Exhibit 10.1

 

FIRST AMENDMENT TO CREDIT AGREEMENT

 

This Amendment is entered into as of March 31, 2009 by and among Arctic Cat
Inc., a Minnesota corporation (the “Borrower”), Arctic Cat Sales Inc., a
Minnesota corporation, Arctic Cat Production LLC, a Minnesota limited liability
company, Arctic Cat Production Support LLC, a Minnesota limited liability
company, and Arctic Cat Shared Services LLC, a Minnesota limited liability
company (the “Guarantors”), and Wells Fargo Bank, National Association, a
national banking association, as the Administrative Agent, Issuing Lender and
sole Lender under the Credit Agreement described below (in such capacities, the
“Bank”).

 

The Borrower and the Bank have entered into a Credit Agreement dated August 29,
2008, setting forth the terms on which the Bank would make advances to and issue
letters of credit for the account of the Borrower (together with all amendments,
modifications and restatements thereof, the “Credit Agreement”).

 

Pursuant to their Guaranty dated August 29, 2008 (together with all amendments,
modifications and restatements thereof, the “Guaranty”), the Guarantors have
guarantied the payment and performance of all obligations of the Borrower
arising under the Credit Agreement and related documents.

 

Pursuant to a Security Agreement dated August 29, 2008 (together with all
amendments, modifications and restatements thereof, the “Security Agreement”),
the Borrower and the Guarantors have granted the Bank a security interest in
substantially all of their personal property.

 

The Borrower has asked the Bank to extend the revolving line of credit provided
under the Credit Agreement, and the Bank is willing to do so on the terms and
subject to the conditions set forth herein.

 

ACCORDINGLY, in consideration of the mutual covenants contained in this
Amendment and in the other documents described herein, the parties hereby agree
as follows:

 

1.                                      Definitions.

 

As used in this Amendment, capitalized terms defined in the Credit Agreement and
not otherwise defined herein shall have the meanings given them in the Credit
Agreement.

 

2.                                      Amendments

 

(a)                                  The following definitions in Section 1.1 of
the Credit Agreement are hereby amended in their entirety to read, respectively,
as follows:

 

“Aggregate Revolving Commitment Amount” means $30,000,000, being an amount equal
to the sum of the Revolving Commitments, as such amount may be reduced from time
to time pursuant to Section 2.8 or amendment in accordance with this Agreement.

 

“Facility Termination Date” means May 31, 2009, or the earlier date of the
termination of the Revolving Facility pursuant to Section 2.8 or 7.2.

 

“Floating Rate” means, at any time, an annual rate equal to the sum of (i) 225
basis points (2.25% per annum), and (ii) the greater of:

 

(A)          the Base Rate; or

 

(B)           the Federal Funds Rate, plus 50 basis points (0.50% per annum).

 

The Floating Rate shall change when and as the Base Rate or Federal Funds Rate
changes.

 

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“LIBO Rate Margin” means 500 basis points (5.00% per annum).

 

(b)                                 Paragraph (a) of the definition of “Eligible
Receivables Value” in Section 1.1 of the Credit Agreement is hereby amended in
its entirety to read as follows:

 

(a)                                  (i)                                    
That portion of Dealer Floorplan Finance Receivables unpaid more than 5 calendar
days after the applicable invoice date;

 

(ii)                                  that portion of other accounts receivable
unpaid more than 90 days after the applicable invoice date.

 

(c)                                  The following paragraph (h) is inserted at
the end of the definition of “Eligible Receivables Value” in Section 1.1 of the
Credit Agreement:

 

(h)           Accounts receivable owed by an account debtor whose chief
executive office or principal place of business is located outside the United
States and Canada.

 

(d)                                 The phrase, “the Security Agreement”, is
deleted in the definition of “Material Adverse Effect” in Section 1.1 of the
Credit Agreement, and the phrase, “any Security Document”, is substituted
therefor.

 

(e)                                  The following definitions are hereby added
to Section 1.1 of the Credit Agreement in its appropriate alphabetical order:

 

“Borrowing Base” means, at any time, the lesser of:

 

(a)           the Aggregate Revolving Commitment Amount, and

 

(b)           the sum of

 

(i)            60% of Eligible Receivables Value,

 

(ii)           the lesser of (A) $20,000,000, or (B) 50% of Eligible Finished
Goods Value,

 

(iii)          20% of Eligible Parts Value, and

 

(iv)          10% of Eligible Raw Materials Value.

 

“Borrowing Base Certificate” means a certificate in substantially the form
attached hereto as Exhibit E, duly completed and certified by the Borrower,
pursuant to which the Borrower sets forth the Borrowing Base as of a particular
date.

 

“Dealer Floorplan Finance Receivables” means amounts owing to any Obligor under
any Dealer Finance Agreement.

 

“First Amendment Date” means March 31, 2009.

 

“Security Documents” means the Security Agreement and each other security
agreement, mortgage, deed of trust, assignment or other instrument or agreement
now or hereafter directly or indirectly securing any Obligations of the Borrower
or any guaranty of any Obligations.

 

(f)                                    The definitions of “Adjusted Asset Value”
and “Asset Coverage Ratio” are hereby deleted.

 

(g)                                 The first two sentences of Section 2.1 of
the Credit Agreement are hereby deleted, and the following is substituted
therefor:

 

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Each Lender agrees, severally but not jointly, on the terms and subject to the
conditions hereinafter set forth, to make Advances to the Borrower and to
participate in commercial and standby Letters of Credit for the account of the
Borrower from the date hereof through the Facility Termination Date; provided,
however, that (A) the Revolving Facility Outstandings shall at no time exceed
the Borrowing Base and (B) no Lender’s Percentage of the Revolving Facility
Outstandings shall at any time exceed that Lender’s Revolving Commitment. The
credit facility established under this Section 2.1 is revolving; within the
limits set forth herein, the Borrower may request Advances and Letters of Credit
through the Facility Termination Date, repay such Advances or terminate such
Letters of Credit, and reborrow or receive additional Letters of Credit, so long
as no Advance or Letter of Credit causes the limits set forth below to be
exceeded.

 

(h)                                 The second sentence of Section 2.3(e) of the
Credit Agreement is hereby deleted, and the following is substituted therefor:

 

Unless otherwise agreed by the Required Lenders in writing, the Borrower shall
deposit in the L/C Cash Collateral Account, not less than 5 Business Days before
the Facility Termination Date, an amount equal to 105% of the L/C Amount, less
the balance (if any) then outstanding in the L/C Cash Collateral Account.

 

(i)            The following is hereby inserted at the end of Section 2.4(b) of
the Credit Agreement:

 

Notwithstanding any other provision of this Agreement, from and after the First
Amendment Date, the Borrower may not elect any Interest Period longer than one
month to be applicable to any LIBO Rate Funding.

 

(j)                                     The following new Section 2.15 is hereby
inserted at the end of Article II of the Credit Agreement:

 

Section 2.15 Borrowing Base Deficiencies.

 

If the Revolving Facility Outstandings shall on any date exceed the Borrowing
Base, the Borrower, not later than the next Business Day following such date,
shall remit to the Administrative Agent an amount equal to such excess, without
notice or demand by the Administrative Agent or any Lender. Such remittance
shall be applied to the Obligations (whether or not due) in such order of
application as the Administrative Agent may in its sole discretion choose. To
the extent that the amount of such remittance exceeds the outstanding
non-contingent Obligations, such excess portion of the remittance shall be
deposited in the L/C Cash Collateral Account.

 

(k)           The following is hereby inserted at the end of Section 3.2 of the
Credit Agreement:

 

Any request for a Borrowing or a Letter of Credit, whether written, telephonic,
telecopy or otherwise, shall be deemed to be a representation by the Borrower
that (i) the amount of the requested Borrowing or Letter of Credit, when added
to the Revolving Facility Outstandings would not cause the sum of the Revolving
Facility Outstandings to exceed the Borrowing Base, and (b) the statements set
forth in this Section 3.2 are correct as of the time of the request.

 

(l)            Section 5.1(c)(i) of the Credit Agreement is hereby amended in
its entirety to read as follows:

 

(i)                                     Consolidated balance sheets of the
Borrower and its Subsidiaries as at the end of such month and related
consolidated statements of earnings of the Borrower and its Subsidiaries for
such month and for the year to date, in reasonable detail and stating in
comparative form the figures for the corresponding date and period in

 

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the previous year, all prepared in accordance with GAAP, and certified by the
chief financial officer of the Borrower, subject to year-end audit adjustments.

 

(m)                               The following paragraphs are inserted after
paragraph (m) in Section 5.1 of the Credit Agreement:

 

(n)                                 On the third Business Day of every calendar
month, a Borrowing Base certificate as of the end of the immediately preceding
calendar month.

 

(o)                                 On each Wednesday, a cash flow budget for
the 13-week period commencing on the immediately preceding Sunday, including
forecasted financing needs during such period (including a forecast of
borrowings hereunder) and the income, expense and other information supporting
such forecast, all presented on a week-by-week basis in such detail as the
Administrative Agent may reasonably request.

 

(n)                                 Sections 5.9, 5.10 and 5.11 of the Credit
Agreement are hereby deleted.

 

(o)                                 Section 6.1(h) of the Credit Agreement is
hereby amended in its entirety to read as follows:

 

(h)                                 Liens granted to the Administrative Agent
pursuant to any Security Documents.

 

(p)                                 The following new paragraph (n) is hereby
added to Section 7.1 of the Credit Agreement:

 

(n)           The aggregate payments made by the Borrower and its Subsidiaries
on account of repurchase or similar obligations or liabilities under Dealer
Finance Agreements in any single calendar month, 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, shall exceed
$2,000,000.

 

(q)                                 Section 7.2(c) of the Credit Agreement is
hereby amended in its entirety to read as follows:

 

(c)           If any Letter of Credit remains outstanding, the Administrative
Agent may, by notice to the Borrower, require the Borrower to deposit in the L/C
Cash Collateral Account immediately available funds equal to 105% of the L/C
Amount, less the balance (if any) then outstanding in the L/C Cash Collateral
Account.

 

(r)                                    The amount, “$75,000,000”, in the table
in Exhibit A to the Credit Agreement is hereby deleted, and the amount,
“$30,000,000”, is substituted therefor.

 

(s)                                  The address and telecopier number for the
Bank (both as Administrative Agent and as a Lender) in Exhibit A are hereby
deleted, and the following is substituted therefor:

 

90 South Seventh Street

MAC N9305-198

Minneapolis, Minnesota 55479

Attention: Jason Wells

Telecopier: 612-316-1491

 

(t)                                    Exhibit C to the Credit Agreement is
hereby amended in its entirety to read as set forth in Exhibit C to this
Amendment.

 

(u)                                 Exhibit E to this Amendment is hereby
inserted as Exhibit E to the Credit Agreement.

 

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3.                                      Loan Documents.

 

This Amendment and the Patent and Trademark Security Agreement, mortgages, deeds
of trust and other agreements required under paragraphs (d), (e) or (f) of
Section 9 shall each be deemed a Loan Document, as defined in the Credit
Agreement, and any breach of any obligation of the Borrower under any such
document shall constitute an Event of Default, as defined in the Credit
Agreement.

 

4.                                      Post-Closing Deliveries.

 

(a)                                  Not later than April 10, 2009, the Borrower
shall deliver an opinion of Austrian counsel for the Borrower, confirming that
the Administrative Agent’s security interest in 65% of the stock of Arctic Cat
ACE Holding GmbH has been duly perfected, together with such documents as may be
required by such counsel as a condition to delivering such opinions.

 

(b)                                 Not later than May 15, 2009, the Borrower
shall deliver a report, prepared by Alliance Management or another independent
consultant acceptable to the Bank, assessing the reasonableness of the
Borrower’s projected cash flow budget for its fiscal year ending March 31, 2010.

 

(c)                                  As soon as practical, and in any event not
later than May 15, 2009, the Borrower shall deliver to the Administrative Agent:

 

(i)                                     Evidence of recording of the Mortgages
(as defined below) in the real estate records of the jurisdiction where the
related real property is located.

 

(ii)                                  A final mortgagee’s title policy issued by
a title insurance company acceptable to the Administrative Agent, in favor of
the Administrative Agent, insuring that the Mortgages are valid and enforceable
first priority Liens on the applicable Obligor’s fee simple title to the real
estate therein described, free and clear of all standard exceptions and defects
and Liens except such as the Administrative Agent in its sole discretion may
approve, including the following endorsements: ALTA form 9.0, ALTA form 3.1
(with parking), contiguity, access to open street, utility, last dollar,
separate tax parcel, no special assessments, usury, forced removal, revolving
credit, mortgage registry tax and such other endorsements as the Administrative
Agent may reasonably require.

 

(iii)                               Copies of such land surveys of the Owned
Real Property as may be in the possession of any Obligor.

 

(iv)                              A certified environmental audit of the real
estate referred to in each Mortgage and the improvements thereon.

 

(v)                                 A certified appraisal conforming to all
applicable requirements of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended, covering the land and improvements referred
to in each Mortgage and establishing the fair market value of such property.

 

(d)                                 As promptly as practicable (and in any event
not more than 45 days) following any request by the Administrative Agent, two
copies of a perimeter land survey covering the land referred to in each Mortgage
and all related appurtenant easements, prepared by a licensed, registered
surveyor and incorporating the legal description of such land, showing the
location of all points and lines referred to in the legal description and, with
respect to each such parcel which has significant improvements thereon, the
location of all existing material improvements, including driveways and parking,
as being within the exterior boundaries of such land and the location of all
utilities and the location of all easements and encroachments onto or from such
land that are visible on

 

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such land, known to the surveyor preparing the survey or of record, identifying
easements of record by recording data.

 

Each item required to be delivered under this Section 4 shall be in form and
substance satisfactory to the Administrative Agent, in its reasonable
discretion.

 

5.                                      Collateral Account and Lockbox.

 

Concurrent with the execution and delivery of this Amendment by the Borrower,
the Borrower shall deliver to the Administrative Agent a Restricted Account
Agreement, Four Party Wholesale Lockbox Agreement and Master Agreement for
Treasury Management Services, duly executed by each Obligor and in form and
substance satisfactory to the Administrative Agent, together with such other
documents as the Administrative Agent may require to ensure that all payments on
accounts receivable of the Obligors are paid to the lockbox and account
established thereunder. Each Company will promptly direct its customers to mail
all payments to any Company to the post office box identified in or pursuant to
such agreements.

 

6.                                      Collateral Audit.

 

The Borrower acknowledges that (i) the Administrative Agent intends to conduct a
collateral audit of the Borrower, (ii) the Administrative Agent has the right to
conduct such collateral audit pursuant to Section 5.2 of the Credit Agreement,
among other provisions, and (iii) pursuant to Section 2.6 (c) of the Credit
Agreement, the Borrower is obligated to pay all reasonable fees charged by the
Administrative Agent in connection with such audit, together with actual
out-of-pocket costs and expenses incurred in conducting such audit.

 

7.                                      Amendment Fee.

 

Concurrently with the execution and delivery of this Amendment, the Borrower
shall pay to the Bank an amendment fee in the amount of $50,000. Such fee shall
be deemed fully earned by the Bank’s execution and delivery of this Amendment.

 

8.                                      Representations and Warranties.

 

The Borrower and the Guarantors each hereby represent and warrant to each Lender
Party as follows:

 

(a)                                  Each of the Borrower and each Guarantor has
all requisite power and authority, corporate or otherwise, to execute and
deliver this Amendment and to perform this Amendment and the Credit Agreement as
amended hereby. This Amendment has been duly and validly executed and delivered
to the Administrative Agent by the Borrower and the Guarantors, and this
Amendment and the Credit Agreement as amended hereby constitute the legal, valid
and binding obligations of the Borrower and the Guarantors, enforceable in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors’ rights generally and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).

 

(b)                                 The execution, delivery and performance by
the Borrower and the Guarantors of this Amendment, and the performance of the
Credit Agreement as amended hereby, have been duly authorized by all necessary
action (corporate or otherwise) and do not and will not (i) require any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign (other than
consents and approvals that have been obtained and remain in full force and
effect), (ii) violate the Organizational Documents of the Borrower or any
Guarantor or any provision of any law, rule, regulation or order presently in
effect having applicability to the Borrower or any Guarantor, or (iii) except
where such breach or default would not have a Material Adverse Effect, result in
a breach of or constitute a default

 

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under any indenture or agreement to which the Borrower or any Guarantor is a
party, or by which the Borrower or any Guarantor or any property of the Borrower
or any Guarantor may be bound or affected.

 

(c)                                  All of the representations and warranties
contained in Article IV of the Credit Agreement are correct in all material
respects on and as of the date hereof as though made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date, in which case such representations and warranties shall be
correct only as of such date.

 

(d)                                 Schedule 1 to this Amendment is a complete
list of all patents, applications for patents, trademarks, applications for
trademarks, service marks, applications for service marks, mask works, trade
dress and copyrights for which any Obligor is the registered owner (the “Owned
Intellectual Property”). Except as disclosed on Schedule 1, (i) each Obligor
owns its Owned Intellectual Property free and clear of all restrictions
(including covenants not to sue a third party), court orders, injunctions,
decrees, writs or Liens, whether by written agreement or otherwise, (ii) no
Person other than an Obligor owns or has been granted any right in the Owned
Intellectual Property, (iii) all Owned Intellectual Property is valid,
subsisting and enforceable and (iv) each Obligor has taken all commercially
reasonable action necessary to maintain and protect the Owned Intellectual
Property owned by it.

 

(e)                                  Schedule 2 to this Amendment sets forth
each parcel of real property owned by any Obligor (the “Owned Real Property”),
including for each parcel the owner, street address and complete legal
description thereof.

 

(f)                                    Schedule 3 to this Amendment sets forth
each deposit account and securities account (as those terms are defined in the
Uniform Commercial Code) owned by any Obligor, including for each account the
owner thereof, the nature thereof (including whether such account is a deposit
account or a securities account), the depository bank or securities intermediary
with which such account is maintained, and the approximate value of such
account.

 

9.                                      Conditions Precedent.

 

The amendments set forth in Section 2 are subject to the conditions precedent
that, on or before the date hereof (or such later date as the Bank may approve
in writing), the Borrower shall have delivered to the Bank each of the
following, each in form and substance satisfactory to the Bank:

 

(a)           This Amendment, duly executed by the Borrower.

 

(b)           The amendment fee specified in Section 7.

 

(c)           A Borrowing Base Certificate as of March 31, 2009.

 

(d)                                 A Patent and Trademark Security Agreement,
duly executed by each Obligor that holds any Owned Intellectual Property, in
form suitable for filing with the Patent and Trademark Office.

 

(e)                                  Such mortgages and deeds of trust (the
“Mortgages”) as may be required to grant the Administrative Agent a mortgage
lien on each parcel of Owned Real Property, together with copies of all surveys,
title insurance polices, title insurance opinions, environmental reports and
other documents related to the Owned Real Property as the Administrative Agent
may request.

 

(f)                                    The agreements identified in Section 5.

 

(g)                                 A signed copy of the opinion of counsel for
the Borrower, addressed to the Administrative Agent and the Lenders, confirming
the matters set forth in paragraphs (a) and (b) of Section 8 above, and such
other matters as the Administrative Agent may request.

 

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10.          Release.

 

The Borrower and the Guarantors each hereby waive, release, relinquish and
forever discharge the Bank, and its past and present directors, officers,
agents, employees, parents, subsidiaries, affiliates, insurers, attorneys,
representatives and assigns, and each and all thereof (collectively, the
“Released Parties”), of and from any and all manner of action or causes of
action, suits, claims, demands, judgments, damages, levies, and the execution of
whatsoever kind, nature and/or description arising on or before the date hereof,
including, without limitation, any claims, losses, costs or damages, including
compensatory and punitive damages, in each case whether known or unknown,
liquidated or unliquidated, fixed or contingent, direct or indirect, which the
Borrower or any Guarantor ever had or now has or may claim to have against any
of the Released Parties, with respect to any matter whatsoever, including,
without limitation, the administration of the Loan Documents and the
negotiations relating to this Amendment.

 

11.          WAIVER OF JURY TRIAL.

 

THE BORROWER, THE GUARANTORS AND THE BANK EACH IRREVOCABLY WAIVE ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE NOTE AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. THE GUARANTORS AND THE BANK EACH REPRESENT TO EACH OTHER THAT THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

 

12.          Payment of Costs.

 

The Borrower reaffirms its obligation under the Credit Agreement, and
specifically agrees, to pay or reimburse the Bank on demand for all costs and
expenses incurred by the Bank in connection with the Loan Documents, including
but not limited to all fees and disbursements of legal counsel to the Bank, and
specifically including all costs and expenses of the Bank, including attorneys
fees, incurred in connection with the drafting and preparation of this Amendment
and any related documents.

 

13.          Miscellaneous.

 

This Amendment sets forth the entire agreement of the parties with respect to
the subject matter hereof. It cannot be waived, modified or amended except by a
writing signed by the party against which enforcement is sought. Except as
expressly amended by this Amendment, all of the terms and conditions of the
Credit Agreement shall remain in full force and effect. This Amendment shall be
governed by the internal law of Minnesota. This Amendment shall be binding upon
and shall accrue to the benefit of the parties and their successors and assigns.
This Amendment may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of which
counterparts of this Amendment, taken together, shall constitute but one and the
same instrument.

 

Signature pages follow

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above-written.

 

 

ARCTIC CAT INC.

 

 

 

 

 

By

/s/ Timothy C. Delmore

 

Name: Timothy C. Delmore

 

Title: Chief Financial Officer

 

 

 

 

 

ARCTIC CAT SALES INC.

 

 

 

 

 

By

/s/ Timothy C. Delmore

 

Name: Timothy C. Delmore

 

Title: Chief Financial Officer

 

 

 

 

 

ARCTIC CAT PRODUCTION LLC

 

 

 

 

 

By

/s/ Timothy C. Delmore

 

Name: Timothy C. Delmore

 

Title: Chief Financial Officer

 

 

 

 

 

ARCTIC CAT PRODUCTION SUPPORT LLC

 

 

 

 

 

By

/s/ Timothy C. Delmore

 

Name: Timothy C. Delmore

 

Title: Chief Financial Officer

 

 

 

 

 

ARCTIC CAT SHARED SERVICES LLC

 

 

 

 

 

By

/s/ Timothy C. Delmore

 

Name: Timothy C. Delmore

 

Title: Chief Financial Officer

 

Signature page to First Amendment to Arctic Cat Inc. Credit Agreement

 

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WELLS FARGO BANK, NATIONAL

 

 

ASSOCIATION, as Administrative Agent,

 

 

Issuing Lender and Lender

 

 

 

 

 

 

 

 

 

 

By

/s/ Jason D. Wells

 

Name: Jason D. Wells

 

Title: Assistant Vice-President

 

Signature page to First Amendment to Arctic Cat Inc. Credit Agreement

 

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