EXHIBIT 10.2
EXECUTION COPY
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment (this "Amendment") to the Credit Agreement referenced
below is entered into as of May 3, 2004, among Quiksilver, Inc., a Delaware
corporation (the "Company"), the other borrowers signatory hereto (collectively
with the Company, the "Borrowers"), the lenders signatory hereto (the " Majority
Lenders"), and JPMorgan Chase Bank, as administrative agent for the Lenders (in
such capacity, the "Agent").
RECITALS:
WHEREAS, the Borrowers, the Lenders and the Agent are parties to the
Credit Agreement, dated as of June 27, 2003 (the "Credit Agreement"), providing
for the extension of credit to the Borrowers in the form of revolving credit
loans and letters of credit in an aggregate principal amount not to exceed
$200,000,000; and
WHEREAS, the Borrowers have requested that certain provisions of the
Credit Agreement be amended, and the Majority Lenders have agreed to such an
amendment, on the terms and subject to the conditions set forth in this
Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendments to Credit Agreement
(a) Section 1.1 of the Credit Agreement. The following defined term
is hereby added to Section 1.1 of the Credit Agreement following the definition
of the term "Currency":
"DC Shoes Acquisition": the acquisition by Quiksilver of DC Shoes,
Inc., a California corporation ("DC Shoes"), pursuant to that
certain Stock Purchase Agreement, dated as of March 8, 2004, by and
among Quiksilver, DC Shoes and the Sellers of DC Shoes, for a
Consideration equal to the sum of (i) approximately US$56,000,000 in
cash, subject to certain adjustments, (ii) approximately 1,600,000
shares of Quiksilver common stock, subject to certain adjustments,
and (iii) possible earnout payments up to US$57,000,000.
(b) Section 5.1(c) of the Credit Agreement. Section 5.1(c) of the
Credit Agreement is hereby amended and restated as follows:
(c) Within 105 days after the end of each fiscal year,
Quiksilver shall deliver to the Lenders its projections with respect
to the financial performance of Quiksilver and its Subsidiaries for
the fiscal year commencing on the immediately preceding November 1.
Such projections shall include quarterly cash-flow forecasts,
quarterly consolidated balance sheets and quarterly
consolidating income statements and shall otherwise be in form and
scope reasonably satisfactory to the Agent.
(c) Section 6.3(b) of the Credit Agreement. Section 6.3(b) of the
Agreement is hereby amended and restated as follows:
(b) Liens existing on any Property (other than trademarks,
copyrights and other intellectual property rights) at the time of
the acquisition of such Property and not created in anticipation of
such acquisition; provided, however, with respect to a Subsidiary,
the stock of which is acquired by one of the Borrowers, the Property
of such Subsidiary shall be deemed to be acquired at the time the
stock of such Subsidiary is acquired by such Borrower;
(d) Section 6.7(d) of the Credit Agreement. Section 6.7(d) of the
Credit Agreement is hereby amended and restated as follows:
(d) Acquisitions of Persons or businesses in the same line of
business as that described in Section 3.17, provided that (i) no
Default has occurred and is continuing or would result from the
consummation of such Acquisition (and Quiksilver shall have
delivered to the Agent a Covenant Compliance Certificate showing pro
forma calculations, as of the most recent quarter-end for which a
Covenant Compliance Certificate has been provided by Quiksilver, and
as of each of the three subsequent quarter-ends and on an annual
basis thereafter through the Revolving Loan Commitment Expiration
Date, assuming such Acquisition had been consummated), (ii) the
aggregate Consideration therefor shall not exceed US$25,000,000
annually, and US$50,000,000 in the aggregate, between the Closing
Date and the Maturity Date; provided, however, that the
Consideration set forth in the definition of "DC Shoes Acquisition"
shall not be considered in this calculation, (iii) the Agent shall
have received, reviewed and approved all documents requested by the
Agent to insure that the Lenders have a first-priority security
interest in, and assignment of, all personal property assets and
interests acquired (excluding intellectual property), to the extent
that a security interest in such assets and interests is required by
the terms of this Agreement, including consents of third parties if
reasonably requested, and (iv) such Acquisition is not opposed by
the Person to be, or whose business is to be, acquired.
(e) Schedule 3.19 to the Credit Agreement. Schedule 3.19 to the
Credit Agreement is hereby amended to add DC Shoes as a Material Domestic
Subsidiary.
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2. Certain Tax Matters Regarding DC Shoes. The Agent and the Lenders
hereby agree that the matters regarding DC Shoes listed in Schedule 3 attached
hereto are exceptions to Section 3.6 of the Credit Agreement, and such matters
shall not constitute a breach thereof.
3. Waiver. To the extent required under the Credit Agreement, if at all,
the Majority Lenders hereby waive compliance by Quiksilver with the requirements
of Section 5.1(c) of the Credit Agreement For the delivery of certain financial
projections for the fiscal year commencing on November 1, 2003.
4. Defined Terms. All capitalized terms used herein, unless otherwise
defined herein, have the same meanings provided herein or in the Credit
Agreement.
5. Modification of Credit Agreement. This Amendment is limited precisely
as written and shall not be deemed to (a) be a consent to a waiver or
modification of any other term or condition of the Credit Agreement, the other
Loan Documents or any of the documents referred to therein or executed in
connection therewith except as provided in Sections 1,2 and 3 hereof or (b)
prejudice any right or rights the Lenders may now have or may have in the future
under or in connection with the Credit Agreement, the other Loan Documents or
any documents referred to therein or executed in connection therewith.
6. Construction. This Amendment is a document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered or applied in accordance with the terms and provisions
thereof. Whenever the Credit Agreement is referred to in the Credit Agreement or
any of the instruments, agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to mean the Credit
Agreement, as modified by this Amendment.
7. Counterparts. This Amendment may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement. The parties may
execute facsimile copies of this Amendment and the facsimile signature of any
such party shall be deemed an original and fully binding on said party.
8. Governing Law. This Amendment shall be governed and construed in
accordance with the applicable terms and provisions of Section 9.11 (Governing
Law) of the Credit Agreement, which terms and provisions are incorporated herein
by reference.
9. Amendment Not a Novation. Except as hereby amended, no other term,
condition or provision of the Credit Agreement shall be deemed modified or
amended, and this Amendment shall not be considered a novation.
10.Authorization. The Majority Lenders hereby direct and instruct the
Administrative Agent to execute this Amendment.
11. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
[ Remainder of Page Intentionally Left Blank. Signature Pages Follow.]
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IN WITNESS WHEREOF, the Borrowers, the Majority Lenders, and the
Administrative Agent have caused this First Amendment to the Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first written above.
BORROWERS
QUIKSILVER, INC.
By:
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CFO
NA PALI, S.A.S.
By:
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: PRESIDENT
QUIKSILVER JAPAN K.K.
By:
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Name: ▇▇▇▇▇▇▇ EXON
Title: DIRECTOR
UG MANUFACTURING CO PTY LTD.
By:
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Name: ▇▇▇▇▇▇▇ EXON
Title: DIRECTOR
[Signature Pages to First Amendment to Credit Agreement]
LENDERS
CHASE BANK, as a Lender
By:
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Name: ▇▇▇▇ ▇'▇▇▇▇▇
Title: VICE PRESIDENT
Loan Commitment: $25,000,000
Address for Notices
(a) For Credit
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations (Other Than Letters of Credit)
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(c) For Letters of Credit
Global Trade Services
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Building No. 2, 4th Floor
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans: ▇▇▇▇
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Applicable Lending Office For LIBOR Loans:
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Applicable Lending Office for Participations in Letters of
Credit:
Global Trade Services
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Building No. 2, 4th Floor
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[Signature Pages to First Amendment to Credit Agreement]
UNION BANK Of CALIFORNIA, N.A.,
as a Lender
By:
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Name: ▇▇▇▇▇▇▇▇ Fuchank
Title: V.P.
Loan Commitment: $40,000,000
Address for Notices
(a) For Credit
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
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Applicable Lending Office for LIBOR Loans:
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Applicable Lending Office for Participations in
Letters of Credit:
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[Signature Pages to First Amendment to Credit Agreement]
FLEET NATIONAL BANK, as a Lender
By:
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
Loan Commitment: $20,000,000
Address for Notices
(a) For Credit
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
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Applicable Lending Office for LIBOR Loans:
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Applicable Lending Office for Participations in
Letters of Credit:
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[Signature Pages to First Amendment to Credit Agreement]
BANK OF AMERICA, N.A., as a Lender
By:
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
Loan Commitment: $20,000,000
Address for Notices
(a) For Credit
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
(b) For Operations
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
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Applicable Lending Office for LIBOR Loans:
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Applicable Lending Office for Participations in
Letters of Credit:
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[Signature Pages to First Amendment to Credit Agreement]
U.S. BANK NATIONAL, ASSOCIATION, as a
Lender
By:
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Loan Commitment: $25,000,000
Address for Notices
(a) For Credit
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
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Applicable Lending Office for LIBOR Loans:
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Applicable Lending Office for Participations in
Letters of Credit:
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[Signature Pages to First Amendment to Credit Agreement]
COMERICA BANK, as a Lender
By:
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
Loan Commitment: $10,000,000
Address for Notices
(a) For Credit
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
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Applicable Lending Office for LIBOR Loans:
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Applicable Lending Office for Participations in
Letters of Credit:
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[Signature Pages to First Amendment to Credit Agreement]
HSBC BANK USA, as a Lender
By:
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Sr. Vice President
Loan Commitment: $20,000,000
Address for Notices
(a) For Credit
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base RATE LOANS:
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Applicable Lending Office for LIBOR Loans:
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Applicable Lending Office for
Participations in Letters of Credit:
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[Signature Pages to First Amendment to Credit Agreement]
BANK ONE, N.A., AS A LENDER
By:
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Associate
Loan Commitment: $15,000,000
Address for Notices
(a) For Credit
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Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
Bank One Plaza, Suite IL 1-0086
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Applicable Lending Office for LIBOR Loans:
Bank One Plaza, Suite IL 1-0086
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Applicable Lending Office for Participations
in Letters of Credit:
Bank One Plaza, Suite IL 1-0086
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[Signature Pages to First Amendment to Credit Agreement]
BANK LEUMI USA, AS A LENDER
By:
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Loan Commitment: $10,000,000
Address for Notices
(a) Bank Leumi USA
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
Bank Leumi USA
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
Bank Leumi USA
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Applicable Lending Office for LIBOR Loans:
Bank Leumi USA
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Applicable Lending Office for Participations in
Letters of Credit:
Bank Leumi USA
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[Signature Pages to First Amendment to Credit Agreement]
ISRAEL DISCOUNT BANK OF NEW YORK, as
a Lender
By:
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NAME: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
TITLE: FVP
BY:
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Manager
Loan Commitment: $15,000,000
Address for Notices
(a) For Credit
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For Operations
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Approved Lending Offices
Applicable Lending Office for Base Rate Loans:
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Applicable Lending Office for LIBOR Loans:
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Applicable Lending Office for Participations in
Letters of Credit:
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[Signature Pages to First Amendment to Credit Agreement]
SCHEDULE 3
EXCEPTIONS TO SECTION 3.6 OF THE CREDIT AGREEMENT
With respect to one of Quiksilver's Material Domestic Subsidiaries, DC
Shoes, Inc., a California corporation ("DC Shoes"):
(a) DC Shoes has been informed by the Hong Kong Inland Revenue Department
that a subsidiary of DC Shoes failed to timely file a Profits Tax return with
respect to its 2002 and 2003 fiscal years. Such subsidiary may be subject to a
penalty and fines which should not be material.
(b) The corporate income and payroll tax returns of DC Shoes have been
audited for fiscal years 1998, 1999 and 2000. To Quiksilver's knowledge, all
issues relating to such years, except those with respect to the 2000 corporate
income tax return, have been resolved. The primary issues raised by the IRS in
connection with each audit related to the following:
(i) Unsubstantiated use of the corporate credit card;
(ii) Expensing certain capital expenditures;
(iii) Using incorrect amortization schedule lor certain capital
expenditures;
(iv) Mischaracterization of ▇▇▇▇▇▇▇ ▇▇▇▇▇ as an independent
contractor instead of as an employee;
(v) Failure to amortize legal expenses related to trademark
registration; and
(vi) Issues relating to Section 263A of the Code.
(c) The issues discussed above with respect to the federal corporate
income and payroll tax returns of DC Shoes also relate to the corresponding
California state tax returns of DC Shoes. DC Shoes has filed amended California
state corporate tax returns for fiscal years 1998 and 1999 based on the
settlement with the IRS Upon final settlement of the 2000 tax year with the
IRS, it is the intent of DC Shoes to file an amended 2000 California state
return based on the settlement with the IRS. Nonetheless, the California tax
returns have not been audited, and deficiency amounts still could be assessed
against DC Shoes in the future with respect to those tax returns for which the
statute of limitations has not expired.
(d) The states of Washington and Arizona have informed DC Shoes that it
may be subject to franchise taxes in those slates based on the fact that DC
Shoes has employees in those states. DC Shoes has not filed returns for such
franchise taxes (or similar taxes).