postpones the Commitment Termination Date or any date fixed for any regularly
scheduled payment of principal, interest or fees on such Loan or Revolver
Commitment, or releases any Borrower, Guarantor or substantially all Collateral.

13.2.3 Participant Register. Each Lender that sells a participation shall,
acting as a non-fiduciary agent of Borrowers (solely for tax purposes), maintain
a register in which it enters the Participant’s name, address and interest in
Revolver Commitments, Loans (and stated interest) and LC Obligations. Entries in
the register shall be conclusive, absent manifest error, and such Lender shall
treat each Person recorded in the register as the owner of the participation for
all purposes, notwithstanding any notice to the contrary. No Lender shall have
an obligation to disclose any information in such register except to the extent
necessary to establish that a Participant’s interest is in registered form under
the Code.

 

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13.2.4 Benefit of Setoff. Borrowers agree that each Participant shall have a
right of set-off in respect of its participating interest to the same extent as
if such interest were owing directly to a Lender, and each Lender shall also
retain the right of set-off with respect to any participating interests sold by
it. By exercising any right of set-off, a Participant agrees to share with
Lenders all amounts received through its set-off, in accordance with
Section 12.5 as if such Participant were a Lender.

13.3 Assignments.

13.3.1 Permitted Assignments. A Lender may assign to an Eligible Assignee any of
its rights and obligations under the Loan Documents, as long as (a) each
assignment is of a constant, and not a varying, percentage of the transferor
Lender’s rights and obligations under the Loan Documents and, in the case of a
partial assignment, is in a minimum principal amount of $10,000,000 (unless
otherwise agreed by Agent in its discretion) and integral multiples of
$1,000,000 in excess of that amount; (b) except in the case of an assignment in
whole of a Lender’s rights and obligations, the aggregate amount of the Revolver
Commitments retained by the transferor Lender is at least $10,000,000 (unless
otherwise agreed by Agent in its discretion); and (c) the parties to each such
assignment shall execute and deliver an Assignment to Agent, for acceptance and
recording. Nothing herein shall limit the right of a Lender to pledge or assign
any rights under the Loan Documents to secure obligations of such Lender,
including a pledge or assignment to a Federal Reserve Bank; provided, however,
that no such pledge or assignment shall release the Lender from its obligations
hereunder nor substitute the pledge or assignee for such Lender as a party
hereto.

13.3.2 Effect; Effective Date. Upon delivery to Agent of an assignment notice in
the form of Exhibit B and a processing fee of $3,500 (unless otherwise agreed by
Agent in its discretion), the assignment shall become effective as specified in
the notice, if it complies with this Section 13.3. From such effective date, the
Eligible Assignee shall for all purposes be a Lender under the Loan Documents,
and shall have all rights and obligations of a Lender thereunder. Upon
consummation of an assignment, the transferor Lender, Agent and Borrowers shall
make appropriate arrangements for issuance of replacement and/or new notes, if
applicable. The transferee Lender shall comply with Section 5.9 and deliver,
upon request, an administrative questionnaire satisfactory to Agent.

13.3.3 Certain Assignees. No assignment or participation may be made to a
Borrower, Affiliate of a Borrower, Defaulting Lender or natural person. Neither
any Borrower nor Agent shall have any obligation to determine whether any
assignee is permitted under the Loan Documents. Assignment by a Defaulting
Lender shall be effective only if there is concurrent satisfaction of all
outstanding obligations of the Defaulting Lender under the Loan Documents in a
manner satisfactory to Agent, including payment by the Eligible Assignee or
Defaulting Lender to Agent of an aggregate amount sufficient upon distribution
(through direct payment, purchases of participations or other methods acceptable
to Agent) to satisfy all funding and payment liabilities of the Defaulting
Lender. If assignment by a Defaulting Lender occurs (by operation of law or
otherwise) without compliance with the foregoing sentence, the assignee shall be
deemed a Defaulting Lender for all purposes until compliance occurs.

13.3.4 Register. Agent, acting as a non-fiduciary agent of Borrowers (solely for
tax purposes), shall maintain (a) a copy (or electronic equivalent) of each
Assignment delivered to it, and (b) a register for recordation of the names,
addresses and Revolver Commitments of, and the Loans, interest and LC
Obligations owing to, each Lender. Entries in the register shall be conclusive,
absent manifest error, and Borrowers, Agent and Lenders shall treat each Person
recorded in such register as a Lender for all purposes under the Loan Documents,
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show only one Borrower as the borrower in the register, without any effect on
the liability of any Obligor with respect to the Obligations. The register shall
be available for inspection by Borrowers or any Lender, from time to time upon
reasonable notice.

13.4 Replacement of Certain Lenders. If a Lender (a) within the last 120 days
failed to give its consent to any amendment, waiver or action for which consent
of all Lenders was required and Required Lenders consented, (b) is a Defaulting
Lender, or (c) within the last 120 days gave a notice under Section 3.5 or
requested payment or compensation under Section 3.7 or 5.8 (and has not
designated a different Lending Office pursuant to Section 3.8), then Agent or
Borrower Agent may, upon ten (10) days’ notice to such Lender, require it to
assign its rights and obligations under the Loan Documents to Eligible
Assignee(s), pursuant to appropriate Assignment(s), within twenty (20) days
after the notice. Agent is irrevocably appointed as attorney-in-fact to execute
any such Assignment if the Lender fails to execute it. Such Lender shall be
entitled to receive, in cash, concurrently with such assignment, all amounts
owed to it under the Loan Documents through the date of assignment.

 

  SECTION 14. MISCELLANEOUS

14.1 Consents, Amendments and Waivers.

14.1.1 Amendment. No modification of any Loan Document, including any extension
or amendment of a Loan Document or any waiver of a Default or Event of Default,
shall be effective without the prior written agreement of Agent (with the
consent of Required Lenders) and each Obligor party to such Loan Document;
provided, however, that

(a) without the prior written consent of Agent, no modification shall alter any
provision in a Loan Document that relates to any rights, duties or discretion of
Agent;

(b) without the prior written consent of Issuing Bank, no modification shall
alter Section 2.2 or any other provision in a Loan Document that relates to
Letters of Credit or any rights, duties or discretion of Issuing Bank;

(c) without the prior written consent of each affected Lender, including a
Defaulting Lender, no modification shall (i) increase the Revolver Commitment of
such Lender; (ii) reduce the amount of, or waive or delay payment of, any
principal, interest or fees payable to such Lender (except as provided in
Section 4.2); (iii) extend the Termination Date; or (iv) amend this clause (c);

(d) without the prior written consent of all Lenders (except any Defaulting
Lender), no modification shall (i) alter Section 5.5.2, 7.1 (except to add
Collateral) or 14.1.1; (ii) amend the definition of Borrowing Base (or any
defined term used in such definition) if the effect of such amendment is to
increase borrowing availability, Pro Rata or Required Lenders; (iii) decrease
the Availability Block; (iv) release all or substantially all Collateral; or
(v) except in connection with a merger, disposition or similar transaction
expressly permitted hereby, release any Obligor from liability for any
Obligations; and

(e) without the prior written consent of a Secured Bank Product Provider, no
modification shall affect its relative payment priority under Section 5.5.2.

14.1.2 Limitations. The agreement of Borrowers shall not be required for any
modification of a Loan Document that deals solely with the rights and duties of
Lenders, Agent and/or Issuing Bank as among themselves. Only the consent of the
parties to any agreement relating to fees or a Bank Product shall be required
for modification of such agreement, and no Bank Product provider (in

 

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such capacity) shall have any right to consent to modification of any Loan
Document other than its Bank Product agreement. Any waiver or consent granted by
Agent or Lenders hereunder shall be effective only if in writing and only for
the matter specified.

14.1.3 Payment for Consents. No Borrower will, directly or indirectly, pay any
remuneration or other thing of value, whether by way of additional interest, fee
or otherwise, to any Lender (in its capacity as a Lender hereunder) as
consideration for agreement by such Lender with any modification of any Loan
Documents, unless such remuneration or value is concurrently paid, on the same
terms, on a Pro Rata basis to all Lenders providing their consent.

14.2 Indemnity. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES
AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE,
INCLUDING CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR ARISING FROM THE
NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan Document have
any obligation thereunder to indemnify or hold harmless an Indemnitee with
respect to a Claim that is determined in a final, non-appealable judgment by a
court of competent jurisdiction to result from the gross negligence or willful
misconduct of such Indemnitee.

14.3 Notices and Communications.

14.3.1 Notice Address. Subject to Section 4.1.4, all notices and other
communications by or to a party hereto shall be in writing and shall be given to
any Borrower, at Borrower Agent’s address shown on the signature pages hereof,
and to any other Person at its address shown on the signature pages hereof (or,
in the case of a Person who becomes a Lender after the Closing Date, at the
address shown on its Assignment), or at such other address as a party may
hereafter specify by notice in accordance with this Section 14.3. Each
communication shall be effective only (a) if given by facsimile transmission,
when transmitted to the applicable facsimile number, if confirmation of receipt
is received; (b) if given by mail, three Business Days after deposit in the U.S.
mail, with first-class postage pre-paid, addressed to the applicable address or
one Business Day after deposit with a reputable overnight courier with all
charges prepaid, in either case; or (c) if given by personal delivery, when duly
delivered to the notice address with receipt acknowledged. Notwithstanding the
foregoing, no notice to Agent pursuant to Section 2.1.4, 2.2, 3.1.2, or 4.1.1
shall be effective until actually received by the individual to whose attention
at Agent such notice is required to be sent. Any written communication that is
not sent in conformity with the foregoing provisions shall nevertheless be
effective on the date actually received by the noticed party. Any notice
received by Borrower Agent shall be deemed received by all Borrowers.

14.3.2 Communications. Electronic communications (including e-mail, messaging
and websites) may be used only in a manner acceptable to Agent and only for
routine communications, such as delivery of Borrower Materials, administrative
matters, distribution of Loan Documents and matters permitted under
Section 4.1.4. Secured Parties make no assurance as to the privacy or security
of electronic communications. E-mail and voice mail shall not be effective
notices under the Loan Documents.

14.3.3 Platform. Borrower Materials shall be delivered pursuant to procedures
approved by Agent, including electronic delivery (if possible) upon request by
Agent to an electronic system maintained by Agent (“Platform”). Borrowers shall
notify Agent of each posting of Borrower Materials on the Platform and the
materials shall be deemed received by Agent only upon its receipt of such
notice. Borrower Materials and other information relating to this credit
facility may be made available to Secured Parties on the Platform. The Platform
is provided “as is” and “as available.” Agent does not warrant the accuracy or
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functioning of the Platform, and expressly disclaims liability for any errors or
omissions in the Borrower Materials or any issues involving the Platform. NO
WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT
WITH RESPECT TO BORROWER MATERIALS OR THE PLATFORM. No Agent Indemnitee shall
have any liability to Borrowers, Secured Parties or any other Person either for
losses, claims, damages, liabilities or expenses of any kind (whether in tort,
contract or otherwise) relating to use by any Person of the Platform, including
any unintended recipient, for e-mail, or for any other electronic platform or
messaging system.

14.3.4 Public Information. Obligors and Secured Parties acknowledge that
“public” information may not be segregated from material non-public information
on the Platform. Secured Parties acknowledge that Borrower Materials may include
Obligors’ material non-public information, and should not be made available to
personnel who do not wish to receive such information or may be engaged in
investment or other market-related activities with respect to an Obligor’s
securities.

14.3.5 Non-Conforming Communications. Agent and Lenders may rely upon any
communications purportedly given by or on behalf of any Borrower even if they
were not made in a manner specified herein, were incomplete or were not
confirmed, or if the terms thereof, as understood by the recipient, varied from
a later confirmation. Each Borrower shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any
electronic or telephonic communication purportedly given by or on behalf of a
Borrower.

14.4 Performance of Borrowers’ Obligations. Agent may, in its discretion at any
time and from time to time, at Borrowers’ expense, pay any amount or do any act
required of a Borrower under any Loan Documents or otherwise lawfully requested
by Agent to (a) enforce any Loan Documents or collect any Obligations;
(b) protect, insure, maintain or realize upon any Collateral; or (c) defend or
maintain the validity or priority of Agent’s Liens in any Collateral, including
any payment of a judgment, insurance premium, warehouse charge, finishing or
processing charge, or landlord claim, or any discharge of a Lien. All payments,
costs and expenses (including Extraordinary Expenses) of Agent under this
Section shall be reimbursed to Agent by Borrowers, on demand, with interest from
the date incurred until paid in full, at the Default Rate applicable to Base
Rate Loans. Any payment made or action taken by Agent under this Section shall
be without prejudice to any right to assert an Event of Default or to exercise
any other rights or remedies under the Loan Documents.

14.5 Credit Inquiries. Agent and Lenders may (but shall have no obligation) to
respond to usual and customary credit inquiries from third parties concerning
any Obligor or Subsidiary.

14.6 Severability. Wherever possible, each provision of the Loan Documents shall
be interpreted in such manner as to be valid under Applicable Law. If any
provision is found to be invalid under Applicable Law, it shall be ineffective
only to the extent of such invalidity and the remaining provisions of the Loan
Documents shall remain in full force and effect.

14.7 Cumulative Effect; Conflict of Terms. The provisions of the Loan Documents
are cumulative. The parties acknowledge that the Loan Documents may use several
limitations or measurements to regulate similar matters, and they agree that
these are cumulative and that each must be performed as provided. Except as
otherwise provided in another Loan Document (by specific reference to the
applicable provision of this Agreement), if any provision contained herein is in
direct conflict with any provision in another Loan Document, the provision
herein shall govern and control.

 

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14.8 Counterparts; Execution. Any Loan Document may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement shall become effective when
Agent has received counterparts bearing the signatures of all parties hereto.
Agent may (but shall have no obligation to) accept any signature, contract
formation or record-keeping through electronic means, which shall have the same
legal validity and enforceability as manual or paper-based methods, to the
fullest extent permitted by Applicable Law, including the Federal Electronic
Signatures in Global and National Commerce Act, the New York State Electronic
Signatures and Records Act, or any similar state law based on the Uniform
Electronic Transactions Act.

14.9 Entire Agreement. Time is of the essence with respect to all Loan Documents
and Obligations. The Loan Documents constitute the entire agreement, and
supersede all prior understandings and agreements, among the parties relating to
the subject matter thereof.

14.10 Relationship with Lenders. The obligations of each Lender hereunder are
several, and no Lender shall be responsible for the obligations or Revolver
Commitments of any other Lender. Amounts payable hereunder to each Lender shall
be a separate and independent debt. It shall not be necessary for Agent or any
other Lender to be joined as an additional party in any proceeding for such
purposes. Nothing in this Agreement and no action of Agent, Lenders or any other
Secured Party pursuant to the Loan Documents or otherwise shall be deemed to
constitute Agent and any Secured Party to be a partnership, joint venture or
similar arrangement, nor to constitute control of any Obligor.

14.11 No Advisory or Fiduciary Responsibility. In connection with all aspects of
each transaction contemplated by any Loan Document, Borrowers acknowledge and
agree that (a)(i) this credit facility and any arranging or other services by
Agent, any Lender, any of their Affiliates or any arranger are arm’s-length
commercial transactions between Borrowers and their Affiliates, on one hand, and
Agent, any Lender, any of their Affiliates or any arranger, on the other hand;
(ii) Borrowers have consulted their own legal, accounting, regulatory and tax
advisors to the extent they have deemed appropriate; and (iii) Borrowers are
capable of evaluating, and understand and accept, the terms, risks and
conditions of the transactions contemplated by the Loan Documents; (b) each of
Agent, Lenders, their Affiliates and any arranger is and has been acting solely
as a principal and, except as expressly agreed in writing by the relevant
parties, has not been, is not, and will not be acting as an advisor, agent or
fiduciary for Borrowers, their Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents
except as expressly set forth therein; and (c) Agent, Lenders, their Affiliates
and any arranger may be engaged in a broad range of transactions that involve
interests that differ from those of Borrowers and their Affiliates, and have no
obligation to disclose any of such interests to Borrowers or their Affiliates.
To the fullest extent permitted by Applicable Law, each Borrower hereby waives
and releases any claims that it may have against Agent, Lenders, their
Affiliates and any arranger with respect to any breach of agency or fiduciary
duty in connection with any transaction contemplated by a Loan Document.

14.12 Confidentiality. Each of Agent, Lenders and Issuing Bank shall maintain
the confidentiality of all Information (as defined below), except that
Information may be disclosed (a) to its Affiliates, and to its and their
partners, directors, officers, employees, agents, advisors and representatives
(provided they are informed of the confidential nature of the Information and
instructed to keep it confidential); (b) to the extent requested by any
governmental, regulatory or self-regulatory authority purporting to have
jurisdiction over it or its Affiliates; (c) to the extent required by Applicable
Law or by any subpoena or other legal process; (d) to any other party hereto;
(e) in connection with any action or proceeding relating to any Loan Documents
or Obligations; (f) subject to an agreement containing provisions substantially
the same as this Section, to any Transferee or any actual or prospective party
(or its advisors) to any Bank Product or to any swap, derivative or other
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are to be made by reference to an Obligor or Obligor’s obligations; (g) to the
extent such Information (i) becomes publicly available other than as a result of
a breach of this Section or (ii) is available to Agent, any Lender, Issuing Bank
or any of their Affiliates on a nonconfidential basis from a source other than
Borrowers; (h) on a confidential basis to a provider of a Platform; or (i) with
the consent of Borrower Agent. Notwithstanding the foregoing, Agent and Lenders
may publish or disseminate general information concerning this credit facility
for league table, tombstone and advertising purposes, and may use Borrowers’
logos, trademarks or product photographs in advertising materials. As used
herein, “Information” means information received from an Obligor or Subsidiary
relating to it or its business that is identified as confidential when
delivered. A Person required to maintain the confidentiality of Information
pursuant to this Section shall be deemed to have complied if it exercises a
degree of care similar to that accorded its own confidential information. Each
of Agent, Lenders and Issuing Bank acknowledges that (i) Information may include
material non-public information; (ii) it has developed compliance procedures
regarding the use of such information; and (iii) it will handle the material
non-public information in accordance with Applicable Law.

14.13 GOVERNING LAW. UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL CLAIMS SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW
PRINCIPLES EXCEPT FEDERAL LAWS RELATING TO NATIONAL BANKS.

14.14 Consent to Forum.

14.14.1 Forum. EACH BORROWER HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION
OF ANY STATE COURT SITTING IN THE STATE OF ILLINOIS OR THE UNITED STATES
DISTRICT COURT OF THE NORTHERN DISTRICT OF ILLINOIS, IN ANY DISPUTE, ACTION,
LITIGATION OR OTHER PROCEEDING RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND
AGREES THAT ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING SHALL BE BROUGHT
BY IT SOLELY IN ANY SUCH COURT. EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY
WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING ANY SUCH
COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.
EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS AND CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR
NOTICES IN SECTION 14.3.1. A final judgment in any proceeding of any such court
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or any other manner provided by Applicable Law.

14.14.2 Other Jurisdictions. Nothing herein shall limit the right of Agent or
any Lender to bring proceedings against any Obligor in any other court, nor
limit the right of any party to serve process in any other manner permitted by
Applicable Law. Nothing in this Agreement shall be deemed to preclude
enforcement by Agent of any judgment or order obtained in any forum or
jurisdiction.

14.15 Waivers by Borrowers. To the fullest extent permitted by Applicable Law,
each Borrower waives (a) the right to trial by jury (which Agent and each Lender
hereby also waives) in any proceeding or dispute of any kind relating in any way
to any Loan Documents, Obligations or Collateral; (b) presentment, demand,
protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any commercial paper, accounts,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which a Borrower may in any way be liable, and hereby ratifies anything Agent
may do in this regard; (c) notice prior to taking possession or control of any
Collateral; (d) any bond or security that might be

 

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required by a court prior to allowing Agent to exercise any rights or remedies;
(e) the benefit of all valuation, appraisement and exemption laws; (f) any claim
against Agent, Issuing Bank or any Lender, on any theory of liability, for
special, indirect, consequential, exemplary or punitive damages (as opposed to
direct or actual damages) in any way relating to any Enforcement Action,
Obligations, Loan Documents or transactions relating thereto; and (g) notice of
acceptance hereof. Each Borrower acknowledges that the foregoing waivers are a
material inducement to Agent, Issuing Bank and Lenders entering into this
Agreement and that they are relying upon the foregoing in their dealings with
Borrowers. Each Borrower has reviewed the foregoing waivers with its legal
counsel and has knowingly and voluntarily waived its jury trial and other rights
following consultation with legal counsel. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.

14.16 Patriot Act Notice. Agent and Lenders hereby notify Borrowers that
pursuant to the Patriot Act, Agent and Lenders are required to obtain, verify
and record information that identifies each Borrower, including its legal name,
address, tax ID number and other information that will allow Agent and Lenders
to identify it in accordance with the Patriot Act. Agent and Lenders will also
require information regarding each personal guarantor, if any, and may require
information regarding Borrowers’ management and owners, such as legal name,
address, social security number and date of birth. Borrowers shall, promptly
upon request, provide all documentation and other information as Agent, Issuing
Bank or any Lender may request from time to time in order to comply with any
obligations under any “know your customer,” anti-money laundering or other
requirements of Applicable Law.

14.17 NO ORAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

14.18 Acknowledgement and Consent to Bail-In of EEA Financial Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other
agreement, arrangement or understanding among any such parties, each party
hereto acknowledges that any liability of any Lender that is an EEA Financial
Institution arising under any Loan Document, to the extent such liability is
unsecured, may be subject to the write-down and conversion powers of an EEA
Resolution Authority and agrees and consents to, and acknowledges and agrees to
be bound by:

(a) the application of any Write-Down and Conversion Powers by an EEA Resolution
Authority to any such liabilities arising hereunder which may be payable to it
by any Lender that is an EEA Financial Institution; and

(b) the effects of any Bail-in Action on any such liability, including, if
applicable: (i) a reduction in full or in part or cancellation of any such
liability; (ii) a conversion of all, or a portion of, such liability into shares
or other instruments of ownership in such EEA Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise
conferred on it, and that such shares or other instruments of ownership will be
accepted by it in lieu of any rights with respect to any such liability under
this Agreement or any other Loan Document; or (iii) the variation of the terms
of such liability in connection with the exercise of the write-down and
conversion powers of any EEA Resolution Authority.

 

  SECTION 15. FX HEDGING ARRANGEMENTS

15.1 Credit Approval. Borrowers may request FX Hedging Arrangements from Bank of
America or any third party financial institution, regardless of whether such
financial institution is a

 

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Lender hereunder (such entities as providers of FX Hedging Arrangements
hereunder, the “FX Hedging Arrangement Providers”). The FX Hedging Arrangement
Providers shall each independently seek internal credit approval to provide all
or part of the requested FX Hedging Arrangements to the Borrowers. Upon each FX
Hedging Arrangement Provider’s receipt of internal approval for such FX Hedging
Arrangements, such FX Hedging Arrangement Provider shall present its pricing
proposal for such FX Hedging Arrangements to the Borrower Agent, and the
Borrower Agent shall negotiate such pricing proposals independently with each FX
Hedging Arrangement Provider.

15.2 Trade Information. The Borrowers shall deliver all required information and
documentation required by the FX Hedging Arrangement Providers in connection
with each FX Hedging Arrangement (including, without limitation, any information
necessary for determining the collateral value for certain of the Borrowers’
fixed assets).

15.3 Covenants relating to FX Hedging Arrangements. At all times when FX Hedging
Arrangements are outstanding, Borrowers agree to do the following:

(i) Not later than 30 days after the beginning of each Fiscal Year, provide
monthly cash flow projections for such Fiscal Year and requested hedging amounts
to Agent and the FX Hedging Arrangement Providers relating to actual or
projected Canadian operations and sales (which projections and hedging amounts
may be delivered concurrently with the projections and other information
delivered pursuant to Section 10.1.2(e) hereof);

(ii) Cooperate with each of the FX Hedging Arrangement Providers to ensure that
all FX Hedging Arrangements in the aggregate do not result in credit exposure
for each of the FX Hedging Arrangement Providers that is in excess of the
respective credit exposure as previously approved by the FX Hedging Arrangement
Providers;

(iii) Provide Agent and the FX Hedging Arrangement Providers who are also
Lenders hereunder (such providers, the “FX Lenders”) or their agents and
designees with the Real Estate Appraisal and the Equipment Appraisal on or prior
to the deadline in effect pursuant to Section 10.1.12, together with any other
information necessary for determining the collateral value for certain of the
Borrowers’ fixed assets, and cooperate with and permit Agent, at Agent’s
expense, to complete annual appraisals of the Seasonal FX Collateral Pool, with
results satisfactory to Agent and using an appraiser satisfactory to Agent;

(iv) At all times, ensure that the sum of the individual absolute values of the
Borrowers’ net liability from time to time under all FX Hedging Arrangements
provided by each FX Lender, to the extent that the net mark-to-market value of
all FX Hedging Arrangements provided by each such FX Lender is negative, does
not exceed the lesser of (a) $15,000,000, or (b) the then Seasonal FX Collateral
Pool Amount (such lesser amount, the “Maximum FX MTM Position”);

(v) If the absolute value of the aggregate net liabilities with respect to all
FX Hedging Arrangements provided by the FX Lenders on a mark-to market basis
exceeds the Maximum FX MTM Position at any time, terminate or modify FX Hedging
Arrangements provided by the FX Lenders in order to reduce such liabilities to
an amount that is not greater than the Maximum FX MTM Position (which, by way of
example, may require the Borrowers to liquidate FX Hedging Arrangements, to Cash
Collateralize FX Hedging Arrangements in amounts acceptable to Agent in its sole
discretion, and to reduce the contract period of an FX Hedging Arrangement); and

 

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(vi) If an FX Hedging Arrangement Reserve is required pursuant to Section 15.4
below, report such reserve on each applicable month-end Borrowing Base Report.

15.4 Obligations of FX Hedging Arrangement Providers. At all times when FX
Hedging Arrangements are outstanding, each FX Lender hereunder agrees to advise
Agent at least monthly as to the aggregate net mark-to-market position (whether
positive or negative) of all FX Hedging Arrangements that it may have with any
one or more Borrowers. Agent may combine such reporting from all FX Lenders and
shall, during the months of January 1 through April 30 of each year and during
the months of October 1 through December 31 of each year, establish an FX
Hedging Arrangement Reserve reflecting any negative mark-to-market positions of
one or more FX Lenders.

[Remainder of page intentionally left blank; signatures begin on following page]

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the
date set forth above.

 

BORROWERS: ARCTIC CAT INC., a Minnesota corporation By:  

/s/ Christopher J. Eperjesy

Name: Christopher J. Eperjesy Title: Chief Financial Officer

Address:    500 North 3rd Street

                  Minneapolis, MN 55401

                  Attn: Chief Financial Officer Telecopy:

ARCTIC CAT SALES INC., a Minnesota corporation By:  

/s/ Christopher J. Eperjesy

Name: Christopher J. Eperjesy Title: Chief Financial Officer ARCTIC CAT
PRODUCTION LLC, a Minnesota limited liability company By:  

/s/ Christopher J. Eperjesy

Name: Christopher J. Eperjesy Title: Chief Financial Officer ARCTIC CAT
PRODUCTION SUPPORT LLC, a Minnesota limited liability company By:  

/s/ Christopher J. Eperjesy

Name: Christopher J. Eperjesy Title: Chief Financial Officer ARCTIC CAT SHARED
SERVICES LLC, a Minnesota limited liability company By:  

/s/ Christopher J. Eperjesy

Name: Christopher J. Eperjesy Title: Chief Financial Officer

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MOTORFIST, LLC, a Minnesota limited liability company By:  

/s/ Christopher J. Eperjesy

Name: Christopher J. Eperjesy Title: Treasurer

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AGENT AND LENDERS:

 

BANK OF AMERICA, N.A.,

as Agent and Lender

 

By:  

/s/ Brian Conole

Name:   Brian Conole Title:   Senior Vice President  

Address: Bank of America Business Capital

20975 Swenson Drive, Suite 200

Waukesha, WI 53186

Telecopy: 262.207.3347