exv10w2






Exhibit 10.2




COMMITMENT LETTER

$200,000,000 Senior Secured Revolving Credit Facility




June 8, 2009




Quiksilver, Inc. and

Quiksilver Americas, Inc.

15202 Graham St.

Huntington Beach, CA 92649




Attention:  Joseph Scirocco, Chief Financial Officer




Dear Mr. Scirocco:




     We are pleased to advise Quiksilver, Inc. (the “Parent”) and Quiksilver Americas, Inc.
of the agreement of (a) Bank of America, N.A. (“Bank”) and General Electric Capital
Corporation (“GECC”) to provide their separate commitments for the financing of a senior
secured revolving credit facility in favor of Quiksilver Americas, Inc. and certain of its domestic
subsidiaries (collectively, the “Borrower”) in an aggregate principal amount equal to
$200,000,000 (the “Facility”) and (b) Banc of America Securities LLC (“BAS”), an
affiliate of Bank, and GE Capital Markets, Inc. (“GECM”; collectively, together with BAS,
the “Arrangers”), an affiliate of GECC, to seek to arrange for the syndication of the
Facility, all as contemplated in this letter and the Summary of Principal Terms and Conditions (the
“Term Sheet”) annexed to this letter as EXHIBIT A (including, without limitation, a
maturity date of three years from the closing date of the Facility).



     Subject to the terms and conditions set forth in this letter, the Term Sheet, and the fee
letter, dated May 21, 2009, among the Borrower, Bank, BAS, GECC and GECM (the “Fee
Letter”), Bank’s several commitment under the Facility shall be in an amount equal to
$100,000,000 (the “Bank Commitment”) and GECC’s several commitment under the Facility shall
be in an amount equal to $100,000,000 (the “GECC Commitment”).



     Bank will act as the sole and exclusive administrative agent for the Facility and Bank and
GECC will act as co-collateral agents for the Facility. The Arrangers shall act as joint lead
arrangers and joint bookrunners. Each of BAS, Bank, GECC and GECM will have the rights and
authority customarily given to financial institutions in such roles, but shall have no duties other
than those expressly set forth herein. No additional agents, co-agents or arrangers will be
appointed with respect to the syndication of the Facility except with the consent of BAS and Bank.



     BAS intends to commence syndication efforts promptly. The Borrower will actively assist BAS in
achieving a Successful Syndication (as defined in the Fee Letter), until such obligation to assist
expires pursuant to the terms of the Fee Letter. Such assistance shall include, among other
things, (a) making the Borrower’s senior officers, representatives, and advisors available from
time to time to attend and make presentations regarding the business of the Borrower at one or more
meetings of prospective lenders; (b) providing, and causing its advisors to provide, BAS, Bank,
GECC and GECM and other prospective lenders with all such customary financial and other customary
information with respect to the Borrower and the transactions contemplated by this letter,
including but not limited to customary financial projections and forecasts relating to the
foregoing which BAS, Bank, GECC, GECM or any such lender reasonably may request from time to time;
and (c) assisting in the preparation of customary marketing materials to be used in connection with
the syndication of the Facility.



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     BAS and Bank will, in consultation with the Borrower, manage and control all aspects of the
syndication, including decisions as to the selection of proposed additional lenders (which lenders
shall be reasonably acceptable to the Borrower, not to be unreasonably withheld) and any titles
offered to proposed additional lenders, when commitments will be accepted and the final allocations
of the commitments amongst the lenders. It is understood that no lender participating in the
Facility will receive compensation from the Borrower in order to obtain its commitment, except on
the terms contained herein, in the Term Sheet, and in the Fee Letter.



     To ensure an orderly and effective syndication of the Facility, the Borrower agrees that, from
the date hereof until the earlier of (i) the Closing Date or (ii) the occurrence of a Successful
Syndication of the Facility (as described above), the Borrower will not, and will not permit any of
its subsidiaries to, syndicate or issue, attempt to syndicate or issue, announce or authorize the
announcement of the syndication or issuance of any debt facility within the United States, other
than in connection with the Term Loan (as defined in the Term Sheet), without the prior written
consent of Bank, BAS, GECC and GECM.



     The Borrower represents and warrants that (i) all written information concerning or affecting
Quiksilver, Inc. or any of its subsidiaries (other than the projections described in clause (ii)
below, forward-looking information and information of a general economic or general industry
nature) that has been or will hereafter be made available to the Bank, BAS, GECC, GECM or any other
lender or any potential lender by the Borrower or any of its representatives in connection with the
transactions contemplated hereby is or will be when furnished, taken as a whole, complete and
correct in all material respects and does not and will not, taken as a whole, contain any untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the circumstances under which
such statements are or were made (after giving effect to all supplements and updates thereto), and
(ii) all financial projections that have been or will be prepared by the Borrower and made
available to Bank, BAS, GECC, GECM or any other lender or any potential lender have been or will be
prepared in good faith based upon assumptions believed by the Borrower to be reasonable at the time
of preparation thereof, provided that Borrower shall update such projections if any of such
underlying assumptions are believed by the Borrower to have changed in any material respect; it
being acknowledged that such projections are not to be viewed as facts and the actual results
during the period or periods covered by any such projections may differ significantly from the
projected results, and no assurance can be given that the projected results will be realized. The
Borrower agrees to supplement the information and projections from time to time until the
definitive loan documents become effective so that the representations and warranties contained in
this paragraph remain correct as of the Closing Date. In providing this letter and arranging for
the syndication of the Facility, Bank, BAS, GECC and GECM are relying on the accuracy of the
information furnished to them by or on behalf of the Borrower and its subsidiaries without
independent verification thereof, it being understood that projections by their nature are
inherently uncertain and no assurance is being given that the projected results will be realized.



     The Borrower hereby acknowledges that (a) Bank and BAS will make any information and
projections furnished by the Borrower (collectively, the “Company Materials”) available to
the proposed syndicate of lenders by posting the Company Materials on IntraLinks or another similar
electronic system (the “Platform”) and (b) certain of the proposed lenders may be
“public-side” lenders (i.e., Lenders that do not wish to receive material non-public information
with respect to the Borrower or its securities (each, a “Public Lender”)). The Borrower
hereby agrees that (a) if requested by BAS or Bank, the Borrower will identify that portion of the
Company Materials that may be distributed to the Public Lenders and include a reasonably detailed
term sheet with such Company Materials and that all Company Materials that are to be made available
to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall
mean that the word “PUBLIC” shall appear prominently on the



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first page thereof; (b) by marking Company Materials “PUBLIC” the Borrower shall be deemed to
have authorized the Bank, BAS, and the proposed lenders to treat such Company Materials as not
containing any material non-public information with respect to the Borrower or its securities for
purposes of United States federal and state securities laws, it being understood that certain of
such Company Materials may be subject to confidentiality requirements; (c) all Company Materials
marked “PUBLIC” are permitted to be made available through a portion of the Platform designated
“Public Investor”; and (d) Bank and BAS shall treat any Company Materials that are not marked
“PUBLIC” as being suitable only for posting on a portion of the Platform designated “Private
Investor”.



     Borrower hereby acknowledges and agrees that each of the Arrangers may provide to industry
trade organizations information with respect to the Facility that is necessary and customary for
inclusion in league table measurements.



     The Borrower shall reimburse each of Bank, BAS, GECC and GECM from time to time promptly
following written demand for reasonable and documented out-of-pocket expenses (including, but not
limited to, reasonable and documented out-of-pocket due diligence and syndication expenses,
including reimbursement of all expenses for field exam, reasonable travel expenses and reasonable
and documented fees, disbursements and charges of its counsel (limited to not more than one primary
counsel and necessary local counsel (limited to one local counsel per jurisdiction) for each of
Bank and BAS, on the one hand, and GECC and GECM, on the other hand ), in each instance incurred in
connection with the preparation of this letter, the Term Sheet, the Fee Letter and the definitive
documentation for the Facility, whether or not the transactions contemplated by this letter are
closed; provided that the Borrower’s liability for GECC’s and GECM’s legal fees and expenses for
the initial closing of the Facility shall not exceed $100,000. The Borrower shall pay to the Bank
and BAS a deposit in the amount of $100,000 to be applied to such expenses of Bank and BAS. In
addition, the Borrower agrees to deliver the Bank and BAS from time to time such additional
deposits as may be necessary to cover such expenses in excess of such deposit (collectively, the
“Deposit”). If the Facility is consummated, then the Deposit, less all such reimbursable
expenses, will be applied to closing fees and expenses, and any balance returned to the Borrower.
If for any reason, the Facility is not consummated the balance, if any, of the Deposit remaining
after payment in full of all reimbursable expenses shall be returned to the Borrower.



     The Borrower agrees to indemnify and hold harmless Bank, BAS, GECC, GECM, each other lender
and each of their respective affiliates and their respective officers, directors, employees,
agents, attorneys, advisors and other representatives (each, an “Indemnified Party”) from
and against (and will reimburse each Indemnified Party as the same are incurred for) any and all
claims, damages, losses, liabilities and expenses (including, without limitation, the reasonable
fees, disbursements and other charges of counsel) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with or by reason of
(including, without limitation, in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (a) any matters contemplated by this letter or
any related transaction or (b) the Facility and any other financings, or any use made or proposed
to be made with the proceeds thereof, except to the extent such claim, damage, loss, liability or
expense is found in a final, nonappealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party’s gross negligence or willful misconduct. In the case of an
investigation, litigation or proceeding to which the indemnity in this paragraph applies, such
indemnity shall be effective whether or not such investigation, litigation or proceeding is brought
by the Borrower, the Borrower’s equityholders or creditors or an Indemnified Party, whether or not
an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated. The Borrower also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the Borrower, or the
Borrower’s subsidiaries or affiliates or to the Borrower’s or their respective equity holders or
creditors arising out of, related to or in connection with any aspect of the transactions
contemplated hereby, except to the extent of direct, as



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opposed to special, indirect, consequential or punitive, damages determined in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified
Party’s gross negligence or willful misconduct. Notwithstanding any other provision of this
letter, no Indemnified Party shall be liable for any damages arising from the use by others of
information or other materials obtained through electronic telecommunications or other information
transmission systems, other than for direct or actual damages resulting from the gross negligence
or willful misconduct of such Indemnified Party as determined by a final and nonappealable judgment
of a court of competent jurisdiction.



     Except as required under applicable law or compulsory legal process, the Parent and the
Borrower shall maintain as confidential the terms or conditions of this letter, the Term Sheet and
the Fee Letter, and the terms, conditions, provisions, and documentation of the Facility;
provided, however, it is understood and agreed that the Parent and the Borrower may
disclose the existence of this letter (including the Term Sheet) and the Fee Letter after your
acceptance of this letter and the Fee Letter, in filings with the Securities and Exchange
Commission and other applicable regulatory authorities and stock exchanges. Without limiting the
foregoing, (i) this letter, the Term Sheet and the Fee Letter may not be disclosed in whole or in
part to any person or entity other than the Parent’s and the Borrower’s respective directors,
employees, accountants, attorneys and professional advisors in connection with the establishment of
the Facility on a confidential basis, without Bank’s and GECC’s prior written consent, and (ii) the
Term Sheet and draft documentation for the Facility may be disclosed on a confidential basis to the
lenders and agent in respect of the Term Loan.



     All of the Borrower’s reimbursement, indemnification and confidentiality obligations set forth
in this letter, the Term Sheet and the Fee Letter shall remain in full force and effect regardless
of whether any definitive documentation for the establishment of the Facility shall be executed and
notwithstanding the termination of this letter or any undertaking hereunder, provided that the
reimbursement and indemnification provisions shall be superseded in each case by the applicable
provisions contained in the definitive documentation upon execution thereof and thereafter shall
have no further force and effect.



     The Parent and the Borrower each acknowledges that Bank, BAS, GECC, GECM or their respective
affiliates may be providing financing or other services to parties whose interests may conflict
with the Parent’s or the Borrower’s. Bank, BAS, GECC and GECM will not furnish confidential
information regarding the Parent and its direct and indirect subsidiaries obtained from the Parent
of the Borrower to any of their other respective customers or any other person (other than their
respective affiliates, attorneys, advisors, appraisers, commercial finance auditors, regulatory
authorities and other persons involved in the transactions contemplated hereby) and will treat
confidential information relating to the Parent and its affiliates with the same degree of care as
they treat their own confidential information. Bank, BAS, GECC and GECM further advise the Parent
and the Borrower that they will not make available to the Parent or the Borrower confidential
information that they have obtained or may obtain from any other customer. In connection with the
services and transactions contemplated hereby, the Parent and the Borrower each agrees that Bank,
BAS, GECC and GECM are permitted to access, use and share with any of their respective bank or
non-bank affiliates, agents, advisors (legal or otherwise) or representatives, any information
concerning the Parent or any of its direct and indirect subsidiaries that is or may come into the
possession of Bank, BAS, GECC or GECM or any of such affiliates.



     In connection with all aspects of each transaction contemplated by this letter, the Borrower
acknowledges and agrees that: (i) the Facility and any related arranging or other services
described in this letter is an arm’s-length commercial transaction between the Borrower and its
affiliates, on the one hand, and Bank, BAS, GECC and GECM, on the other hand, as the case may be,
and the Borrower is capable of evaluating and understanding and understands and accept the terms,
risks and conditions of the transactions contemplated by this letter; (ii) in connection with the
transaction contemplated hereby and the process leading to such transaction, each of Bank, BAS,
GECC and GECM is and has been acting



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solely as a principal and, except as expressly set forth in this letter, is not acting as an
agent or fiduciary, for the Borrower or any of its affiliates, stockholders, creditors or employees
or any other party; (iii) neither Bank, BAS, GECC nor GECM has assumed or will assume an advisory,
agency or fiduciary responsibility in the Borrower’s or its affiliates’ favor with respect to any
of the transactions contemplated hereby or the process leading thereto (irrespective of whether
Bank, BAS, GECC or GECM has advised or is currently advising the Borrower or its affiliates on
other matters) and neither Bank, BAS, GECC nor GECM has any obligation to Borrower or its
affiliates with respect to the transactions contemplated hereby except those obligations expressly
set forth in this letter and as may be set forth in definitive documentation for the Facility; (iv)
each of Bank, BAS, GECC and GECM and their respective affiliates may be engaged in a broad range of
transactions that involve interests that differ from the Borrower and its affiliates and Bank, BAS,
GECC and GECM have no obligation to disclose any of such interests by virtue of any fiduciary,
agency or advisory relationship; and (v) Bank, BAS, GECC and GECM have not provided any legal,
accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby
and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent
the Borrower has deemed appropriate. The Borrower hereby waives and releases, to the fullest
extent permitted by law, any claims that it may have against Bank, BAS, GECC or GECM with respect
to any breach or alleged breach of agency or fiduciary duty with respect to the transactions
contemplated hereby.



     The identity of the Borrower is of material importance to Bank, BAS, GECC and GECM.
Consequently, this letter may not be assigned or transferred by the Borrower without the prior
written consent of Bank, BAS, GECC and GECM, and any attempted assignment without such consent
shall be void. This letter and the Term Sheet may not be amended or any provision hereof waived or
modified except by an instrument in writing signed by the Borrower, Bank, BAS, GECC and GECM. This
letter is intended to be solely for the benefit of the parties hereto and is not intended to confer
any benefits upon, or create any rights in favor of, any person other than the parties hereto and
the Indemnified Persons.



     Each of Bank, BAS, GECC and GECM reserves the right to employ the services of its affiliates
in providing services contemplated by this letter and to allocate, in whole or in part, to its
affiliates certain fees payable to it in such manner as it and its affiliates may agree in their
sole discretion.



     All amounts payable by Borrower under this letter or the Fee Letter will be made in U.S.
dollars and, in any case, shall not be subject to counterclaim or set-off for, or be otherwise
affected by, any claim or dispute relating to any other matter. In addition, all such payments
shall be made without deduction for any taxes, levies, imposts, duties, deductions, charges or
withholdings imposed by any national, state or other taxing authority, or will be grossed up by
Borrower for such amounts.



     This letter, the Term Sheet and the Fee Letter sets forth the entire agreement between the
parties with respect to the matters addressed herein and supersedes all prior communications,
written or oral, with respect hereto. This letter may be executed in any number of counterparts,
each of which, when so executed, shall be deemed to be an original and all of which, taken
together, shall constitute one and the same letter. Delivery of an executed counterpart of a
signature page to this letter by electronic transmission shall be as effective as delivery of an
original executed counterpart of this letter.



     This letter shall terminate unless accepted by the Parent and the Borrower on or before 5:00
p.m. (Eastern time) on June 8, 2009 by signing below and returning this letter and the Fee Letter,
so signed to Bank.



     If this letter is so accepted, then, subject to the terms and conditions of this letter, Bank,
BAS, GECC and GECM would be obligated to enter into the Facility if all conditions precedent
thereto are satisfied (as reasonably determined by Bank, BAS, GECC and GECM) on or before June 26,
2009.



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     This letter does not constitute an unconditional commitment to lend. Such a commitment will
exist only upon satisfaction of the following: (i) the execution and delivery of definitive loan
documents (each in form consistent with this letter and the Term Sheet and otherwise reasonably
satisfactory to the Borrower, Bank, BAS, GECC and GECM) on or before June 26, 2009; and (ii) the
satisfaction of all conditions precedent described herein or in the Term Sheet on or before June
26, 2009.



     THIS LETTER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. Each of the Borrower,
Bank, BAS, GECC and GECM hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any state or Federal court sitting in the Borough of Manhattan over any suit,
action or proceeding arising out of or relating to the transactions contemplated hereby, this
letter, the Term Sheet, the Fee Letter or the performance of services hereunder or thereunder. The
Borrower agrees that service of any process, summons, notice or document by registered mail
addressed to the Borrower shall be effective service of process for any suit, action or proceeding
brought in any such court. Each of the Borrower, Bank, BAS, GECC and GECM hereby irrevocably and
unconditionally waives any objection to the laying of venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding has been brought
in any inconvenient forum. EACH OF THE BORROWER, BANK, BAS, GECC AND GECM WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING AMONGST OR BETWEEN THE BORROWER AND/OR BANK,
BAS, GECC, GECM OR ANY OTHER LENDER.



     Bank, BAS, GECC and GECM hereby notify the Borrower that pursuant to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Patriot
Act”)), each of Bank, BAS, GECC and GECM and each of the other lenders may be required to
obtain, verify and record information that identifies the Borrower, which information may include
the Borrower’s name and address and other information that will allow each of Bank, BAS, GECC and
GECM and the other lenders to identify the Borrower in accordance with the Patriot Act. This
notice is given in accordance with the requirements of the Patriot Act and is effective for each of
Bank, BAS, GECC and GECM and the other lenders.



     This Commitment Letter amends and restates in its entirety the Commitment Letter dated May 21,
2009 among Bank, BAS, GECC, GECM, the Parent and the Borrower.



     From and after the date hereof, all references to the Commitment Letter in the Fee Letter or
any other agreement shall be deemed to be references to this Commitment Letter.



     If the foregoing is in accordance with your understanding of our agreement, please sign this
letter in the space indicated below and return it to Bank.



[Remainder of page intentionally left blank]




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     We look forward to working with you on this transaction and continuing our mutually beneficial
relationship with you.



	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	BANC OF AMERICA SECURITIES LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	GENERAL ELECTRIC CAPITAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	GE CAPITAL MARKETS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 






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The foregoing is agreed to as of

the date first above written:




	 	 	 	 	 
	QUIKSILVER, INC.	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 
	 
	 	 	 	 
	QUIKSILVER AMERICAS, INC.	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 







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EXHIBIT A




SUMMARY OF PRINCIPAL TERMS AND CONDITIONS




$200,000,000 Senior Secured Revolving Credit Facility




 






June 8, 2009




	 	 	 
	Borrower:

	 	Quiksilver Americas, Inc. and all
domestic subsidiaries which own any
assets of the type included in the
Borrowing Base (as defined below)
(collectively, the “Borrower”).
	 
	 	 
	Guarantors:

	 	Quiksilver, Inc. and all other direct
domestic subsidiaries of the Borrower
that are not Borrowers (other than
immaterial subsidiaries to be mutually
agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents). In addition, each
Borrower shall cross guaranty all other
Borrowers.
	 
	 	 
	Administrative Agent:

	 	Bank of America, N.A. will act as sole
and exclusive administrative agent for
the Lenders (in such capacity, the
“Administrative Agent”).
	 
	 	 
	Joint Lead Arrangers and Joint
Bookrunners:

	 	Banc of America Securities LLC (“BAS”)
and GE Capital Markets, Inc. (“GECM”;
collectively, together with BAS, the
“Arrangers”).
	 
	 	 
	Co-Collateral Agents:

	 	Bank of America, N.A. and General
Electric Capital Corporation (“GECC”;
collectively, in such capacity, the
“Co-Collateral Agents”).
	 
	 	 
	Lenders:

	 	Bank of America, N.A., GECC and a
syndicate of financial institutions
arranged by the Arrangers, which lenders
shall be reasonably acceptable to the
Borrower, such acceptance not to be
unreasonably withheld.
	 
	 	 
	Purpose:

	 	The Facility, in conjunction with the
initial proceeds of the Term Loan
(defined below), in an initial principal
amount equal to $125,000,000, will be
used to refinance all of the obligations
under that certain Amended and Restated
Credit Agreement dated as of June 3, 2005
among the Quiksilver, Inc., Quiksilver
Americas, Inc., JPMorgan Chase Bank, N.A.
and the other parties thereto, to repay
certain other indebtedness of Quiksilver,
Inc. and its subsidiaries, to pay related
transaction fees and expenses in
connection with the






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	 	refinancing and
repayment of indebtedness and for working
capital and general corporate purposes of
the Borrower.
	 
	 	 
	Facility:

	 	A senior secured revolving credit
facility in an aggregate principal amount
of $200,000,000 (the “Facility”). The
Facility shall include a sublimit of
$100,000,000 for the issuance of letters
of credit and a swing line loan sublimit
of 10% of the aggregate commitments under
the Facility.1
	 
	 	 
	Increase Option:

	 	Provided that no default or event of
default is then existing or would arise
therefrom, the Administrative Agent and
each of the Lenders agree that the
Borrower, at its option, may request, not
more than on two (2) occasions and in
minimum increments of $25,000,000, that
the Facility be increased by an aggregate
principal amount not to exceed
$50,000,000. Any such increase shall be
on the same terms and conditions as the
Facility. Any or all of the existing
Lenders shall initially have the right of
first refusal (but not the obligation) to
increase their respective commitments to
satisfy the Borrower’s requested increase
in the Facility. If the Lenders are
unwilling to so increase their
commitments, BAS will use its reasonable
efforts to obtain one or more financial
institutions which are not then Lenders
reasonably acceptable to the Borrower to
become party to the Facility and to
provide a commitment in an amount
necessary to satisfy the Borrower’s
requested increase in the Facility. The
Borrower shall pay BAS, the
Administrative Agent and the
participating Lenders fees and other
compensation as agreed to between the
Borrower, BAS, the Administrative Agent
or such Lenders, as applicable, in
connection with the exercise of the
Increase Option.
	 
	 	 
	Borrowing Base:

	 	Credit Extensions under the Facility
shall not exceed the lesser of
$200,000,000 or the Borrowing Base. The
Borrowing Base at any time will be the
sum of (a) 85% of the value of eligible
credit card receivables of the Borrower,
plus (b) 85% of the face amount of the
Borrowers’ eligible accounts receivable
(other than credit card receivables),
plus (c) 85% of the net orderly
liquidation value of eligible inventory
of the Borrower minus (d) customary
reserves established in connection with a
good faith determination made in the
commercially reasonable credit judgment
of the Administrative Agent and the
Co-Collateral Agent. Definitions of
appraised value, eligible inventory,
eligible credit card receivables,
eligible accounts receivable, and








 




			
	1 	 	Facility may include a Canadian subfacility on terms reasonably
acceptable to Lenders.




2









 










	 	 	 
	 

	 	reserve levels and categories will be mutually
established by the Borrower, the
Administrative Agent and the
Co-Collateral Agents upon completion of
an inventory appraisal and commercial
finance examination; provided that those
accounts outstanding for 90 days or less
from the invoice date (or 120 days or
less up to an amount not to exceed
[$TBD]) and those accounts not yet
overdue by 60 days or less shall be
included in eligible accounts receivable,
to the extent such accounts satisfy all
other eligibility criteria. Without
limiting the generality of the foregoing,
the definitive documentation shall
reflect that each Co-Collateral Agent
shall have rights at least as expansive
as the rights afforded to the
Administrative Agent, any Arranger or any
other agent or arranger in the Facility
relating to (i) (x) the definition of
Availability, Excess Availability, and
any component definition of any of the
foregoing, (y) the definition of
Borrowing Base and any component thereof
(including, without limitation, reserves,
advance rates, eligibility criteria,
reporting requirements and appraisals,
examinations and collateral audits) and
(ii) the validity, extent, perfection or
priority of the liens granted to the
Administrative Agent or the Co-Collateral
Agents in regards to the Collateral
(collectively, “Collateral Issues”), and
any provision relating to a Collateral
Issue which would otherwise only need to
be satisfactory (or, as the case may be,
reasonably satisfactory, etc.) to the
Administrative Agent or any other agent
or arranger shall be deemed to require
the consent of or be satisfactory (or, as
the case may be, reasonably satisfactory,
etc.) to the Co-Collateral Agents. In
addition, in the event that the agents
under the Facility cannot agree on issues
relating to the Borrowing Base,
Availability, Excess Availability,
Borrowing Base eligibility standards,
reserves, advance rates, borrowing base
reporting, appraisals or examinations or
any other action or determination, the
determination shall be made by the agent
either asserting the more conservative
credit judgment (that is, that would
result in the least amount of credit
being available to the Borrower) or
declining to permit the requested action.
	 
	 	 
	Closing Date:

	 	A mutually agreed upon date to be
determined but in any event on or before
June 26, 2009.
	 
	 	 
	Maturity Date:

	 	Three years from the Closing Date.
	 
	 	 
	Applicable Margin:

	 	The Applicable Margin shall be the
applicable rate per annum set forth in
the pricing grid, below, based upon
average daily Excess Availability (the
lesser of the Borrowing Base and the
amount of the aggregate commitments under
the Facility less






3









 






	 	 	 
	 

	 	outstanding credit
extensions) for the immediately preceding
fiscal quarter. Initial pricing shall be
at Level II and shall remain at Level II
for 2 full fiscal quarters after the
Closing Date (notwithstanding that the
performance measures for Level I may be
satisfied; provided that, if the
performance measures set forth below for
Level III are in effect, pricing shall be
at Level III during such period that such
performance measures are in effect). The
applicable rates shall thereafter be
adjusted quarterly in accordance with the
pricing grid.






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	LIBOR	 	Base Rate
	Level	 	Excess Availability	 	Loans	 	Loans
	I	 	Equal to or greater than 66%
of the lesser of the Borrowing Base and
the amount of the aggregate commitments
under the Facility
	 	 	4.00	%	 	 	3.00	%
	II	 	Less than 66% but equal to or greater
than 33% of the lesser of the Borrowing
Base and the amount of the aggregate
commitments under the Facility
	 	 	4.25	%	 	 	3.25	%
	III	 	Less than 33% of the lesser of the
Borrowing Base and the amount of the
aggregate commitments under the Facility
	 	 	4.50	%	 	 	3.50	%






	 	 	 
	Letter of Credit Issuer:

	 	Bank of America, N.A., any other Lender
requested by the Borrower and acceptable
to the Administrative Agent, or any of
their respective affiliates.
	 
	 	 
	Letter of Credit Fees:

	 	(a) Documentary Letters of Credit shall
bear a fee equal to the applicable LIBOR
Rate Margin payable quarterly in arrears
on the average daily balance of
Documentary Letters of Credit
outstanding; (b) Standby Letters of
Credit shall be priced at a fee equal to
the applicable LIBOR Rate Margin, payable
on the total face amount of each
outstanding standby letter of credit,
payable quarterly in arrears; (c) a
fronting fee shall be payable to the
Letter of Credit Issuer in an amount






4









 






	 	 	 
	 

	 	equal to 0.125% per annum for all Letters
of Credit quarterly in arrears; and (d)
Letter of Credit Issuer’s customary fees
and charges in connection with the
issuance, negotiation, amendment, and
extension of letters of credit shall be
payable by the Borrower to the Letter of
Credit Issuer. All Letter of Credit fees
shall be calculated on the basis of
actual number of days elapsed in a year
of 360 days.
	 
	 	 
	Default Pricing:

	 	Each level of the Applicable Margin and
Letter of Credit Fees shall be increased
by 2% per annum.
	 
	 	 
	Borrowing Options:

	 	At the option of the Borrower, borrowings
under the Facility shall be at a rate of
interest of either (a) the Base Rate plus
the Applicable Margin (“Base Rate Loan”),
or (b) the LIBOR Rate plus the Applicable
Margin (“LIBOR Rate Loan”). LIBOR Rates
will be quoted for one, two, three, and
six months, but there shall be a 2.0%
floor on LIBOR for one-month and
two-month LIBOR Rate Loans; provided that
Borrower shall be permitted to borrow for
one-month or two-month periods at the
three-month LIBOR rate. Base Rate Loans
shall be available on at least one
business day’s prior notice. LIBOR Rate
Loans shall require at least three
business days’ advance notice. Interest
on Base Rate Loans will be due and
payable quarterly in arrears. Interest
on LIBOR Rate Loans will be payable at
the end of each applicable interest
period or quarterly in arrears, whichever
is earlier. All interest for LIBOR Rate
Loans shall be based on a 360-day year
and actual days elapsed and all interest
on Base Rate Loans shall be based on a
365/366 day year and actual days elapsed.
“Base Rate” means the greatest of (1) the
Prime Rate announced by the Bank as its
“Prime Rate”, (2) the Federal Funds
Effective Rate plus 0.50% per annum, or
(3) the LIBOR Rate for an interest period
of one month plus 1% per annum.
	 
	 	 
	Swing Line Option:

	 	Swing line loans (“Swing Line Loans” )
will be made available by the
Administrative Agent on a same day basis
in an aggregate amount not to exceed 10%
of the aggregate commitments under the
Facility. All Swing Line Loans shall
bear interest at the Base Rate plus the
Applicable Margin.
	 
	 	 
	Unused Line Fee:

	 	The Borrower will pay an unused line fee
calculated from the Closing Date of (i)
1.00% per annum on the average daily
unused portion of the Facility if less
than 33% of the Facility has been used,
(ii) 0.75% per annum on the average daily
unused portion of the Facility if 33% or
more but less than 66% of the Facility
has been used and (iii) 0.50% per annum






5









 






	 	 	 
	 

	 	on the average daily unused portion of
the Facility if 66% or more than 66% of
the Facility has been used and, in each
case, payable quarterly in arrears and
upon the Maturity Date, and adjusted
quarterly. Swing Line Loans will, for
purposes of the commitment fee
calculations only, not be deemed to be a
utilization of the Facility.
	 
	 	 
	Optional Prepayments and
Commitment Reductions:

	 	The Borrower may repay the loans at any
time and from time to time without
premium or penalty (other than breakage
costs with respect to LIBOR loans, if
applicable), in minimum principal amounts
and with customary notice requirements to
be mutually agreed upon by the Borrower,
the Administrative Agent and the
Co-Collateral Agents.
	 
	 	 
	 

	 	The Borrower may reduce the unutilized
portion of the commitments in respect of
the Facility at any time and from time to
time, without premium or penalty, in
minimum principal amounts to be mutually
agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents and subject to
customary notice requirements to be
mutually agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents.
	 
	 	 
	Mandatory Prepayments:

	 	If at any time the sum of borrowings
under the Facility exceeds the lesser of
(i) the Borrowing Base as in effect at
such time and (ii) the amount of the
aggregate commitments under the Facility
as in effect at such time, prepayments of
loans (and/or the cash collateralization
of Letters of Credit) shall be required
in an amount equal to such excess.
	 
	 	 
	Additional Fees:

	 	Payable in the amounts and at the times
set forth in the Fee Letter of even dated
herewith.
	 
	 	 
	Security:

	 	The Facility (and all cash management
services and other bank products provided
to any of the Borrower or Guarantors by
any of the Lenders or their affiliates)
will be secured by a first priority
(subject to exceptions to be mutually
agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents) perfected security
position on all inventory and accounts of
the Borrower and Guarantors, together
with all general intangibles (exclusive
of intellectual property subject to a
first priority lien to secure the Term
Loan) relating to inventory and accounts,
all contract rights under agreements
relating to inventory and accounts, all
documents relating to inventory, all
supporting obligations and
letter-of-credit rights relating to
inventory and accounts, all instruments
evidencing payment for inventory and
accounts;






6









 






	 	 	 
	 

	 	all money, cash, cash
equivalents, securities and other
property of any kind held directly or
indirectly by the Co-Collateral Agents or
any Lender; all deposit accounts,
credits, and balances with any financial
institution with which the Borrower
maintains deposits and which contain
proceeds of or collections on, inventory
and accounts; all books, records and
other property related to or referring to
any of the foregoing, including books,
records, account ledgers, data processing
records, computer software and other
property and all proceeds of any of the
foregoing, including, but not limited to,
proceeds of any insurance policies,
claims against third parties, subject to
exceptions and liens to be mutually
agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents.
	 
	 	 
	 

	 	The Facility will also be secured by (a)
a second priority perfected security
position on substantially all other
personal property of the Borrower and the
Guarantors, subject to exceptions and
liens to be mutually agreed upon by the
Borrower, the Administrative Agent and
the Co-Collateral Agents and (b) a second
priority pledge of the direct and
indirect ownership interest in each
direct domestic subsidiary (and each
Canadian foreign subsidiary, to secure
obligations under the contemplated
Canadian sub-facility, if any) of the
Borrower and each Guarantor. The
Co-Collateral Agents shall enter into an
intercreditor agreement with the agent
for holders of a first priority lien on
such other assets which intercreditor
agreement shall be on terms and
conditions reasonably satisfactory to the
Co-Collateral Agents and which shall in
any event provide that the Co-Collateral
Agents shall have the right to utilize,
at no cost or expense, such properties of
the Borrower and Guarantors (including
without limitation intellectual property)
to the extent necessary to sell, lease or
otherwise dispose of the inventory and
accounts after an event of default
(collectively, the “Collateral”).
	 
	 	 
	 

	 	Notwithstanding the foregoing, but
subject to Sections 9-406 through 9-408
of the Uniform Commercial Code, the
security arrangements shall not include
Collateral to the extent (i) prohibited
by applicable law, (ii) constituting
leaseholds, (iii) constituting vehicles
and other assets subject to certificate
of title, (iv) constituting interests in
joint ventures and non-wholly owned
subsidiaries which cannot be pledged
without the consent of one or more third
parties, (v) those assets over which the
granting of a security interest is such
assets would be prohibited by contract or
(vi) otherwise mutually agreed upon by
the Borrower, the Administrative Agent
and the Co-






7









 






	 	 	 
	 

	 	Collateral Agents.
	 
	 	 
	Cash Management:

	 	If, at any time, (a) Excess Availability
is less than (i) 20.0% of the lesser of
the Borrowing Base and the amount of the
aggregate commitments under the Facility
for 3 consecutive Business Days, or (ii)
$30,000,000 for 3 consecutive Business
Days, (b) an Event of Default exists, or
(c) the failure to either (i) refinance
the indebtedness owing by Pilot SAS (a
wholly-owned indirect subsidiary of
Quiksilver, Inc.) to Crédit Lyonnais SA,
BNP Paribas SA and Société Générale SA
pursuant to that certain unsecured credit
agreement dated as of March 14, 2008 (the
“Pilot SAS Indebtedness”) or (ii) enter
into a binding commitment satisfactory to
the Administrative Agent and the
Co-Collateral Agents to refinance the
Pilot SAS Indebtedness (such refinancing
to close by no later than the maturity
date thereof then in effect), in each
case by no later than that date which is
fifteen (15) days prior to the maturity
date of the Pilot SAS Indebtedness then
in effect (each, a “Cash Dominion
Event”), all cash receipts (subject to
exceptions to be mutually agreed upon by
the Borrower, the Administrative Agent
and the Co-Collateral Agents) shall be
forwarded to a deposit account which is
subject to a control agreement in favor
of the Co-Collateral Agents or to a
concentration account maintained by the
Co-Collateral Agents with Bank of
America, N.A. and such receipts shall be
applied daily in reduction of the
obligations under the Facility. The
occurrence of a Cash Dominion Event shall
be deemed continuing at any time (x) when
an Event of Default is continuing or, (y)
if such Cash Dominion Event has occurred
due to the failure by the Borrower to
maintain Excess Availability as set forth
in clause (a) above, notwithstanding that
Excess Availability may thereafter exceed
the amount set forth in clause (a) above,
unless and until Excess Availability
exceeds such amounts for 60 consecutive
days, in which case a Cash Dominion Event
shall no longer be deemed to be
continuing; provided that a Cash Dominion
Event shall be deemed continuing (even if
Excess Availability exceeds the required
amounts for 60 consecutive days) if a
Cash Dominion Event has occurred and been
discontinued on 3 occasions during the
term of the Facility and (z) if such Cash
Dominion Event has occurred due to events
described in clause (c) above, until such
time as the Pilot SAS Indebtedness has
been refinanced, or a satisfactory
binding commitment to refinance the Pilot
SAS Indebtedness (such refinancing to
close by no later than the maturity date
thereof then in effect) has been entered
into.






8









 






	 	 	 
	 

	 	The definitive documentation for the
Facility shall provide that, so long as
any advances or letters of credit are
outstanding under the Facility, Borrower
shall not permit cash in an aggregate
amount in excess of 10% of the Borrowing
Base as then in effect (other than (i)
“store” cash, cash held in local,
non-concentration deposit accounts, cash
in transit between stores and depository
accounts and cash receipts from sales in
the process of inter-account transfers,
in each case as a result of the ordinary
course operations of the Borrower, and
(ii) to the extent necessary for the
Borrower and Guarantors to satisfy in the
ordinary course of their business the
current liabilities incurred by them in
the ordinary course of their business and
without acceleration of the satisfaction
of such current liabilities) to
accumulate and be maintained in
depository accounts of the Borrower and
the Guarantors.
	 
	 	 
	Representations and Warranties:

	 	Usual and customary for facilities of
this type, with exceptions,
qualifications and materiality to be
mutually agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents, including, without
limitation, the following: (i) corporate
status; (ii) corporate power and
authority and enforceability; (iii) no
material violation of, or conflicts with,
law, material contracts (if any, to be
mutually agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents) or organizational
documents; (iv) no material litigation;
(v) accuracy and completeness of
specified financial statements and other
information, and no material adverse
change; (vi) no required governmental or
third party approvals or consents; (vii)
use of proceeds/compliance with margin
regulations; (viii) valid title to
property and assets (including
intellectual property and licenses), free
and clear of liens, charges and other
encumbrances; (ix) status under
Investment Company Act; (x) ERISA
matters; (xi) environmental matters;
(xii) labor matters; (xiii) status and
adequacy of insurance; (xiv) status of
subsidiaries and perfected liens,
security interests and charges; (xv)
solvency; (xvi) payment of taxes; (xvii)
indebtedness and liens; (xviii)
compliance with applicable laws; (xix) no
default; (xx) licenses and permits; (xxi)
owned and leased business locations; and
(xxii) lines of business. In addition,
the security documents shall contain
representations and warranties with
respect to the Collateral which are usual
and customary for transactions of this
type.
	 
	 	 
	Other Covenants:

	 	Usual and customary affirmative and
negative covenants applicable to the
Borrower and each Guarantor and their






9









 






	 	 	 
	 

	 	subsidiaries appropriate to facilities of
this type (with customary grace periods,
baskets and materiality qualifiers to be
mutually agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents) to include, without
limitation, the following:
	 
	 	 
	 

	 	a) Usual and customary financial
reporting requirements, including monthly
Borrowing Base certificates (unless
Excess Availability is less than (i)
20.0% of the lesser of the Borrowing Base
and the amount of the aggregate
commitments under the Facility, or (ii)
$30,000,000, in which case Borrowing Base
Certificates will be furnished weekly)(to
the extent possible, to include
information regarding inventory), monthly
(commencing with the first month after
the first full six months ending after
the Closing Date) (such monthlies to be
in a format to be mutually determined),
quarterly and annual collateral and
financial reporting requirements,
compliance certificates, and annual
business plans and forecasts.
	 
	 	 
	 

	 	b) (i) Notices of defaults, notices of
litigation and proceedings, environmental
actions and liabilities and ERISA and tax
events and liabilities, of changes in
accounting or financial reporting
practices, organizational structure, and
other business and financial information
as the Administrative Agent or any Lender
shall reasonably request through the
Administrative Agent; (ii) payment of
taxes and other obligations; (iii)
preservation of corporate existence,
rights (charter and statutory),
franchises, permits, licenses and
approvals; (iv) maintenance of properties
and equipment; (v) maintenance of
appropriate and adequate insurance; (vi)
visitation and inspection rights; (vi)
keeping of proper books in accordance
with generally accepted accounting
principles; (vii) compliance with laws
and material contracts; (viii) use of
proceeds; and (ix) further assurances,
additional subsidiary guaranties and
collateral and perfection and priority of
security interests.
	 
	 	 
	 

	 	c) Field examinations and inventory
appraisals will be conducted on an
ongoing basis at the reasonable
discretion of the Administrative Agent or
any Co-Collateral Agent. The Borrower
shall be required to pay the fees and
expenses for only two
examinations/appraisals per year;
provided that such limit shall be
increased to three per year if Excess
Availability is less than (i) 30% of the
lesser of the Borrowing Base and the
amount of the aggregate commitments under
the Facility for 3 consecutive Business
Days, or (ii) $45,000,000 for 3






10









 






	 	 	 
	 

	 	consecutive Business Days. In addition
to the foregoing, the Administrative
Agent or any Co-Collateral Agent may
undertake additional exams and appraisals
at any time at its own expense and may
undertake such exams and appraisals as it
deemed necessary, at the Borrower’s
expense, while an Event of Default
exists.
	 
	 	 
	 

	 	d) Limitations on (i) indebtedness,
guarantees, or other contingent
obligations; (ii) liens, investments,
loans, permitted acquisitions, joint
ventures, other investments, asset
divestitures, dividends and
distributions, other restricted payments
and prepayments, redemption or repurchase
of indebtedness, and transactions with
affiliates; (iii) material changes in the
nature of business; (iv) mergers and
consolidations; (v) changes of fiscal
year or amending organizational
documents, or amending or otherwise
modifying any debt, any related document
or any other material agreement; (vi)
limitations on intercorporate transfers;
(vii) sale/leaseback transactions; (viii)
granting negative pledges; (ix)
impairment of security interests and (x)
changes in accounting policies or
reporting practices. All of the
foregoing will be subject to such
exceptions and qualifications as the
Borrower and the Lenders may mutually
agree in the definitive documentation;
provided, however, that limitations on
foreign subsidiary indebtedness and liens
shall
be no more restrictive than the
limitations set forth in the Borrower’s
existing credit agreement and shall
permit the grant of liens on intellectual
property assets owned by foreign
subsidiaries. In any event, subject to
other limitations provided therein, the
definitive documentation shall permit the
Borrower to (A) pay cash dividends and
repurchase its capital stock if, after
giving effect to any such dividend or
repurchase, the Borrower shall have
certified, and shall have delivered
supporting documentation reasonably
satisfactory to the Administrative Agent,
that Excess Availability is greater than
(i) 30% of the lesser of the Borrowing
Base and the amount of the aggregate
commitments under the Facility
immediately preceding, and on a pro forma
on the date thereof and projected basis
for the 12 months following, such
dividend or repurchase, and (ii)
$45,000,000, and Borrower’s minimum Fixed
Charge Coverage Ratio (to be defined in a
manner to be mutually agreed upon by the
Borrower, the Administrative Agent and
the Co-Collateral Agents), calculated on
a trailing 12 month basis, is greater
than 1.25:1.0, immediately preceding, and
on a pro forma on the date thereof and
projected basis for the 12 months
following, such dividend or repurchase,
and (B) make acquisitions and






11









 






	 	 	 
	 

	 	other
investments and repurchase debt (in
addition to other carve-outs (not subject
to the following conditions) for
repurchases or redemptions of Quiksilver,
Inc.’s existing senior notes in a manner
to be mutually agreed upon by the
Borrower, the Administrative Agent and
the Co-Collateral Agents) if, after
giving effect to any such acquisition,
investment or repurchase, the Borrower
shall have certified, and shall have
delivered supporting documentation
reasonably satisfactory to the
Administrative Agent, that Excess
Availability is greater than (i) 30% of
the lesser of the Borrowing Base and the
amount of the aggregate commitments under
the Facility immediately preceding, and
on a pro forma on the date thereof and
projected basis for the 12 months
following, such acquisition, other
investment or repurchase, and (ii)
$45,000,000, and Borrower’s minimum Fixed
Charge Coverage Ratio (to be defined in a
manner to be mutually agreed upon by the
Borrower, the Administrative Agent and
the Co-Collateral Agents), calculated on
a trailing 12 month basis, is greater
than 1.1:1.0, immediately preceding, and
on a pro forma on the date thereof and
projected basis for the 12 months
following, such acquisition, other
investment or repurchase.
	 
	 	 
	 

	 	e) Usual and customary restrictions on
investments in, loans to and
distributions to non-Guarantor
subsidiaries and affiliates.
	 
	 	 
	 

	 	f) In addition, the security documents
shall contain covenants with respect to
the Collateral which are usual and
customary for transactions of this type.
	 
	 	 
	Financial Covenants:

	 	a) If, at any time, Excess Availability
is less than (i) 15% of the lesser of the
Borrowing Base and the amount of the
aggregate commitments under the Facility,
or (ii) $30,000,000, then the Borrower
will be required to maintain a minimum
Fixed Charge Coverage Ratio (excluding
operations of Europe and Asia Pacific, to
be defined in a manner to be mutually
agreed upon by the Borrower, the
Administrative Agent and the
Co-Collateral Agents), calculated on a
trailing 12 month basis, of 1.1:1.0 until
Excess Availability again equals or
exceeds each of such thresholds for 60
consecutive calendar days.
	 
	 	 
	 

	 	b) Minimum Excess Availability shall at
all times be in excess of 7.5% of the
lesser of the Borrowing Base and the
amount of the aggregate commitments under
the Facility, it being agreed that the
Minimum Excess Availability






12









 






	 	 	 
	 

	 	requirement
may be amended or waived with majority
Lender consent.
	 
	 	 
	Events of Default:

	 	Usual and customary for facilities of
this type, and to include, without
limitation, failure to pay any interest
or principal when due, failure to comply
with covenants, material
misrepresentations, insolvency,
bankruptcy, cross defaults with material
indebtedness and material agreements
(with a material adverse effect
standard), change of control, adverse
judgments, and ERISA defaults, with
appropriate grace periods, exceptions,
materiality, and baskets to be
negotiated.
	 
	 	 
	Conditions Precedent:

	 	Closing of the Facility shall be
conditioned upon satisfaction of the
following conditions and the conditions
described in the letter agreement to
which this Term Sheet is attached:
	 
	 	 
	 

	 	(a) Preparation, execution and delivery
of definitive documentation with respect
to the Facility consistent with the terms
hereof and reasonably satisfactory to the
Administrative Agent, BAS, the Lenders
and the Borrower.
	 
	 	 
	 

	 	(b) Administrative Agent shall have
received such customary corporate
resolutions, certificates and other
corporate documents as the Administrative
Agent or any Co-Collateral Agent shall
reasonably request.
	 
	 	 
	 

	 	(c) All necessary consents and
approvals, if any, to the Facility shall
have been obtained.
	 
	 	 
	 

	 	(d) Administrative Agent and the
Co-Collateral Agents shall have received
the preliminary, or final if available,
quarterly financial statements of the
Borrower and its subsidiaries for the
fiscal quarter ending April 30, 2009,
reasonably satisfactory to the
Administrative Agent and the
Co-Collateral Agents, consisting of
balance sheets, income statements, and
cash flow statements.
	 
	 	 
	 

	 	(e) Administrative Agent and the
Co-Collateral Agents shall have received
an updated business plan prepared by
management of the Borrower consisting of
consolidated balance sheets, statements
of income or operations and cash flows
and borrowing availability forecast of
the Borrower and its Subsidiaries
(excluding foreign subsidiaries other
than Canadian subsidiaries and the
Mexican and Brazilian joint ventures) on
a quarterly basis for the immediately
following fiscal year.
	 
	 	 
	 

	 	(f) Each of the Administrative Agent and
the Co-Collateral






13









 






	 	 	 
	 

	 	Agents shall have completed reasonably satisfactory
background checks on the Parent, the
Borrower and their management.
	 
	 	 
	 

	 	(g) No event shall have occurred after
October 31, 2008 that would reasonably be
expected to have a material adverse
effect on the condition (financial or
otherwise), operations, assets, or
business of the Borrower and Guarantors.
	 
	 	 
	 

	 	(h) There shall not be any action, suit,
investigation or proceeding pending or,
to the knowledge of the Borrower
threatened, in any court or before any
arbitrator or governmental authority that
would reasonably be expected to have a
material adverse effect on the condition
(financial or otherwise), operations,
assets, or business of the Borrower and
Guarantors or would reasonably be
expected to have a material adverse
effect on the Facility or the
transactions contemplated thereby.
	 
	 	 
	 

	 	(i) After giving effect to the
consummation of the transactions
contemplated on the Closing Date, no
Event of Default shall then exist.
	 
	 	 
	 

	 	(j) All costs, fees and expenses
(including, without limitation,
reasonable legal fees and expenses) and
other compensation described in this Term
Sheet and the Fee Letter to be payable by
the Borrower shall have been paid to the
extent due.
	 
	 	 
	 

	 	(k) Receipt by the Administrative Agent
of legal opinions of counsel to the
Borrower reasonably satisfactory in form
and substance to the Administrative Agent
and the Co-Collateral Agents.
	 
	 	 
	 

	 	(l) The Co-Collateral Agents shall have
received (in form for filing) all
required financing statements, and
obtained all such control agreements with
respect to deposit accounts (which
control agreements (i) may be completed
within 10 days after the Closing Date,
which grace period may be extended to 30
days after the Closing Date for selected
deposit accounts acceptable to the
Co-Collateral Agents or may be reduced or
eliminated by the Co-Collateral Agents if
the maturity date of the Pilot SAS
Indebtedness is within 20 days of the
Closing Date, and (ii) shall be subject
to such exceptions as may be acceptable
to the Co-Collateral Agents), and shall
have given all such notices, as may be
necessary for the Co-Collateral Agents to
perfect their security interest in the
Collateral for themselves and for the
benefit of the Lenders and the






14









 






	 	 	 
	 

	 	Administrative Agent and to assure their
first, or second, as applicable, priority
status therein.
	 
	 	 
	 

	 	(m) Borrower shall have entered into and
received proceeds of a term loan (the
“Term Loan”), in a minimum amount of
$125,000,000, on terms and conditions
substantially the same as those set forth
in the term sheet in respect thereof
dated as of June 8, 2009 or as otherwise
reasonably acceptable to the
Administrative Agent and the
Co-Collateral Agents, including without
limitation, execution of an intercreditor
agreement on terms and conditions
reasonably satisfactory to the
Co-Collateral Agents.
	 
	 	 
	 

	 	(n) After giving effect to the
consummation of the transactions
contemplated on the Closing Date and the
credit extensions made under the Facility
on the Closing Date Excess Availability
shall be not less than $90,000,000.
	 
	 	 
	 

	 	(o) Administrative Agent shall have
received, and be reasonably satisfied
with, evidence of the Borrower’s
insurance, together with such customary
endorsements as Administrative Agent or
any Co-Collateral Agent may reasonably
require.
	 
	 	 
	 

	 	(p) No material changes in governmental
regulations or policies affecting the
Borrower or its subsidiaries, or the
Administrative Agent or Lenders shall
occur prior to the Closing Date.
	 
	 	 
	 

	 	(q) The Borrower shall not have executed
a sale agreement with respect to the DC
Shoes business.
	 
	 	 
	 

	 	(r) The Co-Collateral Agents shall have
received all reasonably required UCC, tax
lien and litigation searches relating to
the Borrower the Guarantors and such
results shall indicate the absence of
liens on the assets of the Borrower and
the Guarantors, except for liens
permitted under the definitive
documentation for the Facility and liens
for which termination statements and
releases are being tendered concurrently
with the closing of the Facility or other
arrangements reasonably satisfactory to
the Co-Collateral Agents for the delivery
of such termination statements and
releases have been made.
	 
	 	 
	 

	 	(s) The Co-Collateral Agents shall have
concluded with results reasonably
satisfactory to them all background
checks and other investigations to ensure
compliance with the USA






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	 	Patriot Act,
anti-money laundering laws and other
applicable laws and regulations.
	 
	 	 
	 

	 	(t) The Co-Collateral Agents shall have
received the results of, patent,
trademark and copyright searches
conducted in the United States Patent and
Trademark Office and the United States
Copyright Office, relating to the
Borrower the Guarantors and such results
shall indicate the absence of liens on
the patents, trademarks and copyrights of
the Borrower and the Guarantors, except
for liens permitted under the definitive
documentation for the Facility and liens
for which releases are being tendered
concurrently with the closing of the
Facility or other arrangements reasonably
satisfactory to the Co-Collateral Agents
for the delivery of such releases have
been made.
	 
	 	 
	Expenses:

	 	The Borrower will pay (i) all reasonable
and documented out-of-pocket expenses of
the Administrative Agent, the
Co-Collateral Agents and BAS associated
with the arrangement of the Facility and
the preparation, negotiation,
syndication, execution, delivery and
administration of the definitive
documentation and any amendment or waiver
with respect thereto (including the
reasonable fees, disbursements and other
charges of a single law firm for each
such agent or BAS, auditors and
appraisers, the charges of IntraLinks and
the charges for any field exams);
provided that the Borrower’s liability
for GECC’s and GECM’s legal fees and
expenses for the initial closing of the
Facility shall not exceed $100,000, (ii)
all out-of-pocket expenses of the
Administrative Agent and the
Co-Collateral Agents (including the
reasonable and documented fees,
disbursements and other charges of a
single law firm for each such agent) in
connection with the enforcement of the
definitive documentation or in any
bankruptcy case or insolvency proceeding
and (iii) the reasonable and documented
fees, disbursements and other charges of
one law firm for the Lenders (other than
the Administrative Agent and the
Co-Collateral Agents) in connection with
any matter referred to in clause (ii)
above.
	 
	 	 
	Administrative Agent’s Counsel:

	 	Riemer & Braunstein, LLP
	 
	 	 
	Governing Law:

	 	State of New York







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