EX-10.2 3 a04578exv10w2.txt EXHIBIT 10.2 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. 2 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.] 3 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: -------------------------------------------- Name: STEVEN L. BRINK Title: CFO NA PALI, S.A.S. By: -------------------------------------------- Name: BERNARD MARIETTE Title: PRESIDENT QUIKSILVER JAPAN K.K. By: -------------------------------------------- Name: CHARLES EXON Title: DIRECTOR UG MANUFACTURING CO PTY LTD. By: -------------------------------------------- Name: CHARLES EXON Title: DIRECTOR [Signature Pages to First Amendment to Credit Agreement] LENDERS CHASE BANK, as a Lender By: ------------------------------------------------------ Name: PAUL O'NEILL Title: VICE PRESIDENT Loan Commitment: $25,000,000 Address for Notices (a) For Credit 1411 Broadway, 5th Floor New York, New York 10018 Attention: Paul J. O'Neill Telephone: (212) 391-7157 Facsimile: (212) 391-7118 (b) For Operations (Other Than Letters of Credit) 1411 Broadway, 5th Floor New York, New York 10018 Attention: Millie Nogueras Telephone: (212) 391-6079 Facsimile: (212) 391-7283 (c) For Letters of Credit Global Trade Services 10420 Highland Manor Drive Building No. 2, 4th Floor Tampa, Florida 33610 Attention: Mildred Bowens Telephone: (813) 432-6347 Facsimile: (813) 432-5162 Approved Lending Offices Applicable Lending Office for Base Rate Loans: 1411 Broadway, 5th Floor New York, New York 10018 Applicable Lending Office For LIBOR Loans: 1411 Broadway, 5th Floor New York, New York 10018 Applicable Lending Office for Participations in Letters of Credit: Global Trade Services 10420 Highland Manor Drive Building No. 2, 4th Floor Tampa, Florida 33610 [Signature Pages to First Amendment to Credit Agreement] UNION BANK Of CALIFORNIA, N.A., as a Lender By: ------------------------------- Name: Margaret Fuchank Title: V.P. Loan Commitment: $40,000,000 Address for Notices (a) For Credit 18300 Von Karman Avenue, Suite 310 Irvine, California 92612 Attention: Margaret Furbank Telephone: (949) 553-6853 Facsimile: (949) 553-7122 (b) For Operations 601 Potrero Grande Drive Monterey Park, California 91754 Attention: Shirley Davis Telephone: (323) 720-2870 Facsimile: (323) 724-6198 Approved Lending Offices Applicable Lending Office for Base Rate Loans: 18300 Von Karman Avenue, Suite 310 Irvine, California 92612 Applicable Lending Office for LIBOR Loans: 18300 Von Karman Avenue, Suite 310 Irvine, California 92612 Applicable Lending Office for Participations in Letters of Credit: 1980 Saturn Street Monterey Park, California 91755 [Signature Pages to First Amendment to Credit Agreement] FLEET NATIONAL BANK, as a Lender By: ------------------------------- Name: Stephen J. Garvin Title: Managing Director Loan Commitment: $20,000,000 Address for Notices (a) For Credit 40 Broad Street Boston, Massachusetts 02115 Attention: Stephen J. Garvin Telephone: (617) 434-9399 Facsimile: (617) 434-6685 (b) For Operations 100 Federal Street Bostons, Massachusetts 02110 Attention: Michelle Mogan Telephone: (617) 434-4187 Facsimile: (617) 434-9933 Approved Lending Offices Applicable Lending Office for Base Rate Loans: 100 Federal Street Boston, Massachusetts 02110 Applicable Lending Office for LIBOR Loans: 100 Federal Street Boston, Massachusetts 02110 Applicable Lending Office for Participations in Letters of Credit: 100 Federal Street Boston, Massachusetts 02110 [Signature Pages to First Amendment to Credit Agreement] BANK OF AMERICA, N.A., as a Lender By: ------------------------------- Name: Cynthia Goodfellow Title: Vice President Loan Commitment: $20,000,000 Address for Notices (a) For Credit 675 Anton Boulevard, 2nd Floor Costa Mesa, California 92626 Attention: Cynthia K. Goodfellow Telephone: (714) 850-6547 Facsimile: (714)850-6586 (b) For Operations 333 Beaudry Street; Suite 1100 Los Angeles, California 90017 Attention: Maria Castro Telephone: (714) 850-6504 Facsimile: (714) 850-6586 Approved Lending Offices Applicable Lending Office for Base Rate Loans: 675 Anton Boulevard, 2nd Floor Costa Mesa, California 92626 Applicable Lending Office for LIBOR Loans: 1455 Market Street, 5th Floor San Francisco, California 94103 Applicable Lending Office for Participations in Letters of Credit: 675 Anton Boulevard, 2nd Floor Costa Mesa, California 92626 [Signature Pages to First Amendment to Credit Agreement] U.S. BANK NATIONAL, ASSOCIATION, as a Lender By: ------------------------------- Name: Marni A. Lombardo Title: Vice President Loan Commitment: $25,000,000 Address for Notices (a) For Credit 4100 Newport Place, Suite 900 Newport Beach, California 92660 Attention: Marni Lombardo Telephone: (949) 863-2365 Facsimile: (949) 863-2335 (b) For Operations 555 SW Oak Portland, Oregon 97204 Attention: Marcy Marlow Telephone: (503) 275-5005 Facsimile: (503) 275-8181 Approved Lending Offices Applicable Lending Office for Base Rate Loans: 4100 Newport Place, Suite 900 Newport Beach, California 92660 Applicable Lending Office for LIBOR Loans: 4100 Newport Place, Suite 900 Newport Beach, California 92660 Applicable Lending Office for Participations in Letters of Credit: 4100 Newport Place, Suite 900 Newport Beach, California 92660 [Signature Pages to First Amendment to Credit Agreement] COMERICA BANK, as a Lender By: ------------------------------- Name: Deborah Jenkins Title: Vice President Loan Commitment: $10,000,000 Address for Notices (a) For Credit 201 North Figueroa Street, Suite 1425 Los Angeles, California 90012 Attention: Deborah Jenkins Telephone: (213) 484-3729 Facsimile: (213) 484-3775 (b) For Operations 201 North Figueroa Street, Suite 1425 Los Angeles, California 90012 Attention: Margarita Quiteno Telephone: (213) 484-3722 Facsimile: (213) 484-3775 Approved Lending Offices Applicable Lending Office for Base Rate Loans: 333 West Santa Clara Street San Jose, California 95113 Applicable Lending Office for LIBOR Loans: 333 West Santa Clara Street San Jose, California 95113 Applicable Lending Office for Participations in Letters of Credit: 333 West Santa Clara Street San Jose, California 95113 [Signature Pages to First Amendment to Credit Agreement] HSBC BANK USA, as a Lender By: ---------------------------- Name: George Ahlmeyer Title: Sr. Vice President Loan Commitment: $20,000,000 Address for Notices (a) For Credit 452 Fifth Avenue, 4th Floor New York, New York 10018 Attention: Michael Behuniak/George Ahlmeyer Telephone: (212) 525-6589 Facsimile: (212) 525-6905 (b) For Operations 1 HSBC Center, 26th Floor Buffalo, New York 14203 Attention: Donna L. Riley Telephone: (716) 841-4178 Facsimile: (716) 841-0269 Approved Lending Offices Applicable Lending Office for Base RATE LOANS: 452 Fifth Avenue, 4th Floor New York, New York 10018 Applicable Lending Office for LIBOR Loans: 452 Fifth Avenue, 4th Floor New York, New York 10018 Applicable Lending Office for Participations in Letters of Credit: 452 Fifth Avenue, 4th Floor New York, New York 10018 [Signature Pages to First Amendment to Credit Agreement] BANK ONE, N.A., AS A LENDER By: --------------------------------- Name: Marion M. Church Title: Associate Loan Commitment: $15,000,000 Address for Notices (a) For Credit 131 South Dearborn Street Chicago, Illinois 60603 Attention: Marion Church Telephone: (312) 325-3234 Facsimile: (312) 325-3050 (b) For Operations 1 Bank One Plaza, Suite IL 1-0088 Chicago, Illinois 60670 Attention: Saul Gierstikas Telephone: (312) 732-1794 Facsimile: (312) 732-4303 Approved Lending Offices Applicable Lending Office for Base Rate Loans: Bank One Plaza, Suite IL 1-0086 Chicago, Illinois 60670 Applicable Lending Office for LIBOR Loans: Bank One Plaza, Suite IL 1-0086 Chicago, Illinois 60670 Applicable Lending Office for Participations in Letters of Credit: Bank One Plaza, Suite IL 1-0086 Chicago, Illinois 60670 [Signature Pages to First Amendment to Credit Agreement] BANK LEUMI USA, AS A LENDER By: -------------------------------- Name: Jacques V. Delvoye Title: Vice President Loan Commitment: $10,000,000 Address for Notices (a) Bank Leumi USA 8383 Wilshire Boulevard, #400 Beverly Hills, California 90211 Attention: Jacques Delvoye Telephone: (323) 966-4727 Facsimile: (323) 966-4248 (b) For Operations Bank Leumi USA 8383 Wilshire Boulevard, #400 Beverly Hills, California 90211 Attention: Jacques Delvoye Telephone: (323) 966-4727 Facsimile: (323) 966-4248 Approved Lending Offices Applicable Lending Office for Base Rate Loans: Bank Leumi USA 8383 Wilshire Boulevard, #400 Beverly Hills, California 90211 Applicable Lending Office for LIBOR Loans: Bank Leumi USA 8383 Wilshire Boulevard, #400 Beverly Hills, California 90211 Applicable Lending Office for Participations in Letters of Credit: Bank Leumi USA 8383 Wilshire Boulevard, #400 Beverly Hills, California 90211 [Signature Pages to First Amendment to Credit Agreement] ISRAEL DISCOUNT BANK OF NEW YORK, as a Lender By: ----------------------------- NAME: Alan Lefkowitz TITLE: FVP BY: ----------------------------- Name: Lucas Ramirez Title: Assistant Manager Loan Commitment: $15,000,000 Address for Notices (a) For Credit 511 Fifth Avenue New York, New York 10017 Attention: Alan Lefkowitz Telephone: (212) 551-8288 Facsimile: (212) 551-8720 (b) For Operations 511 Fifth Avenue New York, New York 10017 Attention: Alan Lefkowitz Telephone: (212) 551-8288 Facsimile: (212) 551-8720 Approved Lending Offices Applicable Lending Office for Base Rate Loans: 511 Fifth Avenue New York, New York 10017 Applicable Lending Office for LIBOR Loans: 511 Fifth Avenue New York, New York 10017 Applicable Lending Office for Participations in Letters of Credit: 511 Fifth Avenue New York, New York 10017 [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 Clayton Blehm 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).