Item 1.01 Entry into a Material Definitive Agreement.
Amendment No. 1 to Fourth Amended and Restated Credit Agreement
On May 26, 2020, Polaris Inc. (the “Company”) entered into an amendment (the “First Amendment to Credit Agreement”) to its existing credit facility with U.S. Bank National Association, as administrative agent, and the several lenders party thereto dated as of July 2, 2018 (as amended, the “Existing Credit Agreement;” the Existing Credit Agreement as amended by the First Amendment to Credit Agreement, the “Credit Agreement”). The First Amendment to Credit Agreement amends the Existing Credit Agreement to, among other things: (i) provide certain financial covenant relief, including decreasing the interest coverage ratio to from 3.00 to 1.00 to 2.25 to 1.00 and increasing the leverage ratio from 3.50 to 1.00 to 4.75 to 1.00, each until the fiscal quarter ending on March 31, 2021; (ii) increase applicable interest rate margins and facility fees when the Company’s leverage ratio is at higher tiers; and (iii) make certain other modifications to negative covenants related to restricted payments, including restrictions on share repurchases, on dividends if the Company's leverage ratio exceeds 4.25 to 1.00, and limitations on priority indebtedness until the Company delivers evidence that its interest coverage ratio and leverage ratio returns to the levels that existed prior to giving effect to the First Amendment to Credit Agreement. Depending on the Company’s leverage ratio, during the covenant relief period, the applicable margins for (i) revolving advances range from 0.00% to 1.70% for base rate advances and from 0.90% to 2.70% for eurocurrency advances; (ii) initial term loans range from 0.00% to 2.00% for base rate advances and from 1.00% to 3.00% for eurocurrency advances; and (iii) incremental term loans range from 0.50% to 1.50% for base rate advances and from 1.50% to 2.50% for eurocurrency advances. During the covenant relief period, facility fees range from 0.10% to 0.30%, depending on the Company’s leverage ratio. The Credit Agreement continues to be subject to various other covenants, including, among other things, mergers and consolidations and asset sales and is subject to acceleration upon various events of default.
A copy of the First Amendment to Credit Agreement is filed as Exhibit 10.01 hereto, qualifies the above description and is incorporated by reference herein.
Amendments to Master Note Purchase Agreements
On May 26, 2020, the Company entered into an amendment (the “Fourth Amendment”) to its existing master note purchase agreement with the purchasers party thereto dated December 13, 2010, as amended and supplemented (the “Existing Note Purchase Agreement;” the Existing 2010 Note Purchase Agreement as amended by the Fourth Amendment, the “2010 Note Purchase Agreement”). The Fourth Amendment amends the Existing 2010 Note Purchase Agreement to, among other things: (a) provide certain financial covenant relief, including decreasing the interest coverage ratio from 3.00 to 1.00 to 2.25 to 1.00 and increasing the leverage ratio from 3.50 to 1.00 to 4.75 to 1.00, each until the fiscal quarter ending on March 31, 2021; (ii) increase the interest rate payable when the Company’s leverage ratio exceeds certain levels; and (iii) make certain other modifications to negative covenants related to restricted payments, including restrictions on share repurchases, on dividends if the Company’s leverage ratio exceeds 4.25 to 1.00, and limitations on priority indebtedness until the Company delivers evidence that its interest coverage ratio and leverage ratio returns to the levels that existed prior to giving effect to the Fourth Amendment. Depending on the Company’s leverage ratio, incremental interest accrues on the notes from 0.25% to 1.25% for any period that the leverage ratio exceeds 3.00 to 1.00 as of the date of any fiscal quarter end. The 2010 Note Purchase Agreement continues to include various other covenants, including covenants that restrict the Company’s ability to, among other things, transfer or sell assets or engage in mergers or consolidations and is subject to acceleration upon various events of default.
A copy of the Fourth Amendment is filed as Exhibit 10.02 hereto, qualifies the above description and is incorporated by reference herein.
First Amendment to Master Note Purchase Agreement
On May 26, 2020, the Company entered into an amendment (the “First Amendment to Note Purchase Agreement”) to its existing master note purchase agreement with the purchasers party thereto dated July 2, 2018 (the “Existing 2018 Note Purchase Agreement;” the Existing 2018 Note Purchase Agreement as amended by the First Amendment to Note Purchase Agreement, the “2018 Note Purchase Agreement”). The First Amendment to Note Purchase Agreement amends the Existing 2018 Note Purchase Agreement to, among other things: (a) provide certain financial covenant relief until the fiscal quarter ending on March 31, 2021, including decreasing the interest coverage ratio from 3.00 to 1.00 to 2.25 to 1.00 and increasing the leverage ratio from 3.50 to 1.00 to 4.75 to 1.00, each until the fiscal quarter ending on March 31, 2021; (ii) increase the interest rate payable when the Company’s leverage ratio exceeds certain levels; and (iii) make certain other modifications to negative covenants related to restricted payments, including restrictions on share repurchases, on dividends if the Company’s leverage ratio exceeds 4.25 to 1.00 and limitations on and priority indebtedness until the Company delivers evidence that its interest coverage ratio and leverage ratio returns to the levels that existed prior to giving effect to the First Amendment to Note Purchase Agreement. Depending on the Company’s leverage ratio, incremental interest accrues on the notes from 0.25% to 1.25% for any period that the leverage ratio exceeds 3.00 to 1.00 as of the date of any fiscal quarter end. The 2018 Note Purchase Agreement continues to include various other covenants, including covenants that restrict the Company’s ability to, among other things, transfer or sell assets or engage in mergers or consolidations and is subject to acceleration upon various events of default.
A copy of the First Amendment to Note Purchase Agreement is filed as Exhibit 10.03 hereto, qualifies the above description and is incorporated by reference herein.