EXHIBIT 10.27
AMENDMENT NUMBER FOUR TO AMENDED AND RESTATED
CREDIT AGREEMENT
This AMENDMENT NUMBER FOUR TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), dated as of November 13, 2003, is entered into among DECKERS
OUTDOOR CORPORATION, a Delaware corporation ("Parent"), and UGG Holdings, Inc.,
a California corporation ("UGG") (collectively, referred to herein as
"Borrowers" and individually as a "Borrower"), on the one hand, and COMERICA
BANK, a Michigan banking corporation, successor by merger to Comerica
Bank-California, a California banking corporation ("Bank"), on the other hand,
with reference to the following facts:
A. Borrowers and Bank previously entered into that certain Amended and
Restated Credit Agreement, dated as of November 25, 2002, as amended by that
certain Amendment Number One to Amended and Restated Credit Agreement, dated as
of April 29, 2003, that certain Amendment Number Two to Amended and Restated
Credit Agreement, dated as of June 27, 2003, and that certain Amendment Number
Three to Amended and Restated Credit Agreement, dated as of August 6, 2003 (as
so amended, the "Agreement"); and
B. Borrowers and Bank desire to further amend the Agreement in accordance
with the terms of this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
hereby agree as follows:
1. Defined Terms. All initially capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Agreement.
2. Amendments to Section 1.1.
(a) The definitions of "Inventory Sublimit Increase Period,"
"Overadvance Limit" and "Overadvance Period" set forth in Section 1.1 of the
Agreement are hereby deleted.
(b) The following new definitions are hereby added to Section 1.1 of
the Agreement in appropriate alphabetical order:
"'Permitted Payments' means the following but without
duplication: (i) payments by Parent to repay up to $2,000,000 in
Subordinated Debt under the Subordination Agreement (Peninsula), (ii)
payments by Parent to redeem up to $5,500,000 of Parent's preferred stock
issued to ▇▇▇▇▇▇▇▇ so long as such redemption is permitted under the terms
of the Note Purchase Agreement, and (iii) premium payments of $425,000
associated with the repurchase of up to $5,500,000 of Parent's preferred
stock."
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"'Term Loan Readvance Notice' means an irrevocable written
notice from Borrowers to Bank of Borrowers' request to have Bank make a new
$7,000,000 term loan to Borrowers to be used to refinance the prior term loan
made by Bank and for Permitted Payments."
(c) The definitions of "Applicable LIBOR Lending Rate Margin,"
"Borrowing Base," "Inventory Sublimit," and "Revolving Credit Commitment" set
forth in Section 1.1 of the Agreement are hereby amended in their entirety as
follows:
"'Applicable LIBOR Lending Rate Margin' means the margin set
forth below opposite the applicable Consolidated Total Liabilities to
Consolidated EBITDA Ratio disclosed in the latest Compliance Certificate
delivered pursuant to Section 6.3(c), subject to Section 2.4(d); provided
that until Bank's receipt of Borrowers' audited Financial Statements for
the fiscal year ending December 31, 2003, the margin will be as set forth
opposite Pricing Level V:
Consolidated Total
Liabilities to Applicable LIBOR Lending Applicable LIBOR Lending
Consolidated EBITDA Rate Margin For All Rate Margin For the Term
Pricing Level Ratio Revolving Loans Loan*
--------------- ----------------------- ------------------------- --------------------------
I Less than 1.00:1.0 100 basis points 350 basis points
II Greater than 1.00:1.0 125 basis points 350 basis points
but less than 1.50:1.0
III Greater than or equal 150 basis points 350 basis points
to 1.50:1.0 but less
than 2.00:1.0
IV Greater than or equal 200 basis points 350 basis points
to 2.00:1.0 but less
than 2.50:1.0
V Greater than or equal 250 basis points 350 basis points
to 2.50:1.0
"*Provided, however, upon receipt by Bank of the Term Loan
Readvance Notice and a Replacement Secured Promissory Note (Term Loan) in
the form of Exhibit A attached hereto, duly executed by Borrowers, and
fulfillment of the condition described in Section 12 hereinbelow, the
Applicable LIBOR Lending Rate Margin for the Term Loan shall be
automatically amended to mean 325 basis points without further action
required by any party."
"'Borrowing Base' means, as of the date of determination, the
lesser of (a) the Revolving Credit Commitment or (b) (i) the Eligible
Accounts
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times the Applicable A/R Advance Rate, plus (ii) the lesser of (x) 50% of
the Eligible Inventory or (y) the Inventory Sublimit; less the amount of
outstanding Obligations (other than Obligations in respect of the Term
Loan) and less the Foreign Exchange Reserve; provided, however, Bank may
reduce the advance rates or create additional reserves against the
Eligible Accounts and/or the Eligible Inventory, in its sole and absolute
discretion, without declaring an Event of Default if it reasonably
determines that there has occurred a Material Adverse Effect."
"'Inventory Sublimit' means Twelve Million Five Hundred
Thousand Dollars ($12,500,000)."
"'Revolving Credit Commitment' means Twenty Million Dollars
($20,000.000)."
(d) Upon receipt by Bank of the Term Loan Readvance Notice and a
Replacement Secured Promissory Note (Term Loan) in the form of Exhibit A
attached hereto, duly executed by Borrowers, and fulfillment of the condition
described in Section 12 hereinbelow, the definition of "Term Loan Maturity Date"
set forth in Section 1.1 of the Agreement shall be automatically amended in its
entirety as follows without further action required by any party:
"'Term Loan Maturity Date' means November 25, 2005."
3. Amendments to Sections 2.1 and 2.2. Sections 2.1 and 2.2 of the
Agreement are hereby amended in their entirety as follows:
"2.1 Revolving Loans. Provided that no Event of Default or
Unmatured Event of Default has occurred and is continuing, and subject to
the other terms and conditions hereof, Bank agrees to make revolving loans
("Revolving Loans") to Borrowers, upon notice in accordance with Section
2.5(b), from the Closing Date up to but not including the Revolving Loans
Maturity Date, the proceeds of which shall be used only for the purposes
allowed in Section 7.1(a), subject to the following conditions and
limitations:
"(a) The outstanding Obligations (other than Obligations in
respect of the Term Loan) after giving effect to any proposed Borrowing
shall not exceed the Borrowing Base;
"(b) Borrowers shall not be permitted to borrow, and Bank
shall not be obligated to make, any Revolving Loans to Borrowers, unless
and until all of the conditions for a Borrowing set forth in Section 4.2
have been met to the reasonable satisfaction of Bank; and
"(c) Except as otherwise provided in clause (d) of this
Section 2.1, if, at any time or for any reason, the amount of the
Obligations exceeds the Borrowing Base (an "Overadvance"), Borrowers shall
immediately
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pay to Bank, upon Bank's election and demand, in cash, the amount of such
Overadvance to be used by Bank to repay outstanding Borrowings."
"Borrowers may repay and, subject to the terms and conditions hereof,
reborrow Revolving Loans. All such repayments shall be without penalty or
premium except as otherwise required by Section 2.7 with respect to
repayments of LIBOR Lending Rate Portions. Borrowers shall give Bank at
least three (3) LIBOR Business Days' prior written notice of any repayment
of a LIBOR Lending Rate Portion. On the Revolving Loans Maturity Date,
Borrowers shall pay to Bank the entire unpaid principal balance of the
Revolving Loans together with all accrued but unpaid interest thereon."
"2.2 Foreign Exchange Forward Contracts. Provided that no
Event of Default or Unmatured Event of Default has occurred and is
continuing, and subject to the other terms and conditions of this
Agreement and the Foreign Exchange Agreement, Parent may incur Currency
Obligations from time to time from the Closing Date up to but not
including the Revolving Loans Maturity Date, subject to the following
conditions and limitations:
"(a) Tenors for Parent's Currency Obligations shall not exceed
the lesser of 365 days and the Revolving Loans Maturity Date;
"(b) The aggregate amount of Parent's Currency
Obligations outstanding at any one time after giving effect to any
proposed incurrence of a Currency Obligation by Parent shall not exceed
the Foreign Exchange Sublimit;
"(c) The outstanding Obligations after giving effect to
any proposed incurrence of a Currency Obligation by Parent shall not
exceed the Borrowing Base;
"(d) The Currency Obligations shall be incurred by
Parent only for international transactions incurred in the ordinary course
of business; and
"(e) In connection with all Currency Obligations,
Borrowers shall pay all amounts due to Bank, including all fees, charges
and expenses, in accordance with the terms of the Foreign Exchange
Agreement."
4. Amendment to Section 2.3. Upon receipt by Bank of the Term Loan
Readvance Notice and a Replacement Secured Promissory Note (Term Loan) in the
form of Exhibit A attached hereto, duly executed by Borrowers, and fulfillment
of the condition described in Section 12 hereinbelow, Section 2.3 of the
Agreement shall be automatically amended in its entirety as follows without
further action required from any party:
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"2.3 Term Loan.
"(a) Term Loan. Subject to the terms and conditions
hereof, Bank agrees to make a term loan ("Term Loan") to Borrowers on the
Business Day following Bank's receipt of the Term Loan Readvance Notice
and a Replacement Secured Promissory Note (Term Loan) in form and
substance satisfactory to Bank, in an amount equal to Seven Million
Dollars ($7,000,000). The proceeds of the Term Loan shall be used solely
for the purposes allowed in Section 7.1(b).
"(b) Amortization. Borrowers shall pay monthly principal
reduction payments on the Term Loan, each in the amounts and on the dates
set forth in the table below opposite the due date in which such payment
is due:
MONTHLY PRINCIPAL REDUCTION
PAYMENT DUE DATE PAYMENTS
-------------------------------------------- ------------------------------------------
Date of funding of the Term Loan- 4/30/04 $0
5/31/04 $1,750,000.00
6/30/04 and the last day of each month thereafter $ 291,666.67
"(c) On the Term Loan Maturity Date, the outstanding
principal balance of and all accrued but unpaid interest on the Term Loan
shall be due and payable in full. Borrowers may prepay the Term Loan at
any time, in whole or in part, without penalty or premium except as
otherwise required by Section 2.7(a) with respect to repayments of LIBOR
Lending Rate Portions. All principal amounts so repaid or prepaid may not
be reborrowed. Borrowers shall give Bank at least three (3) Business Days'
prior written notice of any prepayment of a Base Lending Rate Portion and
at least three (3) LIBOR Business Days' prior written notice of any
prepayment of a LIBOR Lending Rate Portion. All prepayments shall be
applied toward scheduled principal reductions payments owing under this
Section 2.3 in inverse order of maturity."
5. Amendment to Section 3.1. Section 3.1 of the Agreement is hereby
amended in its entirety as follows:
"3.1 Letters of Credit.
"(a) Provided that no Event of Default or Unmatured
Event of Default is continuing and subject to the other terms and
conditions hereof, Bank agrees to issue standby and sight and usance
commercial letters of
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credit ("Letters of Credit") for the account of Borrowers in such form as
may be approved from time to time by Bank, subject to the following
limitations:
"(i) The face amount of the Letter of Credit
requested, if and when issued, must not cause the Obligations to exceed
the Borrowing Base;
"(ii) The face amount of the Letter of Credit
requested if and when issued must not cause the Letter of Credit Usage to
exceed the Letter of Credit Sublimit;
"(iii) Standby Letters of Credit may not have an
expiry date or draw period which extends beyond the earlier of (x) 365
days following the date of issuance, or (y) the date which is ten (10)
days prior to the Revolving Loans Maturity Date;
"(iv) Commercial Letters of Credit may not have an
expiry date or draw period which extends beyond the earlier of (x) 180
days following the date of issuance, or (y) the date which is ten (10)
days prior to the Revolving Loans Maturity Date; and
"(v) The conditions specified in Section 4.2 shall
have been satisfied on the date of issuance of such Letter of Credit.
"(b) Each Letter of Credit shall (i) be denominated in
Dollars or other currency acceptable to Bank, and (ii) be a standby or
commercial letter of credit issued to support obligations of a Borrower,
contingent or otherwise, in the ordinary course of business.
"(c) Each Letter of Credit shall be subject to the
Uniform Customs or the ISP, as determined by Bank, in its sole discretion,
and, to the extent not inconsistent therewith, the laws of the State of
California.
"(d) Bank shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or
cause the Bank to exceed any limits imposed by its organizational or
governing documents or by any applicable law, rule, regulation or treaty
or determination of an arbitrator or a court or other governmental
authority to which Bank is subject."
6. Amendment to Section 7.1(a). Section 7.1(a) of the Agreement is hereby
amended in its entirety as follows:
"(a) Use any proceeds of the Revolving Loans for any
purpose other than (i) for working capital, (ii) for general corporate
purposes, and (iii) for Permitted Payments."
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7. Amendment to Section 7.1(b). Upon receipt by Bank of the Term Loan
Readvance Notice and a Replacement Secured Promissory Note (Term Loan) in the
form of Exhibit A attached hereto, duly executed by Borrowers, and fulfillment
of the condition described in Section 12 hereinbelow, Section 7.1(b) of the
Agreement shall be automatically amended in its entirety as follows without
further action required from any party:
"(b) Use any proceeds of the Term Loan for any purpose other
than (i) to repay in full all Obligations owing by Borrowers under the
term loan made by Bank to Borrowers on the Closing Date, and (ii) for
Permitted Payments; or"
8. Amendments to Section 7.15.
(a) Clause (a) of Section 7.15 of the Agreement is hereby amended in
its entirety as follows:
"(a) the Quick Ratio, measured as of the end of each fiscal
quarter of Parent, at any time to be less than the ratio set forth in the
table below opposite the applicable test date:
TEST DATE: MINIMUM QUICK RATIO:
-------------------------------------------------- ----------------------------------------
9/30/03 0.65:1.0
12/31/03
3/31/04
6/30/04 0.60:1.0
9/30/04 0.65:1.0
12/31/04 and each fiscal quarter end thereafter 0.70:1.0
(b) Clause (g) of Section 7.15 of the Agreement is hereby amended in
its entirety as follows:
"(g) The Consolidated Total Liabilities to Consolidated
Effective Tangible Net Worth Ratio at any time, tested at the end of each
fiscal quarter of Parent, to be greater than the ratio set forth in the
table below opposite the applicable fiscal quarter:
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MAXIMUM CONSOLIDATED TOTAL LIABILITIES TO
CONSOLIDATED EFFECTIVE TANGIBLE NET WORTH
FISCAL QUARTER ENDING: RATIO:
-------------------------------------------- -----------------------------------------------
3/31/03 1.50:1.0
6/30/03
9/30/03 2.25:1.0
12/31/03
3/31/04
6/30/04
9/30/04
12/31/04 and each fiscal quarter thereafter 1.50:1.0
9. Replacement of Exhibit 1.1B. Exhibit 1.1 B attached to the Agreement is
hereby replaced with Exhibit 1.1B attached hereto.
10. Representations and Warranties. In order to induce Bank to enter into
this Amendment, Borrowers hereby represent and warrant to Bank that:
(a) No Event of Default or Unmatured Event of Default is continuing;
(b) All of the representations and warranties set forth in the
Agreement and the Loan Documents are true, complete and accurate in all respects
(except for representations and warranties which are expressly stated to be true
and correct as of the Closing Date); and
(c) This Amendment has been duly executed and delivered by the
Borrowers, and after giving effect to this Amendment, the Agreement and the Loan
Documents continue to constitute the legal, valid and binding agreements and
obligations of the Borrowers, enforceable in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency, and similar laws and
equitable principles affecting the enforcement of creditors' rights generally.
11. Conditions Precedent to Effectiveness of Amendment. The effectiveness
of this Amendment is subject to and contingent upon the fulfillment of each and
every one of the following conditions:
(a) Bank shall have received this Amendment, duly executed by the
Borrowers and Bank, together with the Acknowledgement and Agreement of
Subordinate Creditor attached hereto, duly executed by the Peninsula Fund III
Limited Partnership;
(b) Bank shall have received an upfront fee in the amount of
$35,000;
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(c) No Event of Default, Unmatured Event of Default or Material
Adverse Effect shall have occurred and be continuing; and
(d) All of the representations and warranties set forth herein, in
the Loan Documents and in the Agreement shall be true, complete and accurate in
all respects as of the date hereof (except for representations and warranties
which are expressly stated to be true and correct as of the Closing Date).
12. Additional Condition to New Term Loan. The obligation of Bank to make
a new Term Loan to Borrowers, as set forth in Section 4 hereinabove, is further
subject to and contingent upon the receipt by Bank of the Acknowledgement and
Agreement of Subordinate Creditor attached hereto, duly executed by ▇▇▇▇
▇▇▇▇▇▇▇▇.
13. Counterparts; Telefacsimile Execution. This Amendment may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Amendment. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile also shall deliver a manually executed
counterpart of this Amendment but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Amendment.
14. Integration. The Agreement as amended by this Amendment constitutes
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and thereof, and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof and thereof.
15. Reaffirmation of the Agreement. The Agreement as amended hereby and
the other Loan Documents remain in full force and effect.
[remainder of page intentionally left blank; signatures to follow]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Amendment as of the date first hereinabove written.
DECKERS OUTDOOR CORPORATION,
a Delaware corporation
By /s/ M. ▇▇▇▇▇ ▇▇▇
--------------------------------------------
Name: M. ▇▇▇▇▇ ▇▇▇
Title: Chief Financial Officer
UGG HOLDINGS, INC.,
a California corporation
By /s/ M. ▇▇▇▇▇ ▇▇▇
--------------------------------------------
Name: M. ▇▇▇▇▇ ▇▇▇
Title: Chief Financial Officer
COMERICA BANK,
a Michigan banking corporation, successor by
merger to Comerica Bank-California, a
California banking corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President-Western Division
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Exhibit 1.1B
To
Amendment Number Four to Amended and Restated Revolving Credit Agreement
Form of Borrowing Base Certificate
Exhibit 1.1B
BORROWING BASE CERTIFICATE
To: Comerica Bank
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Initially capitalized terms used but not defined in this Borrowing Base
Certificate shall have the meanings given to such terms in the Amended and
Restated Credit Agreement.
I. CALCULATION OF ELIGIBLE ACCOUNTS
1. Face amount of all Accounts: $_____________
2. (a) Less: Accounts that the Account Debtor has failed to pay
within 90 days of invoice date: $____________;
(b) Plus: Accounts for Teva(R) ineligible under line 2(a) above
with selling terms up to 120 days from invoice date created from
November 1 through January 31 of each year that are not past due:
$______________
(c) Plus: Accounts ineligible under line 2(a) above pre-approved
in writing by Bank owing to UGG with selling terms up to 120 days
from invoice date that are not unpaid 150 days from invoice date:
$______________(1)
Total lines 2(a), (b) and (c): $_____________
3. Less: Accounts owed by an Account Debtor or its Affiliates where
25% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under line (2) above:
$_____________
4. Less: Accounts with respect to which the Account Debtor is an
officer, director, shareholder, employee, Affiliate, or agent of
any Borrower: $_____________
--------
(1) May not exceed $5,000,000.
Exhibit 1.1B
1
5. Less: Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval,
▇▇▇▇ and hold, or other terms by reason of which the payment by
the Account Debtor may be conditional: $_____________
6. Less: Accounts that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief
executive office in the United States, or (ii) is not organized
under the laws of the United States or any State thereof, or
(iii) is the government of any foreign country or sovereign
state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency,
public corporation, or other instrumentality thereof, unless (y)
the Account is supported by an irrevocable letter of credit
reasonably satisfactory to Bank (as to form, substance, and
issuer or domestic confirming bank) that must be directly drawn
upon Bank, or (z) the Account is covered by credit insurance in
form and amount, and by an insurer, reasonably satisfactory to
Bank:
$_____________
7. Less: Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or
instrumentality of the United States (exclusive, however, of
Accounts with respect to which the applicable Borrower has
complied, to the reasonable satisfaction of Bank, with the
Assignment of Claims Act, 31 USCss.3727), or (ii) any state of
the United States (exclusive, however, of (y) Accounts owed by
any state that does not have a statutory counterpart to the
Assignment of Claims Act, or (z) Accounts owed by any state that
does have a statutory counterpart to the Assignment of Claims Act
as to which the applicable Borrower has complied to Bank's
reasonable satisfaction):
$_____________
8. Less: Accounts with respect to which the Account Debtor is a
creditor of any Borrower, and either has or has asserted a right
of setoff, has disputed its liability, or has made any claim with
respect to the Account, to the extent of such setoff, dispute or
claim: $_____________
Exhibit 1.1B
2
9. Less: Accounts with respect to an Account Debtor whose total
obligations owing to any Borrower exceed 20% of all Eligible
Accounts, to the extent of the obligations owing by such Account
Debtor in excess of such percentage:
$_____________
10. Less: Accounts with respect to which the Account Debtor is
subject to an Insolvency Proceeding, is not Solvent, has gone out
of business, or as to which any Borrower has received notice of
an imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor, or whose credit
standing is reasonably unacceptable to Bank and Bank has so
notified Borrower:
$_____________
11. Less: Accounts the collection of which Bank, in its reasonable
credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition: $_____________
12. Less: Accounts which are in default or collection: $_____________
13. Less: Accounts on C.O.D. terms: $_____________
14. Less: Accounts with respect to which the goods giving rise to
such Account have not been shipped and billed to the Account
Debtor, the services giving rise to such Account have not been
performed and accepted by the Account Debtor, or the Account
otherwise does not represent a final sale:
$_____________
15. Less: Accounts that are not subject to a valid and perfected
first priority Lien in favor of Bank: $_____________
16. Less: Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West
Virginia (or any other state that requires a creditor to file a
Business Activity Report or similar document in order to bring
suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such
state), unless the applicable Borrower has qualified to do
business in New Jersey, Minnesota, Indiana, West Virginia, or
such other states, or has filed a Notice of Business Activities
Report with the applicable division of taxation, the department
of revenue, or with such other state offices, as
Exhibit 1.1B
3
appropriate, for the then-current year, or is exempt
from such filing requirement:
$_____________
17. Less: Accounts that represent progress payments or other advance
▇▇▇▇▇▇▇▇ that are due prior to the completion of performance by
the applicable Borrower of the subject contract for goods or
services: $_____________
18. Total ineligible Accounts (sum of lines 2 through 17): $_____________
19. Total Eligible Accounts (line 1 minus line 18): $_____________
II. CALCULATION OF ELIGIBLE INVENTORY
20. Total Inventory consisting of shoes, footwear and apparel
finished goods held for sale in the ordinary course of any
Borrower's business located at one of any Borrower's business
locations set forth on Schedule 1.1E (or in-transit between any
such locations) to the Revolving Credit Agreement, that complies
with each of the representations and warranties respecting
Eligible Inventory made by Borrowers in the Loan Documents,
valued at the lower of cost or market on a basis consistent with
Borrowers' historical accounting practices:
$_____________
21. Less: Inventory that a Borrower does not have good, valid, and
marketable title thereto: $_____________
22. Less: Inventory not located at one of the locations in the
United States set forth on Schedule 1.1E to the Revolving Credit
Agreement or in transit from one such location to another such
location: $_____________
23. Less: Inventory located on real property leased by a Borrower or
in a contract warehouse, in each case, unless it is subject to a
Collateral Access Agreement executed by the lessor, warehouseman,
or other third party, as the case may be, and unless it is
segregated or otherwise separately identifiable from goods of
others, if any, stored on the premises:
$_____________
24. Less: Inventory not subject to a valid and perfected first
priority Lien in favor of Bank: $_____________
Exhibit 1.1B
4
25. Less: Goods returned or rejected by the applicable Borrower's
customers: $_____________
26. Less: Goods that are (x) obsolete or not in the following
season's line and more than six (6) months old, (y) restrictive
or custom items, work-in-process, or raw materials, or (z) goods
that constitute spare parts, packaging and shipping materials,
supplies used or consumed in a Borrower's business, ▇▇▇▇ and hold
goods, defective goods, "seconds," or Inventory acquired on
consignment:
$_____________
27. Total ineligible Inventory (sum of lines 21 through 25):
$_____________
28. Total Eligible Inventory (line 20 minus line 27): $_____________
III. CALCULATION OF BORROWING BASE AND AVAILABILITY
29. Availability from Eligible Accounts (____%(2) of line 19): $_____________
30. (a) 50% of line 28: $_____________
(b) $12,500,000
Availability from Eligible Inventory (the lesser of lines 30(a)
or (b): $_____________
31. Sum of lines 29 and 30: $_____________
32. Revolving Credit Commitment: $20,000,000
33. The lesser of lines 31 and 32: $_____________
34. Less: the outstanding Obligations in respect of Revolving Loans:
$_____________
35. Less: the Foreign Exchange Reserve: $_____________
36. Less: other reserves established by Bank: $_____________
37. Availability (line 33 minus lines 34, 35 and 36) $_____________
---------
(2) Enter the Applicable A/R Advance Rate.
Exhibit 1.1B
5
Each of the undersigned hereby represents and warrants to Comerica Bank -
California that the information set forth above is true and correct as of the
date set forth hereinbelow, and based upon the information set forth in
Borrowers' books and records.
Dated:_______________, 20__
DECKERS OUTDOOR CORPORATION
By
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
UGG HOLDINGS, INC.
By
----------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Exhibit 1.1B
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Exhibit A
To
Amendment Number Four to Amended and Restated Revolving Credit Agreement
Form of Replacement Secured Promissory Note (Term Loan)
Exhibit A
REPLACEMENT SECURED PROMISSORY NOTE
(TERM LOAN)
$7,000,000 Los Angeles, California
November __, 2003
1. FOR VALUE RECEIVED, DECKERS OUTDOOR CORPORATION, a Delaware corporation
("Deckers") and UGG HOLDINGS, INC., a California corporation ("UGG", and
together with Deckers, the "Makers"), jointly and severally promise to pay to
the order of COMERICA BANK, a Michigan banking corporation ("Payee"), on or
before the Term Loan Maturity Date, the principal sum of Seven Million Dollars
($7,000,000), or such lesser sum as shall equal the aggregate outstanding
principal amount of the Term Loan made by Payee to Makers pursuant to the
Agreement (as defined below).
2. Makers promise to make principal reduction payments on the outstanding
principal balance hereof in the amounts and on the dates specified in the
Agreement. Makers further promise to pay interest from the date of this
Replacement Secured Promissory Note (this "Note"), in like money, on the
aggregate outstanding principal amount hereof at the rates and on the dates
provided in the Agreement. All computations of interest shall be in accordance
with the provisions of the Agreement.
3. Makers hereby authorize Payee to record in its books and records the
date, type and amount of the Term Loan, and of each continuation, conversion and
payment of principal made by Makers, and Makers agree that all such notations
shall, in the absence of manifest error, be conclusive as to the matters so
noted; provided, however, any failure by Payee to make such notation with
respect to the Term Loan or continuation, conversion, or payment thereof shall
not limit or otherwise affect Makers' obligations under the Agreement or this
Note.
4. Upon the occurrence and during the continuance of an Event of Default,
in addition to and not in substitution of any of Payee's other rights and
remedies with respect to such Event of Default, the entire unpaid principal
balance of the Term Loan shall bear interest at the otherwise applicable rate
plus three hundred (300) basis points. In addition, interest, Expenses, the
Fees, and other amounts due hereunder not paid when due shall bear interest at
the Base Lending Rate plus three hundred (300) basis points until such overdue
payment is paid in full.
5. If any payment due hereunder, whether for principal, interest, or
otherwise, is not paid on or before the tenth (10th) day after the date such
payment is due, in addition to and not in substitution of any of Payee's other
rights and remedies with respect to such nonpayment, Makers shall pay to Payee,
a late payment fee ("Late Payment Fee") equal to five percent (5%) of the amount
of such overdue payment. The Late Payment Fee shall be due and payable on the
eleventh (11th) day after the due date of the overdue payment with respect
thereto.
6. Makers shall make all payments hereunder in lawful money of the United
States of America and in immediately available funds to Payee at Payee's office
located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇; or to such other
Exhibit A
1
address as Payee may from time to time specify by notice to Makers in accordance
with the terms of the Agreement.
7. In no event shall the interest rate and other charges hereunder exceed
the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that Payee has received interest and other
charges hereunder in excess of the highest rate applicable hereto, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the principal balance hereof, and the provisions hereof shall be deemed
amended to provide for the highest permissible rate. If there is no principal
balance outstanding, Payee shall refund to Makers such excess.
8. This Note is the "Term Loan Note" issued pursuant to that certain
Amendment Number Four to Amended and Restated Credit Agreement, dated as of even
date herewith (the "Amendment"), by and among Makers, as Borrowers, and Payee,
and is governed by the terms of the Agreement (as defined in the Amendment).
Initially capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Agreement. The Agreement, among other things,
contains provisions for acceleration of the maturity of this Note upon the
happening of certain stated events and also for prepayments on account of
principal of this Note prior to the maturity hereof upon the terms and
conditions specified in the Agreement. This Note and the Term Loan evidenced
hereby may be assigned or otherwise transferred in whole or in part by Payee
pursuant to the terms of the Agreement.
9. This Note is secured by the Liens granted to Payee under the Loan
Documents.
10. Makers hereby waive presentment for payment, notice of dishonor,
protest and notice of protest.
11. (a) THE VALIDITY OF THIS NOTE, THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL
MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD FOR PRINCIPLES OF CONFLICTS OF LAWS.
(B) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT PAYEE'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE PAYEE ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. MAKERS AND PAYEE WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON
Exhibit A
2
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 11.
(C) MAKERS AND PAYEE HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. MAKERS AND
PAYEE REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, each Maker has duly executed this Note as of the date
first above written.
DECKERS OUTDOOR CORPORATION,
a Delaware corporation
By /s/ M. ▇▇▇▇▇ ▇▇▇
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Name: M. ▇▇▇▇▇ ▇▇▇
Title: Chief Financial Officer
UGG HOLDINGS, INC.,
a California corporation
By /s/ M. ▇▇▇▇▇ ▇▇▇
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Name: M. ▇▇▇▇▇ ▇▇▇
Title: Chief Financial Officer
Exhibit A
3
ACKNOWLEDGMENT AND AGREEMENT OF SUBORDINATE CREDITOR
The undersigned, a subordinate creditor of Deckers Outdoor Corporation and
Ugg Holdings, Inc. ("Borrowers") to Comerica Bank ("Bank") pursuant to a Senior
Subordination Agreement, dated as of November 25, 2002, as amended by that
certain Amendment Number One to Senior Subordination Agreement, dated as of
April 29, 2003, that certain Amendment Number Two to Senior Subordination
Agreement, dated as of June 27, 2003, and that certain Amendment Number Three to
Senior Subordination Agreement, dated as of November 13, 2003 (as so amended,
the "Subordination Agreement"), hereby (i) acknowledges receipt of the foregoing
Amendment Number Four to Amended and Restated Credit Agreement between Borrowers
and Bank (the "Amendment"), (ii) consents to the terms and execution thereof,
and (iii) acknowledges that the Subordination Agreement remains in full force
and effect. Without limiting the generality of the foregoing, the undersigned
hereby consents to the making of the Term Loan (as defined in the Amendment) and
agrees that the Term Loan shall constitute Senior Debt (as defined in the
Subordination Agreement). The undersigned further acknowledges that Bank may
amend, restate, extend, renew or otherwise modify the Senior Loan Documents (as
defined in the Subordination Agreement) and any indebtedness or agreement of
Borrowers, or enter into any agreement or extend additional or other credit
accommodations, without notifying or obtaining the consent of the undersigned
and without impairing the obligations of the undersigned under the Subordination
Agreement, to the extent set forth in the Subordination Agreement, and no
obligation to notify or seek the consent of the undersigned shall be implied by
the execution of this Acknowledgement and Agreement.
THE PENINSULA FUND III LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Peninsula Capital Partners, L.L.C.
Its: General Partner
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Investment Officer
ACKNOWLEDGMENT AND AGREEMENT OF SUBORDINATE CREDITOR
The undersigned, a subordinate creditor of Deckers Outdoor Corporation
("Borrower") to Comerica Bank ("Bank") pursuant to a Subordination Agreement,
dated as of November 25, 2002 (the "Subordination Agreement"), hereby (i)
acknowledges receipt of the foregoing Amendment Number Four to Amended and
Restated Credit Agreement between Borrower, UGG Holdings, Inc. and Bank (the
"Amendment"), (ii) consents to the terms and execution thereof, and (iii)
acknowledges that the Subordination Agreement remains in full force and effect.
The undersigned further acknowledges that Bank may amend, restate, extend, renew
or otherwise modify the Senior Debt (as defined in the Subordination Agreement)
and any indebtedness or agreement of the Borrower, or enter into any agreement
or extend additional or other credit accommodations, without notifying or
obtaining the consent of the undersigned and without impairing the obligations
of the undersigned under the Subordination Agreement, to the extent set forth in
the Subordination Agreement, and no obligation to notify or seek the consent of
the undersigned shall be implied by the execution of this Acknowledgement and
Agreement.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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