exv10w1






Exhibit 10.1




PRIVILEGED AND CONFIDENTIAL




COMMITMENT LETTER




$125,000,000 Senior Secured Term Loan U.S. Facility of Quiksilver Americas, Inc.




and




€20,000,000 Senior Secured Term Loan Facility of European Borrower




June 8, 2009      




Quiksilver, Inc.

Quiksilver Americas, Inc.

c/o Quiksilver, 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”), Quiksilver Americas, Inc.
(the “U.S. Borrower”) and a direct subsidiary of the Parent to be organized in Luxembourg
(the “European Borrower”) of the commitment of Rhône Capital III L.P. on behalf of certain
affiliated investment vehicles and certain other affiliates (collectively, “Rhône”) with
respect to the financing of (i) a senior secured term loan facility in favor of the U.S. Borrower
in an aggregate principal amount equal to $125,000,000 (the “U.S. Facility”) on the terms
set forth in the Summary of Principal Terms and Conditions attached as Exhibit A (the “U.S.
Term Sheet”) and (ii) a senior secured term loan facility in favor of the European Borrower in
an aggregate principal amount equal to €20,000,000 (the “European Facility”) on the terms
set forth in the Summary of Principal Terms and Conditions attached as Exhibit B (the “European
Term Sheet” and, together with the U.S. Term Sheet, the “Term Sheets”), including the
related acquisition by Rhône of warrants (the “Warrants”) to subscribe for the common stock
of Parent as set forth in Exhibit C (together with the Term Sheets and this letter, the
“Commitment Letter”). The U.S. Borrower and the European Borrower are together referred to
herein as the “Borrowers” and the U.S. Facility and the European Facility are together
referred to herein as the “Facilities”.



     In consideration of our commitment, the (i) U.S. Borrower hereby (a) appoints Rhône or its
designated affiliates as the sole arranger, bookrunner, collateral agent, syndication agent and
administrative agent for the U.S. Facility, in each case with the duties and authority customary
for such roles, and (b) agrees that no titles will be given or consideration paid to any other
arranger, agent or lender with respect to the U.S. Facility other than as set forth in the U.S.
Term Sheet without the written consent of Rhône; and (ii) European Borrower hereby (a) appoints
Rhône or its designated affiliates as the sole arranger, bookrunner, collateral agent, syndication
agent and administrative agent for the European Facility, in each case with the duties and



 









 







authority customary for such roles, and (b) agrees that no titles will be given or consideration
paid to any other arranger, agent or lender with respect to the European Facility other than as set
forth in the European Term Sheet without the written consent of Rhône. After consultation with the
U.S. Borrower or the European Borrower, as the case may be, Rhône may designate one or more
institutions participating in the U.S. Facility or European Facility, as the case may be, as
arrangers, co-arrangers, agents or co-agents and may allocate any fees to be paid in connection
with the U.S. Facility or European Facility, as the case may be, among the participating
institutions as Rhône may consider advisable from time to time.



Conditions to Our Commitment




     Our financing commitment and other obligations arising under or relating to the Commitment
Letter and the Facilities are made in reliance on and subject to satisfaction or waiver by us in
writing of each of the following conditions precedent:



     (i) compliance by the Borrowers and Parent with the terms of this letter; and



     (ii) the satisfaction of each of the conditions set forth under the caption “Conditions
Precedent” in the U.S. Term Sheet and the satisfaction of each of the conditions set forth under
the caption “Conditions Precedent” in the European Term Sheet.



Alternative Transactions




     Each of the parties hereto understands and agrees that neither Borrower is obligated to
proceed with the borrowings pursuant to the Facilities. In order to induce Rhône to make the
commitments hereunder and to induce Rhône to designate directors to serve on the Parent’s Board of
Directors, Parent agrees that on the earlier of (i) the Closing Date (as defined in the respective
Term Sheets) of each of the Facilities, and (ii) in the event the Closing Date does not occur and
Rhône is willing to fund the Facilities in accordance with the terms of the Commitment Letter, the
date on or prior to nine months after the date of the Commitment Letter on which Parent or any of
its subsidiaries enters into a binding agreement to sell the business of DC Shoes or enter into an
alternative financing transaction (other than the ABL Facility and the French Facility (each as
defined in the U.S. Term Sheet) and refinancing transactions by Parent’s Australian and Asian
subsidiaries) to refinance existing indebtedness of Parent and its subsidiaries, Parent shall
promptly issue to Rhône Warrants on the terms set forth in Exhibit C hereto (except that in the
case of clause (ii) above, such Warrants shall be exercisable for a number of shares of common
stock equal to 10% of the number of common equity securities outstanding at the time of issuance of
the Warrants).



Expenses and Indemnification




     The Borrowers shall, jointly and severally, reimburse Rhône from time to time following
written demand promptly, and in any event within 10 business days following written demand, for all
reasonable out-of-pocket and documented fees and expenses previously and hereafter incurred in
connection with the Commitment Letter, the Facilities and the transactions contemplated herein
(including without limitation reasonable fees and expenses of counsel (limited to not more than one
primary counsel and necessary local counsel (limited to one local



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counsel per jurisdiction)), consultants and advisors (including (i) the reasonable and documented
fees and expenses of Sullivan & Cromwell LLP; and (ii) the reasonable and documented fees and
expenses of Lazard Frères & Co. in an amount up to, in the case of the fees of Lazard Frères & Co.,
$1,500,000), filing and recording fees and reasonable and documented costs and expenses of due
diligence, travel and lodging, duplication, messenger services, appraisal, audit and electronic
reporting) (the “Expenses”), whether or not the Facilities are consummated or definitive
credit documents are executed. The Borrowers and Rhône acknowledge that this agreement supersedes
the Expense Reimbursement Agreement of May 15, 2009 between Rhône and the Parent, and also agree to
pay all costs and expenses that Rhône incurs in connection with the enforcement of any rights and
remedies under the Commitment Letter or the transactions contemplated hereby.



     The Borrowers shall, jointly and severally, indemnify and hold harmless Rhône, each other
Lender (as defined in each Term Sheet), and each of their respective agents, attorneys,
accountants, advisors, consultants, directors, officers, employees, partners, affiliates and other
representatives (each, an “Indemnified Party”) from and against any and all actions, suits,
proceedings (including any investigations or inquiries), claims, damages, losses, costs,
liabilities and expenses of any kind or nature whatsoever that may be incurred by or asserted or
awarded against any Indemnified Party as a result of or arising out of or in connection with or by
reason of (i) any matters contemplated by the Commitment Letter or any related transaction; or (ii)
either Facility and any other financings, or any use made or proposed to be made with the proceeds
thereof. The Borrowers further agree, jointly and severally, to reimburse each Indemnified Person
upon demand for any legal or other out-of-pocket and documented expenses incurred in connection
with investigating, defending or preparing to defend any such action, suit, proceeding (including
without limitation any inquiry or investigation) or claim (whether or not Rhône or any such other
Indemnified Person is a party to any action or proceeding out of which any such expenses arise).
Notwithstanding the foregoing, each Borrower’s obligation to indemnify any Indemnified Person
hereunder does not extend to any loss, claim, damage, expense or liability found in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified
Party’s gross negligence, willful misconduct or bad faith. 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 a Borrower, a
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. Each Borrower also agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to such Borrower, or such Borrower’s
subsidiaries or affiliates or to such 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 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, willful misconduct or bad faith.
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, willful misconduct or bad faith of such
Indemnified Party as determined by a final and nonappealable judgment of a court of competent
jurisdiction.



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Other Activities of Rhône




     Each Borrower agrees that Rhône may employ the services of its affiliates, managed funds and
affiliated-managed funds in connection with each Facility and the satisfaction of its obligations
under the Commitment Letter, and such affiliates and funds will be entitled to the benefits
afforded to and subject to the obligations of Rhône hereunder. Notwithstanding their involvement
in either Facility or the receipt of confidential information in connection herewith (but subject
to the restrictions herein relating to the disclosure and handling of such confidential
information), each Borrower understands and agrees that Rhône and its respective affiliates,
managed funds and affiliate-managed funds (i) may conduct other transactions for their or their
affiliates’ own account or the account of customers in equity, debt, securities, derivatives and
other financial instruments issued by or relating to such Borrower and its affiliates and
representatives (and their respective affiliates) and other companies with which such persons may
have a commercial or competitive relationship; and (ii) may provide investment advisory, financial
advisory and other services to any of such Borrower and its affiliates and representatives (and
their respective affiliates) or to persons and companies whose interests compete with those of such
Borrower and its affiliates and representatives (and their respective affiliates).



     In connection with all aspects of each transaction contemplated by the Commitment Letter, each
Borrower acknowledges and agrees that: (i) the Facility to which it is party and any related
arranging or other services described in this letter is an arm’s-length commercial transaction
between such Borrower and its affiliates, on the one hand, and Rhône, on the other hand, as the
case may be, and such 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,
Rhône is and has been acting solely as a principal and, except as expressly set forth in the
Commitment Letter, is not acting as an advisor, agent or fiduciary for such Borrower or any of its
affiliates, stockholders, creditors or employees or any other party; (iii) Rhône has not assumed
and will not assume an advisory, agency or fiduciary responsibility in such Borrower’s or its
affiliates’ favor with respect to any of the transactions contemplated hereby or the process
leading thereto (irrespective of whether Rhône has advised or is currently advising such Borrower
or its affiliates on other matters) and Rhône has no obligations to such Borrower or its affiliates
with respect to the transactions contemplated hereby except those obligations expressly set forth
in the Commitment Letter and as may be set forth in definitive documentation for such Facility;
(iv) Rhône and its respective affiliates may be engaged in a broad range of transactions that
involve interests that differ from such Borrower and its affiliates and Rhône has no obligation to
disclose any of such interests by virtue of any fiduciary, agency or advisory relationship; and (v)
Rhône has not provided any legal, accounting, regulatory or tax advice with respect to any of the
transactions contemplated hereby and such Borrower has consulted its own legal, accounting,
regulatory and tax advisors to the extent such Borrower has deemed appropriate. Each Borrower
hereby waives and releases, to the fullest extent permitted by law, any claims that it may have
against Rhône based upon or relating to any allegation that Rhône owes such Borrower and its
affiliates and representatives (and their respective affiliates) any fiduciary duty with respect to
any of the transactions contemplated hereby, and agrees, to the fullest extent permitted by law,
that neither Rhône, nor any of its respective affiliates, managed



4









 







funds or affiliate-managed funds will have any liability (whether direct or indirect) in respect of
any claim for breach of fiduciary duty to any such person or any other person with respect to any
of the transactions contemplated hereby, including any stockholders, employees or creditors
asserting a claim derivatively, in any such person’s name or otherwise on its behalf.



Confidential Nature of the Commitment Letter




     Except as required by applicable law or pursuant to a subpoena or order issued by a court of
competent jurisdiction or by a judicial, administrative or legislative body or committee, the
Parent and each Borrower shall maintain as confidential the terms or conditions of the Commitment
Letter and the terms, conditions, provisions and documentation of the Facilities; provided,
however, it is understood and agreed that the Parent and each Borrower may disclose the
existence of the Commitment Letter and the material terms contained therein after you have accepted
and returned the countersigned copies of the Commitment Letter, in filings with the Securities and
Exchange Commission and other applicable regulatory authorities and stock exchanges. Without
limiting the foregoing, (i) the Commitment Letter may not be disclosed in whole or in part to any
person or entity other than the Parent’s and each Borrower’s and their subsidiaries’ respective
directors, employees, accountants, attorneys and professional advisors in connection with the
establishment of the Facilities on a confidential basis, without Rhône’s prior written consent; and
(ii) the Commitment Letter and draft documentation for the Facilities may be disclosed on a
confidential basis to the lenders and agent in respect of the ABL Facility and to the lenders and
mediator in respect of the French Facility (each term as defined in the U.S. Term Sheet). Parent
and Rhône shall agree in good faith on the text of any press release to be issued regarding this
Commitment Letter and the transactions contemplated hereby.



Termination of Our Commitment




     The Commitment Letter shall terminate unless accepted by the Parent and the U.S. Borrower on
or before 5:00 p.m. (New York time) on June 8, 2009 by signing below and returning this letter, so
signed, to Rhône.



     This letter does not constitute an unconditional commitment to lend. Such a commitment will
exist only upon satisfaction of all conditions precedent described in the Commitment Letter on or
before July 31, 2009. Rhône’s commitment to provide the Facilities and the other obligations of
the parties under the Commitment Letter will terminate upon written notice by Rhône on July 31,
2009 unless each Facility becomes effective on or before such date.



     The obligations of each Borrower and its affiliates and representatives (and their respective
affiliates) under the sections of the Commitment Letter entitled “Alternative
Transactions,” “Expenses and Indemnification,” Other Activities of Rhône,”
“Confidential Nature of the Commitment Letter,” “Syndication,” and, to the extent
applicable, “Governing Law, Etc.” and “Miscellaneous” will survive the termination
of our commitment and obligations. Notwithstanding the foregoing, all of the Borrowers’
reimbursement, indemnification and confidentiality obligations set forth in this letter and the
Term Sheets shall remain in full force and effect regardless of whether any definitive
documentation for the establishment of the Facilities shall be executed and notwithstanding the
termination of this letter or any undertaking hereunder, provided that the reimbursement and
indemnification provisions shall be superseded



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in each case by the applicable provisions contained in the definitive documentation upon execution
thereof and thereafter shall have no further force and effect.



Syndication




     Rhône shall have the right to syndicate all or part of either Facility to investment vehicles
controlled by Rhône and to limited partners (or their affiliates) of such investment vehicles (each
such party, a “Lender”). The Parent and each Borrower grant Rhône permission to share
confidential information of Parent and such Borrower provided to Rhône with each Lender, including
the limited partners or equivalent thereof, in each case on a confidential basis.



Governing Law, Etc.




     THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS. Each of the Parent, each Borrower and Rhône
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, the Commitment Letter or the performance of
services hereunder. Each Borrower agrees that service of any process, summons, notice or document
by registered mail addressed to such Borrower shall be effective service of process for any suit,
action or proceeding brought in any such court. Each Borrower and Rhône 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 party hereto agrees that a final judgment in any such proceeding
will be conclusive and may be enforced in other jurisdictions.



     EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY SUCH SUIT, ACTION, OR PROCEEDING AMONGST OR
BETWEEN ANY BORROWER AND RHÔNE OR ANY OTHER LENDER.



     Each party hereto has agreed as a material term that, to the fullest extent permitted by New
York law, no party hereto will be liable to any other party hereto for any special, consequential
or similar damages relating to the Commitment Letter or the transactions contemplated hereby or on
any cause of action based on promissory estoppel, detrimental reliance or a similar theory of
relief, in each case regardless of whether or not damages or reliance was foreseeable.



     Rhône hereby notifies each 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”)), Rhône
and each other Lender may be required to obtain, verify and record information that identifies each
Borrower, which information may include such Borrower’s name and address and other information that
will allow Rhône and each other Lender to identify such 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 Rhône and any other Lender.



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Miscellaneous




     Rhône, Parent and the Borrowers may mutually agree to shift Rhône’s commitment to lend between
the U.S. Facility and the European Facility, provided that the U.S. Dollar equivalent of the
aggregate amount of the Facilities shall not be reduced.



     This letter may not be assigned or transferred by either Borrower without the prior written
consent of Rhône, and any attempted assignment without such consent shall be void. With respect to
the European Borrower, Parent shall cause the European Borrower to be formed as promptly as
reasonably practical following the date hereof (on terms consistent with the European Term Sheet)
and shall promptly thereafter cause the European Borrower to execute a signature page hereto. The
Commitment Letter may not be amended or any provision thereof waived or modified except by an
instrument in writing signed by the Parent, the U.S. Borrower and Rhône. 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, their affiliates to the
extent expressly provided in the Commitment Letter and the Indemnified Persons.



     All amounts payable by the Borrowers under the Commitment Letter will be made in U.S. dollars,
except for the fees set forth in the European Term Sheet, which will be made in Euros 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 the Borrowers for such
amounts.



     The Commitment Letter (including the Term Sheets) set forth the entire agreement between the
parties with respect to the matters addressed herein and supersede all prior communications,
written or oral, with respect hereto. If any provision of the Commitment Letter is determined by a
court of competent jurisdiction to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of the Commitment Letter will not in any way be affected
or impaired thereby.



     The agreements of Rhône hereunder are made solely for the benefit of the Borrowers and may not
be relied upon or enforced by any other person. Please note that those matters that are not
covered or made clear in the Commitment Letter are subject to mutual agreement of the parties.



     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 Rhône at the address set forth below, no later
than 5:00 p.m., New York time, on June 8, 2009. 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.



[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.



	 	 	 	 	 
	 	 	RHÔNE CAPITAL III L.P.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	 

	 	To:
	 	Rhône Capital III L.P.
	 

	 	 	 	630 Fifth Avenue, 27th Floor
	 

	 	 	 	New York, NY 10111






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The foregoing is agreed to and accepted

this ___ day of June, 2009




	 	 	 	 	 
	QUIKSILVER, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:
	 	 	 	 
	 
	 	 	 	 
	QUIKSILVER AMERICAS, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:
	 	 	 	 







9












 





PRIVILEGED AND CONFIDENTIAL




EXHIBIT A

SUMMARY OF CERTAIN TERMS AND CONDITIONS

$125,000,000 Senior Secured Term Loan Facility




	 	 	 
	Borrower:

	 	Quiksilver Americas, Inc. (the “Borrower”).
	 
	 	 
	Guarantors:

	 	All obligations under the Facility to be
unconditionally guaranteed by Quiksilver, Inc.
(the “Parent”) and all U.S. subsidiaries of the
Borrower (other than immaterial subsidiaries to
which the Agent reasonably consents)
(collectively the “Guarantors”). Obligations
under the Facility will be guaranteed on a
senior basis. Each of the Borrower, Parent,
each other Guarantor and each other party
pledging Collateral hereunder are referred to
herein as an “Obligor”.
	 
	 	 
	Agent:

	 	Rhône Capital III L.P. or one or more
affiliated entities designated by Rhône Capital
III L.P. (collectively, “Rhône”) to be
arranger and bookrunner, administrative agent
and collateral agent (in all such capacities,
the “Agent”).
	 
	 	 
	Lenders:

	 	Rhône, investment vehicles controlled by Rhône
and limited partners of Rhône investment
vehicles (or their affiliates) (each, a
“Lender” and collectively, the “Lenders”),
which, in the case of any Lenders who are not
Rhône investment vehicles or limited partners
of Rhône investment vehicles (or their
affiliates), shall be reasonably acceptable to
the Borrower.
	 
	 	 
	Closing Date:

	 	The date on or before July 31, 2009 on which
the borrowings under the Facility are made to
be mutually agreed upon (the “Closing Date”).
	 
	 	 
	Facility:

	 	A senior secured term loan facility in an
amount not to exceed $125,000,000 (the
“Facility” and the loan made pursuant thereto,
the “Term Loan”).
	 
	 	 
	Availability:

	 	The Term Loan would be fully funded on the
Closing Date and amounts repaid would not be
able to be reborrowed.
	 
	 	 
	Maturity:

	 	The day that is one day prior to the five-year






A-1









 






	 	 	 
	 

	 	anniversary of the Closing Date (the “Maturity
Date”). The outstanding principal balance of
the Term Loan will be due and payable on the
Maturity Date.
	 
	 	 
	 

	 	The Borrower will have the right to prepay the
Term Loan in part or in full at any time and
from time to time without premium or penalty,
provided that in the event of any voluntary
prepayment by Borrower on or prior to the third
anniversary of the Closing Date, if the U.S.
dollar has depreciated against the Euro between
the Closing Date and the date of such voluntary
prepayment, the Borrower shall pay the Lenders
an additional amount such that the principal
amount and accrued PIK interest being
voluntarily prepaid plus such additional
payment yields the same amount in Euros as such
principal amount and accrued PIK interest would
have yielded at a U.S. dollar to Euro exchange
rate equal to 1.42 and provided further that
the maximum aggregate additional amount payable
shall be $18,750,000 plus 15% of the amount of
accrued and unpaid PIK interest then being
prepaid. At the time of the final payment on
the Term Loan (whether at the Maturity Date or
upon prepayment), the Borrower will pay the
Lenders an additional amount equal to the
excess, if any, of $1,500,000 over the amount
paid in respect of the exchange rate adjustment
pursuant to the immediately preceding sentence.
	 
	 	 
	Amortization:

	 	No amortization. The Term Loan will be payable
in full at maturity.
	 
	 	 
	Use of Proceeds:

	 	Proceeds of the Term Loan borrowed on the
Closing Date would be used to refinance certain
existing indebtedness of the Borrower and its
subsidiaries, to pay related transaction fees
and expenses and for general corporate
purposes.
	 
	 	 
	Security:

	 	The Facility will be secured by (i) a
first-priority, perfected security interest in
the Quiksilver and Roxy trademarks owned by the
Borrower or any Guarantor with respect to the
Americas, including the United States and
Mexico and in all D.C. Shoes trademarks owned
by D.C. Shoes, Inc.






A-2









 






	 	 	 
	 

	 	(“DC”) (the “Trademarks”);
(ii) a first-priority (subject to exceptions to
be mutually agreed upon by the Borrower and
Agent), perfected security interest in all
other property of the Borrower and Guarantors,
excluding collateral in which the lenders under
the ABL Facility (as defined below) (the “ABL
Lenders”) have a first-priority security
interest; (iii) a second-priority, perfected
security interest in all of the property of the
Borrower and Guarantors subject to a first
priority security interest granted to the ABL
Lenders under the ABL Facility; and (iv) a
first-priority perfected pledge of 66 2/3% of
the shares of the European Borrower (as
defined in the Commitment Letter)
(collectively, the “Collateral”).
	 
	 	 
	 

	 	It is understood and agreed that there will be
customary exceptions to the definition of
Collateral or the requirements and
representations relating to perfection of any
security interest in assets otherwise
constituting Collateral, including the
following, subject to Sections 9-406 through
9-409, inclusive, of the Uniform Commercial
Code of any relevant jurisdiction or any other
applicable law or principles of equity: (i) all
leasehold interests; (ii) motor vehicles and
other assets subject to certificates of title,
letter of credit rights and commercial tort
claims; (iii) assets over which the granting of
a security interest would be prohibited by
agreement or applicable law or regulation; (iv)
those assets as to which the Agent reasonably
determines the cost of obtaining or perfecting
a security interest outweighs the benefit to be
obtained thereby; (v) interests in joint
ventures and non-wholly owned subsidiaries
which cannot be pledged without the consent of
one or more third parties, provided the
Borrower makes good faith efforts to obtain any
such third-party consents in order to be able
to grant security interests in any such
interests in joint ventures and non-wholly
owned subsidiaries; and (vi) other exceptions
to be mutually agreed upon by the Borrower and
the Agent.
	 
	 	 
	 

	 	All Collateral would be free and clear of other
liens except for (i) liens in respect to the
security






A-3









 






	 	 	 
	 

	 	interests granted to the ABL Lenders
under the ABL Facility; (ii) liens in favor of
the lenders under the European Facility; and
(iii) other liens to be mutually agreed upon by
the Borrower and the Agent.
	 
	 	 
	Interest Rates:

	 	The outstanding principal balance under the
Facility would bear interest at a fixed rate of
15% per annum, of which up to 6% per annum
would be payable quarterly in kind at
Borrower’s option at any time when there is no
pending or existing Event of Default, with the
remaining portion payable in cash, in each
case, payable quarterly in arrears on the first
day of each quarter. All interest calculations
would be made on the basis of actual days
elapsed in a year of 360 days.





Upon the occurrence and during the continuance
of any Event of Default, the margin applicable
to all loans would be increased by an
additional 2% per annum, payable on demand.




The Borrower shall agree to gross up the
Lenders for any withholding taxes in customary
fashion.
	 
	 	 
	Fees:

	 	3.0% of the initial maximum principal amount of
the Term Loan fully-earned and due and payable
in cash to the Agent for its own account on the
Closing Date.
	 
	 	 
	Prepayments:

	 	Mandatory prepayment of the Term Loan without
premium or penalty (i) in full, upon a Change
in Control of Parent or Borrower, the Change in
Control definition to be mutually agreed based
on ABL Facility and French Facility
definitions; (ii) in an amount equal to the net
cash proceeds of asset sales received by the
Borrower and the Guarantors outside the
ordinary course of business in excess of
$15,000,000 in any fiscal year; and (iii) upon
the occurrence of any other event that results
in the mandatory prepayment pursuant to the ABL
Facility in an amount equal to the net cash
proceeds received by Borrower or Guarantors
therefrom (excluding any borrowing base or
overadvance-related prepayment requirement
thereunder); provided that, in the case of
clauses






A-4









 






	 	 	 
	 

	 	(ii) and (iii), Borrower shall have no
obligation to make any such prepayment if and
to the extent such prepayment is made to the
ABL Lenders and the ABL Facility is not repaid
in full as a result of such prepayment.
	 
	 	 
	Conditions Precedent:

	 	The obligation of the Lenders to make the Loan
on the Closing Date shall be subject to the
conditions set forth in the Commitment Letter
under the caption “Conditions to Our
Commitment” and the following other conditions:
	 
	 	 
	 

	 	(i) The final terms and conditions of the
Facility and the intercreditor agreement, and
all documentation relating thereto, including
Collateral and Warrant (as defined in the
Commitment Letter) documentation, being
consistent with this Term Sheet and the
Commitment Letter to which this Term Sheet is
attached and otherwise in form and substance
reasonably satisfactory to the Agent; and
execution and delivery of such documentation by
each applicable Obligor.
	 
	 	 
	 

	 	(ii) All of the capital stock of each of
Parent’s subsidiaries and each of Borrower’s
subsidiaries being owned by Parent or Borrower,
respectively, in each case free and clear of
any lien, charge or encumbrance, other than the
liens and security interest created or
permitted under the loan documentation; the
Agent having valid and perfected (subject to
the exceptions set forth under “Security” and
other exceptions reasonably acceptable to the
Agent to be set forth in the loan
documentation) liens and security interests in
all of the Collateral, with the respective
priorities set forth above; all filings and
recordations necessary or desirable in
connection with such liens and security
interests having been prepared in form for
filing or recordation (with such filings and
recordings to be made promptly upon execution
of the final documentation or delivered to the
Agent at its request for filings or
recordation); and all filing and recording fees
and taxes relating to such filings and
recordings having been duly paid.






A-5









 






	 	 	 
	 

	 	(iii) The Agent having received the final
quarterly financial statements of the Parent
and its subsidiaries for the fiscal quarter
ending April 30, 2009, with such final
quarterly financial statements corresponding in
all substantive respects to the preliminary
financial statements for the fiscal quarter
ending April 30, 2009 delivered to Rhône on May
29, 2009.
	 
	 	 
	 

	 	(iv) Receipt by the Agent of the following
documents for each Obligor (in original or copy
certified by an authorized signatory of the
relevant Obligor): (a) a copy of the
constituent documents; (b) a copy of a
resolution of the board of directors (or other
appropriate body) approving the transactions
contemplated by the Commitment Letter and
authorizing the execution and delivery of final
documentation for the Facility to which it is a
party; (c) a certificate of the Borrower and
the Parent (signed by an authorized signatory
of these companies) confirming that borrowing
or guaranteeing or securing, as appropriate,
the Facility would not cause any borrowing,
guarantee, security or similar limit binding on
any Obligor to be exceeded; and (d) a customary
incumbency certificate.
	 
	 	 
	 

	 	(v) Since January 31, 2009, there having
occurred no event or occurrence which has
resulted in or would reasonably be expected to
result in any material adverse change in the
business, assets, operations, properties,
performance or condition (financial or
otherwise) of the Borrower and its
subsidiaries, taken as a whole or of Parent and
its subsidiaries, taken as a whole.
	 
	 	 
	 

	 	(vi) Since the date of the Commitment Letter,
no material changes in governmental regulations
or policies affecting the Parent or its
subsidiaries, the Borrower or its subsidiaries
or the Lenders having occurred prior to the
Closing Date.
	 
	 	 
	 

	 	(vii) The Parent and its subsidiaries not
having entered into any binding agreement to
dispose of any of the Collateral outside the
ordinary course of business (including, without
limitation, the DC






A-6









 






	 	 	 
	 

	 	Shoes business) or as
otherwise contemplated in the Commitment
Letter.
	 
	 	 
	 

	 	(viii) There existing no action, suit,
investigation, litigation or proceeding pending
or, to the knowledge of Borrower or Parent,
threatened that (a) would reasonably be
expected to (1) have a material adverse effect
on the business, assets, operations,
properties, performance, condition (financial
or otherwise) of the Parent and its
subsidiaries, taken as a whole, or of the
Borrower and its subsidiaries, taken as a
whole, (2) adversely affect the ability of the
Obligors to perform their obligations under the
loan documentation in any material respect, or
(3) adversely affect the rights and remedies of
the Agent and the Lenders under the loan
documentation in any material respect; or (b)
purports to adversely affect in any material
respect the financing of the Facility or
prevent the anticipated use of the proceeds.
	 
	 	 
	 

	 	(ix) All governmental and material third party
consents and approvals necessary in connection
with the Facility having been obtained.




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




(xi) The Agent having received customary
endorsements naming the Agent, on behalf of the
Lenders, as an additional insured under all
applicable liability insurance policies
maintained by Borrower and the Guarantors and a
loss payee for all applicable casualty
insurance policies of the Borrower and the
Guarantors forming part of the Collateral.
	 
	 	 
	 

	 	(xii) Execution of an intercreditor agreement
between the Agent and the agents for the ABL
Lenders, with terms and conditions reasonably
satisfactory to the Agent.
	 
	 	 
	 

	 	(xiii) Execution of an agreement between
European Borrower (as defined in the Commitment
Letter) and the Agent, in form and






A-7









 






	 	 	 
	 

	 	substance
reasonably acceptable to Rhône, providing that
European Borrower (as defined in the Commitment
Letter) will not exercise the right to
terminate its licensing agreements with
Quiksilver Canada Corp. or Quiksilver Industria e Comercio de Artigos Esportivos Ltda (the
“Licensees”) nor permit the Licensees to
terminate such agreements, without the prior
written consent of the Agent (such consent not
to be unreasonably withheld).
	 
	 	 
	 

	 	(xiv) The Agent having received legal opinions
from counsel for the Borrower and the Parent in
customary form relating to: (a) the due
authorization of each Obligor to enter into the
respective Facility documentation to which each
is a party, (b) enforceability of all material
definitive loan documentation relating to the
Term Loan, the Facility, the pledge of the
Collateral and the Warrants (subject to
customary limitations and exceptions that are
reasonably acceptable to the Agent) and (c) no
conflict with the Indenture with respect to the
Senior Notes and other specified material
indebtedness of the Obligors.
	 
	 	 
	 

	 	(xv) The Agent having received (a) customary
legal opinions from local counsel in each
foreign jurisdiction where Collateral
constituting equity interests in subsidiaries
of Parent is being pledged and (b) other
customary opinions on pledges of Collateral, in
all cases covering such customary matters as the perfection, authorization and
enforceability of any such pledge and with such
exceptions as the Agent may agree.




(xvi) The Borrower having delivered a
certificate in customary form attesting to the
accuracy of representations and warranties,
absence of defaults and the solvency of the
Borrower and its subsidiaries, taken as a
whole, after giving effect to the Facility.
	 
	 	 
	 

	 	(xvii) The Agent having received (a) a copy of
the final legal and tax structure memorandum
from Skadden Arps Slate Meagher & Flom LLP
referenced in the conditions precedent in the
term






A-8









 






	 	 	 
	 

	 	sheet relating to the new French term and
revolving credit facilities with respect to
certain of the Parent’s French subsidiaries
(the “French Facility”) and any material
differences with respect to the settlement of
intercompany payables that have an impact on
the liquidity of the Obligors in such final
memorandum as compared to the prior version
delivered to the Agent being reasonably
acceptable to Agent, and (b) a copy of a funds
flow statement consistent with such memorandum,
and, to the extent the memorandum contemplates
settlement before the Closing Date, the Parent
and its subsidiaries having taken such steps as
are reasonably necessary to settle the
intercompany payables to the extent, in the
manner and on the timing set forth in such
memorandum.
	 
	 	 
	 

	 	(xviii) The Borrower having paid all fees and
expenses then due and owing to the Agent and
Lenders under the Commitment Letter to the
extent invoiced prior to the Closing Date.




(xix) The Agent having received all reasonably
required UCC, tax lien and litigation searches
relating to the Obligors and such results shall
indicate the absence of liens on the assets of
the Obligors, 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 borrowing of the Term Loan or other
arrangements reasonably satisfactory to the
Agent for the delivery of such termination
statements and releases have been made.
	 
	 	 
	 

	 	(xx) The closing of the senior secured
revolving credit facility (the “ABL Facility”)
on terms and conditions substantially the same
as those set forth in the term sheet in respect
thereof dated as of May 21, 2009 (as amended by
the letter agreement dated as of June [___],
2009), with such modifications as the Agent
shall agree in its reasonable discretion and
the initial funding of the ABL Facility and
concurrent repayment of the Borrower’s existing
revolving credit facility.






A-9









 






	 	 	 
	 

	 	(xxi) The closing of the French Facility on
terms and conditions substantially consistent
with the terms set forth in the memorandum from
Sullivan & Cromwell LLP dated May 24, 2009,
with such modifications as the Agent shall
agree in its reasonable discretion.
	 
	 	 
	 

	 	(xxii) The Borrower having caused DC Shoes,
Inc. to enter into a new agreement with Emerald
Coast, SAS and DC Shoes Australia Pty Ltd.
(which shall replace the Services Fee
Agreement) which provides that the rights of
such entities to engage in the DC business or
exploit the use of the DC trademarks, service
marks, tradenames and logos outside of the
United States shall terminate within 12 months
of a change in control of, or sale of all or
substantially all of the assets of, DC Shoes,
Inc. or of the DC trademarks, service marks,
tradenames or logos and such other terms and
conditions as are reasonably acceptable to the
Agent.
	 
	 	 
	 

	 	(xxiii) The Parent having transferred all
trademarks, service marks, tradenames and logos
related to Quiksilver and Roxy (including the
trademarks, applications and registrations with
respect thereto and all associated goodwill)
owned by the Parent with respect to the United
States and Mexico, to the Borrower.




(xxiv) The satisfaction or waiver of all
conditions set forth in the term sheet and
final documentation with respect to the
European Facility.
	 
	 	 
	 

	 	(xxv) The representations and warranties set
forth in the final documentation with respect
to the Facility (as described under
“Representations and Warranties” below) being
true and correct in all material respects as of
the Closing Date.
	 
	 	 
	 

	 	(xxvi) Entry into final documentation for the
Warrants in form consistent with Exhibit C to
the Commitment Letter and otherwise reasonably
satisfactory to the Agent, including a
registration rights agreement with respect to
the Warrants and common stock issuable upon
exercise of the






A-10









 






	 	 	 
	 

	 	Warrants, reservation of
authorized and unissued common shares in an
amount sufficient to satisfy the full exercise
of the Warrants and issuance of the Warrants to
Rhône.
	 
	 	 
	 

	 	(xxvii) Parent’s Board of Directors having
granted all necessary approvals under Parent’s
constituent documentation and Delaware General
Corporation Law with respect to the acquisition
and exercise of the Warrants.




(xxviii) In accordance with the terms of the
Warrants, the number of directors on the Board
of Directors of the Parent having been
increased by two and such new seats having been
filled by nominees of Rhône.




(xxix) Parent’s Board of Directors having
adopted an equity incentive plan for members of
current management and future hires, on terms
reasonably acceptable to the Agent.
	 
	 	 
	 

	 	(xxx) The Agent having concluded any
legally-required background checks and other
investigations to ensure compliance with the
USA Patriot Act, anti-money laundering laws
with results reasonably satisfactory to the
Agent.
	 
	 	 
	Representations and
Warranties:

	 	The final documentation shall contain
representations and warranties customarily
found in loan documentation for similar secured
financings, with exceptions, qualifications and
materiality to be mutually agreed, including
without limitation representations and
warranties with respect to: (i) authority; (ii)
capitalization of Borrower and each Guarantor;
(iii) financial statements and the absence of
undisclosed liabilities; (iv) the accuracy and
completeness of all filings under the
Securities Exchange Act of 1934 and the
accuracy and completeness of all other
information provided to the Lenders; (v)
compliance with all applicable laws, including
the Sarbanes-Oxley Act of 2002; (vi) compliance
with debt instruments in all material respects;
(vii) the absence of insolvency proceedings
against Parent and any of its direct or
indirect subsidiaries on the






A-11









 






	 	 	 
	 

	 	Closing Date;
(viii) intellectual property; (ix) real
property and leases; (x) employee benefits
plans and pension plans; (xi) labor matters;
(xii) taxation; (xiii) the due execution,
perfection (where applicable), delivery,
authorization and enforceability of all loan
documentation, including each pledge or lien;
(xiv) the absence of any amendment to the
agreements referenced in clause (xxii) of
“Conditions Precedent”, excluding amendments
made in accordance with and to satisfy such
condition; and (xv) since January 31, 2009, the
absence of any event or occurrence which has
resulted in or would reasonably be expected to
result in any material adverse change in the
business, assets, operations, properties,
performance or financial condition of the
Parent and its subsidiaries, taken as a whole,
and the Borrower and its subsidiaries, taken as
a whole.
	 
	 	 
	Covenants:

	 	The final documentation shall contain such
covenants of Parent, Borrower and the
Guarantors customarily found in loan
documentation for similar secured financings
(with customary exceptions and materiality
qualifiers to be mutually agreed upon by the
Borrower and the Agent).
	 
	 	 
	 

	 	Negative covenants would include, without
limitation: liens; negative pledges; restricted
junior payments (dividends, redemptions and
voluntary payments on certain debt);
restrictions on subsidiary distributions;
fundamental changes, investments, mergers and
acquisitions; sales of assets (including
subsidiary interests); sales and lease-backs;
transactions with affiliates; conduct of
business; amendments and waivers of
organizational documents that could materially
affect the Facility or the security therefor;
affiliate transactions; and changes to fiscal
year, including, in each case, exceptions and
baskets to be mutually agreed upon.
	 
	 	 
	 

	 	Affirmative covenants would include, without
limitation: delivery of financial statements
and other reports as set forth under
“Information






A-12









 






	 	 	 
	 

	 	Rights” below; maintenance of
existence; payment of taxes and claims;
maintenance of properties; maintenance of
insurance; books and records; inspections;
compliance with laws; environmental matters;
additional collateral and guarantors; and
further assurances.
	 
	 	 
	 

	 	In addition, Parent shall covenant that it will
work in good faith to determine whether there
is a tax-efficient way to cause a dividend,
distribution or other transfer of the Preferred
Shares from QS Holdings SARL to the European
Borrower or a wholly-owned subsidiary of the
European Borrower (subject to the Agent’s
security interest in the Preferred Shares) and,
if it determines in its reasonable discretion
that a tax-efficient method exists, effectuate
such dividend, distribution or other transfer.
	 
	 	 
	 

	 	Financial covenants would include only:
	 
	 	 
	 

	 	With respect to Parent and its subsidiaries
(including European Borrower and its
subsidiaries and in any event including
Quiksilver Brazil JV and Quiksilver Industria e
Comercio de Artigos, but excluding QS Holdings
SARL and its subsidiaries and Quiksilver
Greater China Ltd and its subsidiaries):
	 
	 	 
	 

	 	(i) Other than any incurrence pursuant
to the ABL Facility or otherwise permitted
under an existing basket in the Indenture
relating to the Senior Notes dated as of July
22, 2005 (the “Indenture”), at the time of
incurrence of any debt (pro forma for such
incurrence), total debt of such entities shall
not exceed five times the EBITDA of such
entities for the last four fiscal quarters
considered as a single period.

	 
	 	 
	 

	 	(ii) As of the last day of each fiscal
quarter, the EBITDA of such entities for the
last four fiscal quarters considered as a
single period shall be greater than the amounts
as set forth in Annex A1.







A-13









 






	 	 	 
	 

	 	(iii) Excess availability under the ABL
shall at all times be in excess of 7.5% of the
lesser of the Borrowing Base (as defined under
the ABL Facility) and the amount of the
aggregate commitments under the ABL Facility.

	 
	 	 
	 

	 	With respect to Parent and its subsidiaries,
other than any incurrence pursuant to the ABL
Facility or otherwise permitted under an
existing basket in the Indenture, at the time
of incurrence of any debt (pro forma for such
incurrence), total debt of such entities shall
not exceed five times the EBITDA of such
entities for the last four fiscal quarters.
	 
	 	 
	 

	 	In addition, other than intercompany transfers
among the subsidiaries of Newco II (as defined
in the European Term Sheet) and transfers to
the European Borrower (including intermediate
transfers to Newco II in order to effectuate
transfers to the European Borrower), the
European Borrower, Newco II and their
subsidiaries would be prohibited from incurring
or guaranteeing any indebtedness (other than
pursuant to the European Facility and the ABL
Facility and other than in accordance with
mutually agreed exceptions for the Canadian and
Brazilian subsidiaries) or granting any
security in their shares or assets (other than
pursuant to the Term Loan, the European
Facility and the ABL Facility and other than
the granting of a limited recourse pledge of
any shares of QS Holdings SARL held by Newco
II) for so long as the Term Loan is
outstanding.
	 
	 	 
	Events of Default:

	 	The final documentation shall contain those
events of default customarily found in loan
documentation for similar secured financings,
with appropriate grace periods, exceptions,
materiality, and baskets to be mutually agreed
(each, an “Event of Default”). The events of
default shall include without limitation (i)
material breach of representations and
warranties; (ii) payment and interest default;
(iii) certain negative and affirmative
covenants; (iv) cross-default on the ABL
Facility, the existing Senior Notes issued by
Parent on July 22, 2005 and the European
Facility






A-14









 






	 	 	 
	 

	 	and any refinancings thereof; (v)
cross-acceleration with respect to the French
Facility; (vi) failure of Parent’s Board of
Directors to nominate, or of Parent’s
stockholders to elect, any director proposed by
Rhône in accordance with the Warrants; (vii)
amendment of any agreements referenced in
clause (xxii) of “Conditions Precedent” in a
manner that is materially adverse to the
Lenders and excluding amendments made in
accordance with and to satisfy such condition;
(viii) bankruptcy; (ix) judgments in excess of
specified amounts; (x) material ERISA events;
(xi) failure of enforceability of liens or loan
documents; and (xii) invalidity of guarantees
or of Collateral pledges.
	 
	 	 
	Expenses:

	 	The Borrower shall pay all of the Lenders’
out-of-pocket and documented costs, including
without limitation reasonable fees and expenses
of counsel (limited to not more than one
primary counsel and necessary local counsel
(limited to one local counsel per
jurisdiction)), consultants and advisors,
filing and recording fees and reasonable and
documented costs and expenses of due diligence,
travel and lodging, duplication, messenger
services, appraisal, audit, insurance, search
and electronic reporting in connection with the
Facility and the Warrants described under
“Warrants”, as well as the reasonable
out-of-pocket and documented expenses of the
Agent in connection with the administration of
the loan documentation (including without
limitation the reasonable and documented fees
and expenses of counsel for the Agent (limited
to not more than one primary counsel and
necessary local counsel (limited to one local
counsel per jurisdiction)) and the reasonable
and documented fees and expenses of Lazard
Frères & Co. in an amount, with respect to the
fees of Lazard Frères & Co., up to $1,500,000.
The Borrower would also pay the expenses of the
Agent and the Lenders in connection with the
enforcement of the loan documentation. Borrower
shall pay the foregoing expenses regardless of
whether or not the Facility closes.






A-15









 






	 	 	 
	Indemnity:

	 	The Borrower shall indemnify and hold harmless
the Agent, each Lender and each of their
affiliates and their officers, directors,
employees, agents and advisors from claims and
losses relating to the Facility on terms
customarily contained in loan documentation for
similar secured financings.
	 
	 	 
	Information Rights:

	 	Parent shall deliver to the Lenders: (i) as
soon as available but no later than October 15
of the fiscal year ending on October 31, 2009,
and September 15 of each fiscal year
thereafter, a copy of the approved annual
budget for the upcoming fiscal year; (ii)
commencing with the first month after the first
full six months after the Closing Date, monthly
unaudited financial statements within 30 days
after the end of such period with comparisons
to the prior years and budget for all such
statements relating to periods from and after
the first month to close after the first full
18 months after the Closing Date and otherwise
in such form as prepared by management for
internal use; (iii) quarterly unaudited
financial statements within 45 days after the
end of such period with comparisons to the
prior years and budget; (iv) annual audited
financial statements within 90 days after the
end of the year; and (v) at all times, any
other information provided in writing by the
Parent or any subsidiary to the ABL Lenders or
the French Lenders. In addition, so long as
excess availability under the ABL Facility is
less than $30,000,000, Parent shall deliver to
the Lenders weekly cash flow reports, which
will include a 13-week rolling cash flow
forecast.
	 
	 	 
	 

	 	Lenders shall have customary rights to (i)
inspect the properties, books and other records
of the Obligors at reasonable times and upon
reasonable notice, and (ii) reasonably request
from time to time any other information
(financial or otherwise). Parent and Borrower
shall, and shall cause their subsidiaries to,
comply with any such inspections and requests.






A-16









 






	 	 	 
	Public Disclosure:

	 	Except as required pursuant to the Securities
Act of 1933, the Securities Exchange Act of
1934, the rules of the New York Stock Exchange
or other applicable law, the Agent and Parent
shall agree on the timing and content of any
disclosure, including without limitation, any
press release relating to the transactions
contemplated hereby prior to its initial public
dissemination, and no such disclosure shall be
made without the consent of the Agent and
Parent.
	 
	 	 
	Miscellaneous:

	 	Waiver of jury trial and submission to
jurisdiction and venue in the federal and state
courts of the State of New York. Lenders shall
have the right at any time to sell and assign
interests and sell participations under the
Facility, in accordance with customary terms,
subject to the consent of the Borrower (which
consent shall not be unreasonably withheld).
	 
	 	 
	Governing Law:

	 	New York.
	 
	 	 
	Counsel to Agent and
Lenders:

	 	Sullivan & Cromwell LLP.






A-17









 



PRIVILEGED AND CONFIDENTIAL





EXHIBIT B

SUMMARY OF CERTAIN TERMS AND CONDITIONS

€20,000,000 Senior Secured Term Loan Facility




	 	 	 
	Borrower:

	 	A newly-formed direct, wholly-owned
subsidiary of Quiksilver, Inc. (the “Parent”) to be organized in
Luxembourg (the “European Borrower”).
The European Borrower will be the
direct parent of (i) QS Holdings SARL
and (ii) a newly-formed wholly-owned
subsidiary to be organized in
Luxembourg (“Newco II”), which will
issue shares of non-voting preferred
stock (“Preferred Shares”) in
exchange for all Quiksilver and Roxy
trademarks, service marks, tradenames
and logos relating to the Americas,
excluding those owned by Quiksilver
Americas, Inc. Newco II will be the
direct owner of Quiksilver Deluxe
SARL, and the Parent shall use its
reasonable efforts to obtain any
necessary consents for the transfer
of QS Holdings SARL’s interest in
Quiksilver Brazil JV to Newco II and,
upon receipt of such consent, shall
cause QS Holdings SARL to transfer
such interest to Newco II.
	 
	 	 
	Guarantors:

	 	All obligations under the Facility to
be unconditionally guaranteed by (i)
Parent and all U.S. subsidiaries of
Parent from time to time (other than
immaterial subsidiaries to which the
Agent reasonably consents), and (ii)
Quiksilver Deluxe SARL and its
direct and indirect subsidiaries from
time to time (collectively the
“Guarantors”). Obligations under the
Facility will be guaranteed on a
senior basis. The European Borrower,
Parent, each other Guarantor and each
other party pledging Collateral (as
defined below) under the Facility is
referred to herein as an “Obligor”.
	 
	 	 
	Agent:

	 	Rhône Capital III L.P. or one or more
affiliated entities designated by
Rhône Capital III L.P.
(collectively, “Rhône”) to be
arranger and bookrunner,
administrative agent and collateral
agent (in all such capacities, the
“Agent”).
	 
	 	 
	Lenders:

	 	Rhône, investment vehicles controlled
by Rhône






B-1









 







	 	 	 
	 

	 	and limited partners of
Rhône investment vehicles (or their
affiliates) (each, a “Lender” and
collectively, the “Lenders”), which,
in the case of any Lenders who are
not Rhône investment vehicles or
limited partners of Rhône investment
vehicles (or their affiliates), shall
be reasonably acceptable to the
European Borrower.
	 
	 	 
	Closing Date:

	 	The date on or before July 31, 2009
on which the borrowings under the
Facility are made to be mutually
agreed upon (the “Closing Date”).
	 
	 	 
	Facility:

	 	A senior secured term loan facility
in an amount not to exceed
€20,000,000 (the “Facility” and the
loan made pursuant thereto, the “Term
Loan”).
	 
	 	 
	Availability:

	 	The Term Loan would be fully funded
on the Closing Date and amounts
repaid would not be able to be
reborrowed.
	 
	 	 
	Maturity:

	 	The day that is one day prior to the
five-year anniversary of the Closing
Date (the “Maturity Date”). The
outstanding principal balance of the
Term Loan will be due and payable on
the Maturity Date.
	 
	 	 
	 

	 	The European Borrower will have the
right to prepay the Term Loan in part
or in full at any time and from time
to time without premium or penalty.
	 
	 	 
	Amortization:

	 	No amortization. The Term Loan will
be payable in full at maturity.
	 
	 	 
	Use of Proceeds:

	 	Proceeds of the Term Loan borrowed on
the Closing Date will be transferred
in a manner such that they will
ultimately be received by the Parent.
	 
	 	 
	Security:

	 	The Facility will be secured by (i) a
second-priority, perfected pledge by
the Parent of the shares of the
European Borrower that are subject to
a first-priority security interest in
respect of the U.S. Facility (as
defined in the Commitment Letter);
(ii) a first-priority, perfected
pledge by the Parent of the shares of
the European Borrower to the extent
not pledged in respect of the U.S.
Facility and of all other property of
the European






B-2









 








	 	 	 
	 

	 	Borrower, other than the
shares of QS Holdings SARL; (iii) a
first-priority, perfected pledge by
QS Holdings SARL of the Preferred
Shares; (iv) a first-priority,
perfected security interest in all of
the property of Newco II, including
all intellectual property (including
trademarks, service marks, tradenames
and logos) owned by Newco II; (v) a
first-priority, perfected security
interest in the shares of each of
Quiksilver Deluxe SARL, Quiksilver
Canada Corp. and QS Retail Canada
Corp.; and (vi) in the event that
Newco II holds the shares of
Quiksilver Brazil JV and has obtained
the necessary consents in order to
grant such pledge, a first-priority,
perfected security interest in the
shares of Quiksilver Brazil JV held
by Newco II (collectively, the
“Collateral”).
	 
	 	 
	 

	 	It is understood and agreed that
there will be customary exceptions to
the definition of Collateral or the
requirements and representations
relating to perfection of any
security interest in assets otherwise
constituting Collateral in accordance
with local law and practice, in each
case as mutually agreed upon by the
European Borrower and the Agent.
	 
	 	 
	 

	 	All Collateral would be free and
clear of other liens, claims and
encumbrances, except for (i) liens in
respect to the first-priority
security interest granted to the
lenders under the U.S. Facility; and
(ii) liens to be mutually agreed upon
by the European Borrower and the
Agent.
	 
	 	 
	Interest Rates:

	 	The outstanding principal balance
under the Facility would bear
interest at a fixed rate of 15% per
annum, of which up to 100% per annum
would be payable quarterly in kind at
the European Borrower’s option at any
time when there is no pending or
existing Event of Default, with the
remaining portion payable in cash, in
each case, payable quarterly in
arrears on the first day of each
quarter. All interest calculations
would be made on the basis of actual
days elapsed in a year of 360 days.






B-3









 








	 	 	 
	 

	 	Upon the occurrence and during the
continuance of any Event of Default,
the margin applicable to all loans
would be increased by an additional
2% per annum, payable on demand.
	 
	 	 
	 

	 	The European Borrower shall agree to
gross up the Lenders for any
withholding taxes in customary
fashion.
	 
	 	 
	Fees:

	 	3.0% of the initial maximum principal
amount of the Term Loan fully-earned
and due and payable in cash to the
Agent for its own account on the
Closing Date.
	 
	 	 
	Prepayments:

	 	Mandatory prepayment of the Term Loan
without premium or penalty (i) in
full, upon a Change in Control of
Parent or the European Borrower, the
Change in Control definition to be
mutually agreed based on ABL Facility
and French Facility definitions; and
(ii) on a dollar-by-dollar basis in
the case of asset sales by the
European Borrower or Newco II; and
(iii) in an amount equal to the net
cash proceeds of asset sales received
by the subsidiaries of Newco II
outside the ordinary course of
business in excess of $2,000,000 in
any fiscal year; provided that, in
the case of clauses (iii), Borrower
shall have no obligation to make any
such prepayment if and to the extent
such prepayment is made to the ABL
Lenders and the ABL Facility is not
repaid in full as a result of such
prepayment.
	 
	Conditions Precedent:

	 	The obligation of the Lenders to make
the Loan on the Closing Date shall be
subject to the conditions set forth
in the Commitment Letter under the
caption “Conditions to Our
Commitment” and the following other
conditions:
	 
	 	 
	 

	 	(i) The satisfaction of each of the
conditions precedent set forth in the
U.S. Term Sheet (as defined in the
Commitment Letter), which shall be
incorporated by reference herein (but
references therein to “Borrower”,
“Obligors”, “Collateral” , “Lenders”,
“Agent”, “Facility” and “Closing
Date” being deemed to refer to the
“European






B-4









 








	 	 	 
	 

	 	Borrower”, “Obligors”,
“Collateral”, “Lenders”, “Agent”,
“Facility” and “Closing Date”,
respectively, as defined herein and
references therein to the “Term
Sheet” being deemed to refer to this
Term Sheet).
	 
	 	 
	 

	 	(ii) The satisfaction or waiver of
all conditions set forth in the term
sheet and final documentation with
respect to the U.S. Facility.
	 
	 	 
	 

	 	(iii) European Borrower shall have
been created as a wholly-owned direct
subsidiary of Parent and Newco II
shall own all Quiksilver and Roxy
trademarks, service marks, tradenames
and logos relating to the Americas
currently owned by QS Holdings SARL,
and Newco II will be the direct owner
of Quiksilver Deluxe SARL, in each
case free and clear of all liens
other than pursuant to the European
Facility.
	 
	 	 
	Representations and Warranties:

	 	The final documentation shall contain
representations and warranties on the
same scope as those set forth under
“Representations and Warranties” in
the U.S. Term Sheet (but references
therein to “Borrower”, “Obligors”,
“Collateral” , “Lenders”, “Agent”,
“Facility” being deemed to refer to
“European Borrower”, “Obligors”,
“Collateral”, “Lenders”, “Agent” and
“Facility”, respectively, as defined
herein).
	 
	 	 
	Covenants:

	 	The final documentation shall contain
covenants on the same scope as those
set forth under “Covenants” in the
U.S. Term Sheet (but references
therein to “Borrower”, “Obligors”,
“Collateral”, “Lenders”, “Agent”,
“Facility” being deemed to refer to
“European Borrower”, “Obligors”,
“Collateral”, “Lenders”, “Agent” and
“Facility”, respectively, as defined
herein).
	 
	 	 
	 

	 	Parent shall covenant that it will
work in good faith to determine
whether there is a tax-efficient way
to cause a dividend, distribution or
other transfer of the Preferred
Shares from QS Holdings SARL to the
European Borrower or a wholly-owned
subsidiary of the European Borrower
(subject to the Agent’s security
interest in the






B-5









 








	 	 	 
	 

	 	Preferred Shares)
and, if it determines in its
reasonable discretion that a
tax-efficient method exists,
effectuate such dividend,
distribution or other transfer.
	 
	 	 
	 

	 	In addition, other than intercompany
transfers among the subsidiaries of
Newco II and transfers to the
European Borrower (including
intermediate transfers to Newco II in
order to effectuate transfers to the
European Borrower), the European
Borrower, Newco II and their
subsidiaries would be prohibited from
incurring or guaranteeing any
indebtedness (other than pursuant to
the European Facility and the ABL
Facility and other than in accordance
with mutually agreed exceptions for
the Canadian and Brazilian
subsidiaries) or granting any
security in their shares or assets
(other than pursuant to the Term
Loan, the European Facility and the
ABL Facility and other than the
granting of a limited recourse pledge
of any shares of QS Holdings SARL
held by Newco II) for so long as the
Term Loan is outstanding.
	 
	 	 
	Events of Default:

	 	The final documentation shall contain
events of default on the same scope
as those set forth under “Events of
Default” in the U.S. Term Sheet (but
references therein to “Borrower”,
“Obligors”, “Collateral”, “Lenders”,
“Agent”, “Facility” being deemed to
refer to “European Borrower”,
“Obligors”, “Collateral”, “Lenders”,
“Agent” and “Facility”, respectively,
as defined herein).
	 
	 	 
	Expenses:

	 	The European Borrower shall pay all
of the Lenders’ out-of-pocket and
documented costs, including without
limitation reasonable fees and
expenses of counsel (limited to not
more than one primary counsel and
necessary local counsel (limited to
one local counsel per jurisdiction)),
consultants and advisors, filing and
recording fees and reasonable and
documented costs and expenses of due
diligence, travel and lodging,
duplication, messenger services,
appraisal, audit, insurance, search
and electronic reporting in
connection with the Facility and the
Warrants described under “Warrants”,
as well as the reasonable
out-of-pocket and documented






B-6









 








	 	 	 
	 

	 	expenses
of the Agent in connection with the
administration of the loan
documentation (including without
limitation the reasonable and
documented fees and expenses of
counsel for the Agent (limited to not
more than one primary counsel and
necessary local counsel (limited to
one local counsel per jurisdiction))
and the reasonable and documented
fees and expenses of Lazard Frères &
Co. in an amount, with respect to the
fees of Lazard Frères & Co., up to
$1,500,000 (less any amounts paid in
respect of such fee by the U.S.
Borrower pursuant to the U.S.
Facility). The European Borrower
would also pay the expenses of the
Agent and the Lenders in connection
with the enforcement of the loan
documentation. The European Borrower
shall pay the foregoing expenses
regardless of whether or not the
Facility closes.
	 
	 	 
	Indemnity:

	 	The European Borrower shall indemnify
and hold harmless the Agent, each
Lender and each of their affiliates
and their officers, directors,
employees, agents and advisors from
claims and losses relating to the
Facility on terms customarily
contained in loan documentation for
similar secured financings.
	 
	 	 
	Information Rights:

	 	Same as U.S. Term Sheet.
	 
	 	 
	Public Disclosure:

	 	Same as U.S. Term Sheet.
	 
	 	 
	Miscellaneous:

	 	Same as U.S. Term Sheet.
	 
	 	 
	Governing Law:

	 	New York.
	 
	 	 
	Counsel to Agent and Lenders:

	 	Sullivan & Cromwell LLP.








B-7










 





EXHIBIT C




SUMMARY OF TERMS AND CONDITIONS

WARRANTS




	 	 	 
	Issuer:

	 	Quiksilver, Inc. (the “Parent”).
	 
	 	 
	Number of Shares:

	 	Warrants exercisable for a number of shares of
common stock equal to 20% less one share of the
number of common equity securities outstanding at
the time of issuance of the Warrants (except as set
forth in the Commitment Letter). The Warrants shall
be fully earned and vested as of the earlier of (i)
the Closing Date (as defined in the respective Term
Sheets) of each of the Facilities, and (ii) in the
event the Closing Date does not occur and Rhône is
willing to fund the Facilities in accordance with
the terms of the Commitment Letter, the date on or
prior to nine months following the date of the
Commitment Letter on which Parent or any of its
subsidiaries enters into a binding agreement to sell
the business of DC Shoes or enter into an
alternative financing transaction (other than the
ABL Facility and the French Facility (each as
defined in the U.S. Term Sheet) and refinancing
transactions by Parent’s Australian and Asian
subsidiaries) to refinance existing indebtedness of
Parent and its subsidiaries. The Warrants will be
attributed to Rhône without payment of any
subscription price therefor.
	 
	 	 
	Exercise Price:

	 	The exercise price of the Warrants shall be $1.86
per share (the volume weighted average price for a
60 trading day period immediately preceding June 2,
2009). The Warrants shall be exercisable at any
time during their term by paying the Exercise Price
in cash, pursuant to a “cashless exercise” of the
Warrant or by a combination of the two methods.






C-1









 






	 	 	 
	Adjustments:

	 	The Exercise Price and the number of common shares
issuable upon exercise of each Warrant will be
subject to customary adjustment for certain events,
including without limitation stock splits (including
reverse stock splits), combinations, stock dividends
(with above zero-dividend initial pricing
assumptions) and certain distributions to
stockholders (including the right to receive
non-cash dividends and distributions on an
‘as-converted’ basis). Subject to customary
exceptions, in the event Parent issues common stock
(or instruments convertible or exchangeable into or
exercisable for common stock) at a price per share
(or with a conversion or exercise price) that is
less than the Exercise Price, the Exercise Price
shall be decreased to a weighted-average downward
ratchet. In addition, the exercise price under each
Warrant will be reduced by the aggregate amount of
cash dividends paid on each share of common stock
from the date of issuance of such Warrant to the
date of exercise of such Warrant.
	 
	 	 
	 

	 	To the extent of any adjustment that would require
an approval of Parent’s stockholders under NYSE
rules, the Warrants will instead be exercisable for
non-voting preferred shares of Parent that provide
the same economic rights (including the right to
participate in any change of control) as a share of
common stock, other than a fixed dividend right to
be agreed. Such preferred shares will be
automatically converted to common stock upon receipt
of approval of Parent’s stockholders. Parent will
undertake to seek the approval of its stockholders
for such conversion and the holders of the Warrants
will agree to vote any common stock they then hold
in favor of such approval.
	 
	 	 
	Term:

	 	7 years.






C-2









 






	 	 	 
	Transferability:

	 	Warrants will not be transferrable at any time
(other than to Rhône, investment vehicles it
controls or limited partners of such investment
vehicles from time to time). Common Stock issuable
upon exercise of the Warrants will be freely
transferrable, provided that Rhône will not transfer
common stock representing 15% or more of the
then-outstanding number of shares of common stock to
any one person unless such transfer has received the
approval of the Board of Directors of Parent.
Notwithstanding the foregoing, no restrictions shall
apply to any transfer of common stock made by Rhône
pursuant to a bona fide underwritten public offering
or in open market transactions. Rhône shall benefit
from customary demand and piggy-back registration
rights with respect to the Warrants and the shares
underlying the Warrants. Parent shall pay all
expenses in connection with the exercise of the
registration rights, including underwriters’
discounts and commissions and transfer taxes, and
Parent and Rhône shall mutually agree upon selection
of the underwriters.
	 
	 	 
	Preemptive Rights:

	 	Each holder of at least 50% of the Warrants (or the
shares underlying the Warrants) initially issued to
such holder shall have additional subscription
rights pursuant to the Warrants allowing such holder
to maintain its proportionate, as-if-converted
ownership interest in Parent if Parent makes a
public or private offering of common stock (or
instruments convertible or exchangeable into or
exercisable for common stock) for cash. Excluded
issuances would include, among others, (i) Board of
Directors approved issuances to employees, officers
and directors for purposes of compensation, (ii)
Board of Directors approved issuances as
consideration in mergers and acquisitions, and (iii)
prior to the date of exercise of the Warrants, any
issuance that gives rise to an antidilution
adjustment pursuant to the terms of the Warrants.






C-3









 






	 	 	 
	Board Representation:

	 	On the issuance date of the Warrants, Parent shall
increase the number of directors on its Board of
Directors by two and fill the vacancies created
thereby with two directors nominated by Rhône.
Rhône’s right to nominate two directors shall
continue until such time as Rhône has sold 33 1/3%
of the shares of common stock issued upon exercise
of the Warrants and its right to nominate one
director shall continue until such time as Rhône has
sold 66 2/3% of the shares of common stock issued
upon exercise of the Warrants.







C-4