SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 27, 2010 among DECKERS OUTDOOR CORPORATION and TSUBO, LLC as Borrowers,

 

		Page
ARTICLE I DEFINITIONS AND INTERPRETATIONS		1
1.1	Definitions	1
1.2	Accounting Terms and Determinations	14
1.3	Computation of Time Periods	14
1.4	Construction	14
1.5	Exhibits and Schedules	14
1.6	No Presumption Against Any Party	14
1.7	Independence of Provisions	15
ARTICLE II TERMS OF THE CREDIT		15
2.1	Revolving Loans	15
2.2	Foreign Exchange Forward  Contracts	15
2.3	Intentionally omitted.	16
2.4	Interest Rates; Payments of Interest.	16
2.5	Request for Advance Requirements.	17
2.6	Conversion or Continuation Requirements.	17
2.7	Additional Costs.	18
2.8	Illegality; Impossibility	19
2.9	Disaster	20
2.10	Increased Risk-Based Capital Cost	20
2.11	Statements of Obligations	20
2.12	Holidays	21
2.13	Time and Place of Payments.	21
2.14	Mandatory Principal Reductions	21
2.15	Fees.	22
ARTICLE III LETTERS OF CREDIT		22
3.1	Letters of Credit.	22
3.2	Procedure for Issuance of Letters of Credit	23
3.3	Fees, Commissions and Other Charges.	23
3.4	Reimbursement Obligations.	24

(b)           Cause to be delivered to Bank, upon Bank’s request, each of the following:  (i) a copy of each Plan (or, where any such plan is not in writing, complete description thereof) (and if applicable, related trust agreements of other funding instruments) and all amendments thereto, all written interpretations thereof and written descriptions thereof that have been distributed to employees or former employees of any Borrower or its Subsidiaries; (ii) the most recent determination letter issued by the IRS with respect to each Plan; (iii) for the three (3) most recent Plan years, annual reports on Form 5500 Series required to be filed with any governmental agency for each Plan; (iv) all actuarial reports prepared for the last three (3 ) Plan years for each Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of the most recent annual contributions required to be made by any Borrower or any member of the ERISA Group to each such plan and copies of the collective bargaining agreements requiring such contributions; (vi) any information that has been provided to any Borrower or any member of the ERISA Group regarding withdrawal liability under any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual payments made to former employees of Borrowers under any Retiree Health Plan.

 

6.10           Further Assurances. Execute and deliver, or cause to be executed and delivered, upon the request of Bank and at Borrowers expense, such additional documents, instruments and agreements as Bank may reasonably determine to be necessary or advisable to carry out the provisions of this Agreement and the Loan Documents, and the transactions and actions contemplated hereunder and thereunder.

 

6.11           Bank Accounts.  Maintain, and cause each Subsidiary (other than the Excluded Subsidiaries) to maintain, its cash on hand and cash equivalent investments in deposit accounts  listed on Schedule 1 to the Security Agreement (Borrowers) (which schedule may be amended from time to time by notice to Bank), and (ii) if an Event of Default has occurred or is continuing, Borrowers shall promptly deliver to Bank such control agreements and/or other agreements, instruments and documents, fully and duly executed, as Bank shall reasonably require to perfect an d maintain perfected Bank’s security interest in such deposit accounts, all in form and substance reasonably satisfactory to Bank.

 

6.12           Environment.  Be and remain, and cause each Subsidiary (other than the Excluded Subsidiaries) and each operator of any of any Borrower’s or any Subsidiary’s (other than the Excluded Subsidiaries) Assets to be and remain, in compliance in all material respects with the provisions of all federal, state and local environmental, health and safety laws, codes and ordinances, and all rules and regulations issued thereunder; notify Bank immediately of any notice of a hazardous discharge or environmental complaint received from any Governmental Authority or any other Person; notify Bank immediately of any hazardou s discharge from or affecting its premises; immediately contain and remove the same, in compliance with all applicable laws; promptly pay any fine or penalty assessed in connection therewith; permit Bank to inspect the premises, to conduct tests thereon, and to inspect all books, correspondence, and records pertaining thereto; and at Bank’s request, and at Borrowers’ expense, provide a report of a qualified environmental engineer, satisfactory in scope, form and content to Bank, and such other and further assurances reasonably satisfactory to Bank that the condition has been corrected.

 

 

6.13           Additional Collateral.

 

(a)           With respect to any Assets (or any interest therein) acquired after the Closing Date by any Borrower or any Subsidiary (other than the Excluded Subsidiaries) that are of a type covered by the Lien created by any of the Loan Documents but which are not so subject, promptly (and in any event within thirty (30) days after the acquisition thereof):  (i) execute and deliver, or cause such Subsidiary (other than the Excluded Subsidiaries) to execute and deliver, to Bank such amendments to the relevant Loan Documents or such other documents as Bank shall deem necessary or advisable to grant to Bank a Lien on such Assets (or such interest therein), (ii) take all actions, or cause such Subsidiary (other than the Excluded Subsidiaries) to take all actions, necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable law, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by Bank, (iii) if requested by Bank, deliver to Bank legal opinions relating to the matters described in the immediately preceding clauses (i) and (ii), which opinions shall be in form and substance, and from counsel, reasonably satisfactory to Bank, and (iv) if requested by Bank, deliver to Bank evidence of insurance as required by Section 6.5.

 

(b)           Without limiting the generality of Section 6.13(a), except as otherwise provided in Section 6.13(c), each Borrower shall pledge to Bank all of its right, title and interest in and to the Capital Stock of each presently existing and hereafter acquired or formed Subsidiaries (other than Excluded Subsidiaries) pursuant to a Stock Pledge Agreement, and such Borrower shall take such actions as Bank shall reasonably require to perfect its security interest in all such Capital Stock; provided that Borrowers shall not acquire or form any new Subsidiaries except as otherwise permitted under Section 7.8(b).

 

(c)           Notwithstanding Section 6.13(b), if an Event of Default has occurred or is continuing, Borrowers shall be required, if requested by Bank, to pledge sixty-five percent (65%) of the Capital Stock of the Excluded Subsidiaries.

 

6.14           Guarantors.  Cause (a) New Guarantor to execute and deliver to Bank a Guaranty in form and substance satisfactory to Bank, and (b) upon Bank’s request (in its sole and absolute discretion), each and every now existing and hereafter acquired or formed Subsidiary (other than any Borrower and the Excluded Subsidiaries) to execute and deliver to Bank a Guaranty and Security Agreement (Subsidiary), in form and substance satisfactory to Bank.

 

6.15           Returns.  Cause returns and allowances, as between any Borrower and its Account Debtors, to be on the same basis and in accordance with the usual customary practices of such Borrower, as they exist at the time of the execution and delivery of this Agreement.  If, at a time when no Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to any Borrower, such Borrower promptly shall determine the reason for such return and, if Borrower accepts such return, issue a credit memorandum (with a copy to be sent to Bank upon its request) in the appropriate amount to such Account Debt or.  If, at a time when an Event of Default has occurred and is continuing, any Account Debtor returns any Inventory to any Borrower, such Borrower promptly shall determine the reason for such return and, if Bank consents (which consent shall not be unreasonably withheld), issue a credit memorandum (with a copy to be sent to Bank upon its request) in the appropriate amount to such Account Debtor.

 

 

ARTICLE VII

 

NEGATIVE COVENANTS

 

Each Borrower further covenants and agrees that from the Closing Date and thereafter until the indefeasible payment, performance and satisfaction in full of the Obligations, all of Bank’s, obligations hereunder have been terminated and no Letters of Credit are outstanding, such Borrower shall not:

 

7.1           Use of Funds; Margin Regulation.

 

(a)           Use any proceeds of the Revolving Loans for any purpose other than (i) for working capital, (ii) for general corporate purposes, and (iii) for Permitted Payments; or

 

(b)           Use any portion of the proceeds of the Loans in any manner which might cause the Loans, the applica­tion of the proceeds thereof, or the transactions contemplated by this Agreement to violate Regulation T, U, or X of the Board of Governors of the Federal Reserve System, or any other regulation of such board, or to violate the Securities and Exchange Act of 1934, as amended or supplemented.

 

7.2           Debt.  Create, incur, assume or suffer to exist, or permit any Subsidiary (other than the Excluded Subsidiaries) to create, incur, assume or suffer to exist, any Debt except Permitted Debt.

 

7.3           Liens.  Create, incur, assume or suffer to exist, or permit any Subsidiary (other than the Excluded Subsidiaries) to create, incur, assume or suffer to exist, any Lien (including the lien of an attachment, judgment or execution) on any of its Assets, whether now owned or hereafter acquired, except Permitted Liens; or sign or file, or permit any Subsidiary (other than the Excluded Subsidiaries) to sign or file, under the UCC as adopted in any jurisdiction, a financing statement which names any Borrower or any Subsidiary (other than the Excluded Subsidiaries) as a debtor, except with respect to Permitted Liens, or sign, or permit any Subsidiary (other than the Excluded Subsidiaries) to sign, any security agreement authorizing any secured party thereunder to file such a financing statement, except with respect to Permitted Liens.

 

7.4           Merger, Consolidation, Transfer of Assets.  Wind up, liquidate or dissolve, reorganize, reincorporate, merge or consolidate with or into any other Person, or acquire all or substantially all of the Assets or the business of any other Person, or permit any Subsidiary to do so; provided, however, upon prior written notice to Bank, any Subsidiary may merge into or consolidate with or transfer Assets to any Borrower or any other Subsidiary.

 

 

7.5           Intentionally omitted.

 

7.6           Sales and Leasebacks.  Sell, transfer, or otherwise dispose of, or permit any Subsidiary (other than the Excluded Subsidiaries) to sell, transfer, or otherwise dispose of, any real or personal property to any Person, and thereafter directly or indirectly leaseback the same or similar property.

 

7.7           Asset Sales.  Conduct any Asset Sale, or permit any Subsidiary (other than the Excluded Subsidiaries) to do so, other than (i) sales of Inventory in the ordinary course of business, (ii) dispositions of obsolete, worn or nonfunctional equipment, (iii) sales of Assets generating aggregate Net Cash Proceeds of no more than $5,000,000 in any fiscal year, (iv) sales of marketable securities, (v) licensing of intellectual property in the ordinary course of business, and (vi) other Asset Sales approved in writing by Bank (which approval shall not be unreasonably withheld or delayed).

 

7.8           Investments.

 

(a)           Except as otherwise permitted by clauses (b), (c) and (d) of this Section 7.8, make any loans or advances to, or any investment in, any Person (other than Permitted Investments); or acquire, or permit any Subsidiary to acquire, any Capital Stock, (other than pursuant to Parent’s stock buyback program), Assets, obligations, or other securities of, make any contribution to, or otherwise acquire any interest in, any Person; or acquire or form or permit any Subsidiary (other than the Excluded Subsidiaries) to acquire or form, any new Subsidiary (other than the Excluded Subsidiaries); or participate, or permit any Subsidiary  to participate, as a partner or joint venturer with any other Person.< /font>

 

(b)           Notwithstanding the terms of Section 7.8(a), any Borrower may acquire or form, and permit any Subsidiary to acquire or form, any new Subsidiary or the Assets or a minority investment in the equity securities of another Person; provided that (i) at any time the outstanding Obligations exceed $2,000,000, the acquisition costs for all such acquisitions (including the total consideration paid to the seller(s), taxes, fees and other transaction costs), does not exceed, in the aggregate, Twenty Five Million Dollars ($25,000,000), (ii) such acquisition is of a business engaged in the manufacture, design, marketing, distribution and/or sale (wholesale or retail) of apparel, shoes, footwear and/or outdoo r sporting goods, (iii) Borrowers shall have complied with Sections 6.13 and 6.14 (other than with respect to an Excluded Subsidiary), (iv) the acquisition shall not be hostile, and (v) at any time the outstanding Obligations exceed $2,000,000, prior to the consummation of the acquisition, Borrowers shall have demonstrated to the reasonable satisfaction of Bank that both before and, on a pro forma basis after giving effect to such acquisition, no Event of Default shall be continuing or will result therefrom.

 

 

(c)           Intentionally omitted.

 

(d)           Notwithstanding the terms of Section 7.8(a), Borrowers shall be permitted to make loans and advances (i) to their employees, provided that such loans and advances do not exceed Two Hundred Thousand Dollars ($200,000) in the aggregate outstanding at any time, (ii) to any Subsidiary and (iii) to any Excluded Subsidiary, provided that such net loans and advances to Subsidiaries (who are not Loan Parties) and Excluded Subsidiaries (who are not Loan Parties) do not exceed Twenty Five Million Dollars ($25,000,000) in the aggregate per calendar year.

 

7.9           Character of Business.  Engage in any business activities or operations substantially different from or unrelated to its present business activities and operations, or permit any Subsidiary (other than the Excluded Subsidiaries) to do so (it being specifically acknowledged by Bank that Borrowers may directly or indirectly engage in the wholesale and retail sale of apparel, footwear and shoes and sale of consumer goods).

 

7.10           Distributions.

 

(a)           Except as otherwise permitted by Section 7.10(b), make any Restricted Payments, or permit any Subsidiary to do so (other than an Excluded Subsidiary).

 

(b)           Notwithstanding the terms of Section 7.10(a), Parent may make Restricted Payments pursuant to its (i) stock buyback program provided that the proceeds of the Loans may not be used for such purpose and (ii) any cash dividend program as may be approved by the Parent’s Board of Directors so long as no Event of Default has occurred or is continuing and Borrowers are in compliance with the financial covenants set forth in Section 7.15 without regard to the amount of outstanding Obligations.

 

7.11           Guaranty.  Assume, guaranty, endorse (other than checks and drafts received by a Borrower in the ordinary course of business so long as an Event of Default has not occurred), or otherwise be or become directly or contingently responsible or liable, or permit any Subsidiary (other than the Excluded Subsidiaries) to assume, guaranty, endorse, or otherwise be or become directly or contingently responsible or liable (including, any agreement to purchase any obligation, stock, Assets, goods, or services or to supply or advance any funds, Assets, goods, or services, or any agreement to maintain or cause such Person to maint ain, a minimum working capital or net worth, or otherwise to assure the creditors of any Person against loss) for the obligations of any other Person (other than a Borrower); or pledge or hypothecate, or permit any Subsidiary (other than the Excluded Subsidiaries) to pledge or hypothecate, any of its Assets as security for any liabilities or obligations of any other Person (other than a Borrower); notwithstanding the foregoing, Borrowers may guaranty operating leases of any Subsidiary or Excluded Subsidiary.  The foregoing restriction shall not apply to any guaranty or contractual commitment issued by Parent in connection with Permitted Debt as well as any contractual commitment issued by Borrower in the ordinary course of business to any supplier of products, such as sheepskin products, necessary for the operation of Parent’s business.

 

7.12           Intentionally omitted.

 

 

7.13           Transactions with Affiliates.  Enter into any transaction, including borrowing or lending and the purchase, sale, or exchange of property or the rendering of any service (including management services), with any Affiliate (other than with Parent or with a Subsidiary that is not an Excluded Subsidiary), or permit any Subsidiary (other than the Excluded Subsidiaries) to enter into any transaction, including borrowing or lending and the purchase, sale, or exchange of property or the rendering of any service (including management services), with any Affiliate (other than with Parent or with a Subsidiary that is not an Exc luded Subsidiary), other than in the ordinary course of and pursuant to the reasonable requirements of such Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to such Borrower or such Subsidiary than would obtain in a comparable arm’s length transaction with a Person not an Affiliate. Notwithstanding the foregoing, (a) Parent shall be permitted to sell to Holbrook the foreign intellectual property assets acquired in the Acquisition, and Holbrook shall be entitled to repay the purchase price thereof, all in accordance with terms agreed to between Holbrook and Parent, and (b) parent may provide management services to Holbrook in consideration of a management fee payable by Holbrook to Parent.

 

7.14           Stock Issuance.  Permit any Subsidiary to issue any additional Capital Stock.

 

7.15           Financial Condition.  Permit or suffer:

 

(a)           At any time outstanding Obligations exceed Two Million Dollars ($2,000,000), Consolidated Effective Tangible Net Worth, measured as of the end of each fiscal quarter of Parent, commencing with the fiscal quarter ended December 31, 2009, to be less than the sum of (i) $294,891,000 plus (ii) on a cumulative basis, 75% of the Consolidated Net Profit (but in no event less than zero) for each fiscal year, commencing with the fiscal year ended December 31, 2010.

 

(b)           At any time outstanding Obligations exceed Two Million Dollars ($2,000,000), any Consolidated Net Loss for two or more consecutive fiscal quarters.

 

7.16           Transactions Under ERISA.  Directly or indirectly:

 

(a)           engage, or permit any member of the ERISA Group to engage, in any prohibited transaction which is reasonably likely to result in a civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the Internal Revenue Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the Department of Labor;

 

(b)           permit to exist with respect to any Plan any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of the Internal Revenue Code), whether or not waived;

 

(c)           fail, or permit any member of the ERISA Group to fail, to pay timely required contributions or installments due with respect to any waived funding deficiency to any Plan;

 

 

(d)           terminate, or permit any member of the ERISA Group to terminate, any Plan where such event would result in any liability of any Borrower or any member of ERISA Group under Title IV of ERISA;

 

(e)           fail, or permit any member of the ERISA Group to fail, to make any required contribution or payment to any Multiemployer Plan;

 

(f)           fail, or permit any member of the ERISA Group to fail, to pay to a Plan or Multiemployer Plan any required installment or any other payment required under Section 412 of the Internal Revenue Code on or before the due date for such installment or other payment;

 

(g)           amend, or permit any member of the ERISA Group to amend, a Plan resulting in an increase in current liability for the plan year such that either of any Borrower or any member of the ERISA Group is required to provide security to such Plan under Section 401(a)(29) of the Internal Revenue Code; or

 

(h)           withdraw, or permit any member of the ERISA Group to withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely to result in any liability of any such entity under Title IV of ERISA;

 

which, individually or in the aggregate, results in or reasonably would be expected to result in a claim against or liability of any Borrower, any of the Subsidiaries or any member of the ERISA Group in excess of Two Million Five Hundred Thousand Dollars ($2,500,000).

 

ARTICLE VIII

 

EVENTS OF DEFAULT AND REMEDIES

8.1           Events of Default.  The occurrence of any one or more of the following events, acts or occurrences shall constitute an event of default (an “Event of Default”) hereunder:

 

(a)           Borrowers fail to pay when due any payment of principal due on the Loans, or fail to pay within three (3) days of the due date thereof any interest due on the Loans, the Fees, any Expenses, or any other amount payable hereunder or under any Loan Document;

 

(b)           Borrowers fail to observe or perform any of the covenants and agreements set forth in Article VII and such failure continues for a period of five (5) Business Days after the earlier to occur of (i) Borrowers obtaining Knowledge of such failure or (ii) Bank’s dispatch of notice to Borrowers of such failure;

 

(c)           Borrowers or any Guarantor fail to observe or perform any covenant or agreement set forth in this Agreement or the Loan Documents (other than those covenants and agreements described in Sections 8.1(a) and 8.1(b)), and such failure continues for fifteen (15) days after the earlier to occur of (i) Borrowers obtaining Knowledge of such failure or (ii) Bank’s dispatch of notice to Borrowers of such failure;

 

 

(d)           Any representation, warranty or certifi­cation made by any Borrower or any Guarantor or any officer or employee of any Borrower or any Guarantor in this Agreement or any Loan Document, in any certificate, financial statement or other document delivered pursuant to this Agreement or any Loan Document proves to have been misleading or untrue in any material respect when made or if any such representation, warranty or certification is withdrawn;

 

(e)           Any Borrower or any Guarantor fails to pay when due any payment in respect of its Debt in the aggregate principal amount in excess of $2,500,000 (other than under this Agreement);

 

(f)           Any event or condition occurs that:  (i) results in the acceleration of the maturity of any of any Borrower’s or any Guarantor’s Debt in the aggregate principal amount in excess of $2,500,000; or (ii) permits (or, with the giving of notice or lapse of time or both, would permit) the holder or holders of such Debt or any Person acting on behalf of such holder or holders to accelerate the maturity thereof;

 

(g)           Any Borrower or any Guarantor commences a voluntary Insolvency Proceeding seeking liquidation, reorganization or other relief with respect to itself or its Debt or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official over it or any substantial part of its property, or consents to any such relief or to the appointment of or taking possession by any such official in an involuntary Insolvency Proceeding or fails generally to pay its Debt as it becomes due, or takes any action to authorize any of the foregoing;

 

(h)           An involuntary Insolvency Proceeding is commenced against any Borrower or any Guarantor seeking liquidation, reorganization or other relief with respect to it or its Debt or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property and any of the following events occur:  (i) the petition commencing the Insolvency Proceeding is not timely controverted; (ii) the petition commencing the Insolvency Proceeding is not dismissed within forty-five (45) calendar days of the date of the filing thereof; (iii) an interim trustee is appointed to take possession of all or a substantial portion of the Assets of, or to operate all or any substantial portion of the business o f, Borrower or such Guarantor; or (iv) an order for relief shall have been issued or entered therein;

 

(i)           Any Borrower or any Guarantor suffers (i) one or more money judgments in excess of $5,000,000 in the aggregate over applicable insurance coverage or (ii) one or more writs, warrants of attachment, or similar process involving Assets valued in the aggregate in excess of $5,000,000, and any of the foregoing shall continue in effect for a period of thirty (30) days without being vacated, discharged, satisfied, stayed or bonded pending appeal;

 

(j)           A judgment creditor obtains possession of any of the Assets valued in the aggregate in excess of $5,000,000 of any Borrower or any Guarantor by any means, including levy, distraint, replevin, or self-help,

 

 

(k)           Any order, judgment or decree is entered decreeing the dissolution of Borrower or any Guarantor, or any Guarantor dies;

 

(l)           Any Borrower or any Guarantor is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business affairs;

 

(m)           A notice of lien, levy or assessment is filed of record with respect to any or all of any Borrower's or any Guarantor’s Assets valued in the aggregate in excess of $5,000,000 by any Governmental Authority, or any taxes or debts owing at any time hereafter to any Governmental Authority becomes a Lien, whether inchoate or otherwise, upon any or all of any Borrower's or any Guarantor’s Assets valued in the aggregate in excess of $5,000,000 and the same is not paid on the payment date thereof;

 

(n)           If any Borrower's or any Guarantor’s records are prepared and kept by an outside computer service bureau on the Closing Date or during the term of this Agreement such an agreement with an outside service bureau is entered into, and at any time thereafter, without first obtaining the written consent of Bank, such Borrower or Guarantor terminates, modifies, amends or changes its contractual relationship with said computer service bureau or said computer service bureau fails to provide Bank with any requested information or financial data pertaining to Bank’s Collateral, such Borrower's or Guarantor’s financial condition or the results of such Borrower's or Guarantor’s operations;

 

(o)           Any reportable event, which Bank determines constitutes grounds for the termination of any Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer any such Plan, shall have occurred and be continuing thirty (30) days after written notice of such determination shall have been given to Parent by Bank, or any such Plan shall be terminated within the meaning of Title IV of ERISA, or a trustee shall be appointed by the appropriate United States District Court to administer any such Plan, or the PBGC shall institute proceedings to terminate any Plan and in case of any event described in this Section 8.1(p), the aggregate amount of Borrowers’ liability to the PBGC under Sections 4062, 4063 or 4064 o f ERISA shall exceed five percent (5%) of the Consolidated Effective Tangible Effective Net Worth;

 

(p)           Any Change of Control occurs;

 

(q)           Any of the Loan Documents fails to be in full force and effect for any reason, or Bank fails to have a perfected, first priority Lien in and upon all of the collateral assigned or pledged to Bank thereunder, or a breach, default or an event of default occurs under any Loan Document; or

 

(r)           Any other Material Adverse Effect occurs.

 

 

8.2           Remedies.  Upon the occurrence of any Event of Default described in Section 8.1(g) or 8.1(h), Bank’s obligation hereunder to make Loans to Borrowers and/or Bank’s to issue Letters of Credit shall immediately terminate and the Obligations shall become immediately due and payable without any election or action on the part of Bank, without presentment, demand, protest or notice of any kind, all of which each Borrower hereby expressly waives.  Upon the occurrence and continuance of any other Event of Default, either or both of the following actions may be taken:  (i) Bank may witho ut notice of its election and without demand, immediately terminate the Revolving Credit Commitment, whereupon Bank’s obligation to make Loans to Borrowers and/or to issue Letters of Credit shall immediately cease; and (ii) Bank may, without notice of its election and without demand, declare the Obligations to be due and payable, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which each Borrower hereby expressly waives.

 

8.3           Setoff.  During the continuance of an Event of Default, Bank is hereby authorized at any time and from time to time, without notice to Borrowers (any such notice being expressly waived by each Borrower), to set off and apply any and all deposits (general or special, time or demand, provisional or final), at any time held and other indebtedness at any time owing by Bank to or for the credit or the account of Borrowers, against any and all of the Obligations owing to Bank, irrespective of whether Bank shall have made any demand under this Agreement or the Loan Documents, and although the Obligations may be unmatured. Ban k agrees promptly to notify Borrowers after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

8.4           Appointment of Receiver or Trustee. Borrowers hereby irrevocably agree that Bank, has the right under this Agreement, upon the occurrence of an Event of Default, to seek the appointment of a receiver, trustee or similar official over Borrowers to effect the transactions contemplated by this Agreement, and that Bank is entitled to seek such relief.  Borrowers hereby irrevocably agree not to object to such appointment on any grounds.

 

8.5           Remedies Cumulative.  The rights and remedies of Bank herein and in the Loan Documents are cumulative, and are not exclusive of any other rights, powers, privileges, or remedies, now or hereafter existing, at law, in equity or otherwise.

 

ARTICLE IX

 

TAXES

9.1           Taxes on Payments.  All payments in respect of the Obligations shall be made free and clear of and without any deduction or withholding for or on account of any present and future taxes, levies, imposts, deductions, charges, withholdings, assessments or governmental charges, and all liabilities with respect thereto, imposed by the United States of America, any foreign government, or any political subdivision or taxing authority thereof or therein, excluding any taxes imposed on Bank under the Internal Revenue Code or similar state and local laws and determined by such Bank’s net income, and any franchise taxes im posed on Bank by any state (or any political subdivision thereof) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, assessments, charges and liabilities being hereinafter referred to as “Taxes”).  If any Taxes are imposed and required by law to be deducted or withheld from any amount payable to Bank, then Borrower shall (i) increase the amount of such payment so that Bank will receive a net amount (after deduction of all Taxes) equal to the amount due hereunder, and (ii) pay such Taxes to the appropriate taxing authority for the account of Bank prior to the date on which penalties attach thereto or interest accrues thereon; provided, however, if any such penalties or interest shall become due, Borrowers shall make prompt payment thereof to the appropriate taxing authority.

 

 

9.2           Indemnification For Taxes.  Borrowers shall indemnify Bank for the full amount of Taxes (including penalties, interest, expenses and Taxes arising from or with respect to any indemnification payment) arising therefrom or with respect thereto, whether or not the Taxes were correctly or legally asserted.  This indemnification shall be made on demand.  If Borrowers make a payment under Section 9.1 or this Section 9.2 for account of Bank and Bank reasonably determines that it has received or been granted a credit against or relief or remission for, or repayment of, any Tax paid or payable by i t in respect of or calculated with reference to the deduction or withholding giving rise to such payment, Bank shall, to the extent that it can do so without prejudice to the retention of the amount of such credit, relief, remission or repayment, pay to Borrowers such amount as Bank shall have reasonably determined to be attributable to such deduction or withholding.  The amount paid by Bank to Borrowers pursuant to the immediately preceding sentence shall not exceed: (x) in the case of a refund of cash, the amount of cash refunded to Bank with respect to such Tax; or (y) in the case of a refund taking the form of a credit against Tax, the economic benefit to Bank with respect to the amount received as credit with respect to such Tax.  Borrowers further agree promptly to return to Bank the amount of any credit or refund actually paid to Borrowers by Bank if Bank is required to repay it.

 

9.3           Evidence of Payment.  Within thirty (30) days after the date of payment of any Taxes, Borrowers shall furnish to Bank the original or a certified copy of a receipt evidencing payment thereof.  If no Taxes are payable in respect of any payment due hereunder, Borrowers shall furnish to Bank a certificate from each appropriate taxing authority, or an opinion of counsel acceptable to Bank, in either case stating that such payment is exempt from or not subject to Taxes.

 

ARTICLE X

 

MISCELLANEOUS

10.1           Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or similar writing) and shall be given to such party at its address or facsimile number set forth on the signature pages hereof or such other address or facsimile number as such party may hereafter specify by notice to the other party in accordance with this Section 10.1.  Each such notice, request or other communica­tion shall be deemed given on the second (2nd) business day after mailing ; provided that actual notice, however and from whomever given or received, shall always be effective on receipt; provided further that notices to Bank pursuant to Article II and Article III shall not be effective until received by a Responsible Officer of Bank; provided further that notices sent by Bank in connection with Bank’s exercise of its enforcement rights against any of its collateral shall be deemed given when deposited in the mail or personally delivered, or, where permitted by law, transmitted by facsimile.

 

 

10.2           No Waivers.  No failure or delay by Bank in exercising any right, power or privilege hereunder or under any Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

10.3           Expenses; Documentary Taxes; Indemnification.

 

(a)           Borrowers shall pay all Expenses on demand.

 

(b)           Borrowers shall pay all and indemnify Bank against any and all transfer taxes, documentary taxes, assessments, or charges made by any Governmental Authority and imposed by reason of the execution and delivery of this Agreement, any of the Loan Documents, or any other document, instrument or agreement entered into in connection herewith.

 

(c)           Each Borrower shall and hereby agrees to indemnify, protect, defend and hold harmless Bank and their respective directors, officers, Banks, employees and attorneys (collectively, the “Indemnified Persons” and individually, an “Indemnified Person”) from and against (i) any and all losses, claims, damages, liabilities, deficiencies, judgments, costs and expenses (including attorneys’ fees and attorneys’ fees incurred pursuant to proceedings arising under the Bankruptcy Code) incurred by any Indemnified Person (except to the extent that it is finally judicially determined to have resulted from the gross negligence or willful misconduct of any Indemnified Person) arising out of or by reason of any litigations, investigations, claims or proceedings (whether administrative, judicial or otherwise), including discovery, whether or not Bank is designated a party thereto, which arise out of or are in any way related to (1) this Agreement, the Loan Documents or the transactions contemplated hereby or thereby, (2) any actual or proposed use by Borrowers of the proceeds of the Loans, or (3) Bank’s entering into this Agreement, the Loan Documents or any other agreements and documents relating hereto; (ii) any such losses, claims, damages, liabilities, deficiencies, judgments, costs and expenses arising out of or by reason of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence on, under or about any Borrower’s operations or property or property leased by any Borrower of any material, substance or waste which is or becomes designated as Hazard ous Materials; and (iii) any such losses, claims, damages, liabilities, deficiencies, judgments, costs and expenses incurred in connection with any remedial or other action taken by any Borrower or Bank in connection with compliance by any Borrower with any federal, state or local environmental laws, acts, rules, regulations, orders, directions, ordinances, criteria or guidelines (except to the extent that it is finally judicially determined to have resulted from the gross negligence or willful misconduct of any Indemnified Person).  If and to the extent that the obligations of Borrowers hereunder are unenforceable for any reason, Borrowers hereby agree to make the maximum contribution to the payment and satisfaction of such obligations to Bank which is permissible under applicable law.

 

(d)           Borrowers obligations under this Section 10.3 and under Section 9.2 shall survive any termination of this Agreement and the Loan Documents and the payment in full of the Obligations, and are in addition to, and not in substitution of, any other of its obligations set forth in this Agreement.

 

 

10.4           Amendments and Waivers.  Neither this Agreement nor any Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.4.  Bank may from time to time, (a) enter into with Borrowers or any other Person written amendments, supplements or modifications hereto and to the Loan Documents or (b) waive, on such terms and conditions as Bank may specify in such instrument, any of the requirements of this Agreement or the Loan Documents or any Event Default or Unmatured Event of Default and its consequences, if, but only if, such amendment, supplement, modification or waiver is in writing and is signed by the party asserted to be bound thereby, and then such amendment, supplement, modification or waiver shall be effective only in the specific instance and specific purpose for which given.  Any such waiver and any such amendment, supplement or modification shall be binding upon Borrower, Bank and all future holders of the Loans.  In the case of any waiver, Borrower and Bank shall be restored to their former positions and rights hereunder and under the Loan Documents, and any Event of Default or Unmatured Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Event of Default or Unmatured Event of Default or impair any right consequent thereon.

 

Borrowers may, from time to time, prospectively amend any Schedule hereto or to any Loan Document.  No such amendment shall be evidence, in and of itself, that the representations and warranties in the corresponding section of the applicable agreement previously made are no longer true and correct in all material respects, nor shall any such amendment cure any Event of Default caused by a misrepresentation previously made.

 

10.5           Successors and Assigns; Participations; Disclosure.

 

(a)           This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Borrowers may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of all Bank’s and any such prohibited assignment or transfer by Borrowers shall be void.

 

(b)           Bank may make, carry or transfer the Loans at, to or for the account of, any of its branch offices or the office of an Affiliate of Bank or to any Federal Reserve Bank, all without Borrowers consent.

 

(c)           Bank may, at its own expense, assign to one or more banks or other Eligible Assignees all or a portion of its rights (including voting rights) and obligations under this Agreement and the Loan Documents.  In the event of any such assignment by Bank pursuant to this Section 10.5(c), Bank’s obligations under this Agreement arising after the effective date of such assignment shall be released and concurrently therewith, transferred to and assumed by Bank’s assignee to the extent provided for in the document evidencing such assignment, and Bank shall give prompt notice of such assignment to Borrowers.  The provisions of this Section 10.5 relate only to absolute assignments (whether or not arising as the result of foreclosure of a security interest) and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by Bank of any Loan or the Note to any Federal Reserve Bank in accordance with applicable law.

 

 

(d)           Bank may at any time sell to one or more banks or other financial institutions (each a “Participant”) participating interests in the Loans, the Letters of Credit and in any other interest of Bank hereunder.  In the event of any such sale by Bank of a participating interest to a Participant, Bank’s obligations under this Agreement shall remain unchanged, Bank shall remain solely responsible for the performance thereof, and Borrowers shall continue to deal solely and directly with Bank in connection with Bank’s rights and obligations under this Agreement. Each Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the b enefits of Article IX with respect to its participating interest.

 

(e)           Each Borrower authorizes Bank to disclose to any assignee under Section 10.5(c) or any Participant (either, a “Transferee”) and any prospective Transferee any and all financial information in Bank’s possession con­cern­ing Borrowers which has been delivered to Bank by Borrowers pursuant to this Agreement or which has been delivered to Bank by Borrowers in connection with Bank’s credit evaluation prior to entering into this Agreement; provided that such Transferee or prospective Transferee has first agreed to be bound by the provisions of Section 11.6.

 

(f)           Each Borrower agrees that Bank may use Borrower’s and the Subsidiaries’ name(s) in advertising and promotional materials, and in conjunction therewith, Bank may disclose the amount of the Loans and the purpose thereof.

 

10.6           Confidentiality.  Bank agrees to keep confidential any information relating to Borrower and the Subsidiaries previously delivered or delivered from time to time by Borrower hereunder; provided that nothing herein shall prevent Bank from disclosing such information:  (a) to any Affiliate of Bank or any actual or potential Transferee that agrees to be bound by this Section 10.6, (b) upon order, subpoena, or other process of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over Bank, (d) which has been publicly disclosed (other than by Bank or any Transferee unless such disclosure was otherwise permitted hereunder), (e) which has been obtained from any Person that is not a party hereto or an Affiliate of any such party, (f) in connection with the exercise of any remedy, or the resolution of any dispute, hereunder or under any Loan  Document, (g) to the legal counsel or certified public accountants for Bank or (h) as otherwise permitted by Borrower or as expressly contemplated by this Agreement.

 

10.7           Counterparts; Effectiveness; Integration.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall be effective when executed by each of the parties hereto.  This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

10.8           Severability.  The provisions of this Agreement are severable.  The invalidity, in whole or in part, of any provision of this Agreement shall not affect the validity or enforceability of any other of its provisions.  If one or more provisions hereof shall be declared invalid or unen­forceable, the remaining provisions shall remain in full force and effect and shall be construed in the broadest possible manner to effectuate the purposes hereof.

 

 

10.9           Knowledge.  For purposes of this Agreement, an individual will be deemed to have knowledge of a particular fact or other matter if:  (a) such individual is actually aware of such fact or other matter; or (b) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter.  Each Borrower will be deemed to have knowledge of a particular fact or other matter if the chief executive officer, chief operating officer, chief financial offi cer, controller, treasurer, president, senior vice president or other such executive officer of such Borrower has, or at any time had, knowledge of such fact or other matter.  Parent will be deemed to have knowledge of a partial fact or other matter if any other Borrower has knowledge of such fact or other matter.

 

10.10           Additional Waivers.

 

(a)           Each Borrower agrees that checks and other instruments received by Bank in payment or on account of the Obligations constitute only conditional payment until such items are actually paid to Bank and each Borrower waives the right to direct the application of any and all payments at any time or times hereafter received by Bank on account of the Obligations, and each Borrower agrees that Bank shall have the continuing exclusive right to apply and reapply such payments in any manner as Bank may deem advisable, notwithstanding any entry by Bank upon its books.

 

(b)           Each Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which Borrower may in any way be liable.

 

(c)           Bank shall not in any way or manner be liable or responsible for (a) the safekeeping of the Inventory or Equipment; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency or other person whomsoever. All risk of loss, damage or destruction of Inventory shall be borne by Borrowers.

 

(d)           Each Borrower waives the right and the right to assert a confidential relationship, if any, it may have with any accountant, accounting firm and/or service bureau or consultant in connection with any information requested by Bank pursuant to or in accordance with this Agreement, and agrees that Bank may contact directly any such accountants, accounting firm and/or service bureau or consultant in order to obtain such information.

 

10.11           Destruction Of Borrowers’ Documents.  Any documents, schedules, invoices or other papers delivered to Bank may be destroyed or otherwise disposed of by Bank six (6) months after they are delivered to or received by Bank, unless Parent requests, in writing, the return of the said documents, schedules, invoices or other papers and makes arrangements, at Borrowers’ expense, for their return.

 

 

10.12           CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

 

 

(b)           THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT BANK’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE BANK ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWERS AND BANK WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRIN E OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 10.12.

 

 

 

10.13           Second Amended and Restated Agreement.  This Agreement amends and restates in its entirety, and continues the Obligations incurred under, the Prior Agreement.

 

10.14           No Novation; Reaffirmation of Loan Documents. Borrowers and Bank hereby agree that, upon the Closing Date, this Agreement shall amend, restate and supersede in its entirety the Prior Agreement.  Nothing contained herein shall be construed as a substitution or novation of the obligations of Borrowers outstanding under the Prior Agreement or instruments securing the same, which obligations shall remain in full force and effect, except to the extent that the terms thereof are modified hereby or by instruments executed concurrently herewith.  Nothing expressed or implied in this Agreement shall be construed as a release or other discharge of Borrowers from any of their obligations or liabilities under the Prior Agreement or any of the other original Loan Documents.  Borrowers hereby (i) confirm and agree that each Loan Document to which any Borrower is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that on and after the Closing Date all references in any such Loan Document to the “Credit Agreement”, “Amended and Restated Credit Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Prior Agreement shall mean the Prior Agreement as amended and restated by this Agreement; and (ii) confirms and agrees that to the extent that the Prior Agreement or any Loan Document executed in connection therewith purports to assign or pledge to Bank, a security interest in or lien on, any collateral as security for the Obligations of Borrowers from time to time existing in respect of the Prior Agreement, such pledge, assignment or grant of the security interest or lien is hereby ratified and confirmed in all respects and shall remain effective as of the first date it became effective.

 

ARTICLE XI

 

JOINT AND SEVERAL LIABILITY; SINGLE LOAN ACCOUNT

 

11.1           Joint and Several Liability.  Each Borrower agrees that it is jointly and severally, directly and primarily liable to Bank for payment, performance and satisfaction in full of the Obligations and that such liability is independent of the duties, obligations, and liabilities of the other Borrower.  Bank may bring a separate action or actions on each, any, or all of the Obligations against any Borrower, whether action is brought against the other Borrowers or whether the other Borrowers are joined in such action.  In the event that any Borrower fails to make any payment of any obligation on or before the due date thereof, the other Borrowers immediately shall cause such payment to be made or each of such obligations to be made or each of such Obligations to be performed, kept, observed, or fulfilled.

 

11.2           Primary Obligation; Waiver of Marshalling.  This Agreement and the Loan Documents to which Borrowers are a party are a primary and original obligation of each Borrower, are not the creation of a surety relationship, and are an absolute, unconditional, and continuing promise of payment and performance which shall remain in full force and effect without respect to future changes in conditions, including any change of law or any invalidity or irregularity with respect to this Agreement or the Loan Documents to which Borrowers are a party.  Each Borrower agrees that its liability under this Agreement and the Loa n Documents which Borrowers are a party shall be immediate and shall not be contingent upon the exercise or enforcement by Bank of whatever remedies they may have against the other Borrowers, or the enforcement of any lien or realization upon any security Bank may at any time possess.  Each Borrower consents and agrees that Bank shall be under no obligation to marshal any assets of any Borrower against or in payment of any or all of the Obligations.

 

 

11.3           Financial Condition of Borrowers.  Each Borrower acknowledges that it is presently informed as to the financial condition of the other Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations.  Each Borrower hereby covenants that it will continue to keep informed as to the financial condition of the other Borrowers, the status of the other Borrowers and of all circumstances which bear upon the risk of nonpayment.  Absent a written request from any Borrower to Bank for information, each Borrower hereby waives any and all rights it may have to require Bank to disclose to such Borrower any information which Bank may now or hereafter acquire concerning the condition or circumstances of the other Borrowers.

 

11.4           Continuing Liability.  The liability of each Borrower under this Agreement and the Loan Documents to which Borrowers are a party includes Obligations arising under successive transactions continuing, compromising, extending, increasing, modifying, releasing, or renewing the Obligations, changing the interest rate, payment terms, or other terms and conditions thereof, or creating new or additional Obligations after prior Obligations have been satisfied in whole or in part.  To the maximum extent permitted by law, each Borrower hereby waives any right to revoke its liability under this Agreement and Loan Docum ents as to future indebtedness, and in connection therewith, each Borrower hereby waives any rights it may have under Section 2815 of the California Civil Code.

 

11.5           Additional Waivers.  Each Borrower absolutely, unconditionally, knowingly, and expressly waives:

 

(a)           (1) notice of acceptance hereof; (2) notice of any Loans or other financial accommodations made or extended under this Agreement and the Loan Documents to which Borrowers are a party or the creation or existence of any Obligations; (3) notice of the amount of the Obligations, subject, however, to each Borrower’s right to make inquiry of Bank to ascertain the amount of the Obligations at any reasonable time; (4) notice of any adverse change in the financial condition of the other Borrowers or of any other fact that might increase such Borrower’s risk hereunder; (5) notice of presentment for payment, demand, protest, and notice thereof as to any instruments among the Loan Documents to which Borrowers are a party; (6) notice of any Unmatured Event of Default or Event of Default; and (7) all other notices (except if such notice is specifically required to be given to Borrowers hereunder or under the Loan Documents to which Borrowers are a party) and demands to which such Borrower might otherwise be entitled.

 

(b)           its right, under Sections 2845 or 2850 of the California Civil Code, or otherwise, to require Bank to institute suit against, or to exhaust any rights and remedies which Bank has or may have against, the other Borrowers or any third party, or against any collateral for the Obligations provided by the other Borrowers, or any third party.  Each Borrower further waives any defense arising by reason of any disability or other defense (other than the defense that the Obligations shall have been fully and finally performed and indefeasibly paid) of the other Borrowers or by reason of the cessation from any cause whatsoever of the liability of the other Borrowers in respect thereof.

 

 

(c)           (1) any rights to assert against Bank any defense (legal and equitable), set-off, counterclaim, or claim which such Borrower may now or at any time hereafter have against the other Borrowers or any other party liable to Bank; (2) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability of the Obligations or any security therefor; (3) any defense such Borrower has to performance hereunder, and any right such Borrower has to be exonerate, provided by Sections 2819, 2822, or 2825 of the California Civil Code, or otherwise, arising by reason of:  the impairment or suspension of Bank’s rights or remedies ag ainst the other Borrowers; the alteration by Bank of the Obligations; any discharge of the other Borrowers’ obligations to Bank by operation of law as a result of Bank’s intervention or omission; or the acceptance by Bank of anything in partial satisfaction of the Obligations; and (4) the benefit of any statute of limitations affecting such Borrower’s liability hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limitations applicable to the Obligations shall similarly operate to defer or delay the operation of such statute of limitations applicable to such Borrower’s liability hereunder.

 

(d)           Each Borrower absolutely, unconditionally, knowingly, and expressly waives any defense arising by reason of or deriving from (i) any claim or defense based upon an election of remedies by Bank including any defense based upon an election of remedies by Bank under the provisions of Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure or any similar law of California or any other jurisdiction; or (ii) any election by Bank under Section 1111(b) of the Bankruptcy Code to limit the amount of, or any collateral securing, its claim against the Borrowers.  Pursuant to California Civil Code Section 2856(b):

 

(i)           Each Borrower waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed such Borrower’s rights of subrogation and reimbursement against the other Borrowers by the operation of Section 580(d) of the California Code of Civil Procedure or otherwise.

 

(ii)           Each Borrower waives all rights and defenses that such Borrower may have because the Obligations are secured by real property.  This means, among other things:  (1) Bank may collect from such Borrower without first foreclosing on any real or personal property collateral pledged by the other Borrowers; and (2) if Bank forecloses on any real property collateral pledged by the other Borrowers:  (A) the amount of the Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (B) Bank may collect from such Borrower even if Bank, by foreclosing on the real property collateral, has destroyed any right such Borrower ma y have to collect from the other Borrowers.  This is an unconditional and irrevocable waiver of any rights and defenses each Borrower may have because the Obligations are secured by real property.  These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.

 

 

(e)           If any of the Obligations at any time are secured by a mortgage or deed of trust upon real property, Bank may elect, in its sole discretion, upon a default with respect to the Obligations, to foreclose such mortgage or deed of trust judicially or nonjudicially in any manner permitted by law, before or after enforcing this Agreement and the Loan Documents, without diminishing or affecting the liability of any Borrower hereunder except to the extent the Obligations are repaid with the proceeds of such foreclosure.  Each Borrower understands that (a) by virtue of the operation of California’s antideficiency law applicable to nonjudicial foreclosures, an election by Bank nonjudicially to foreclose such a mortgage or deed of trust probably would have the effect of impairing or destroying rights of subrogation, reimbursement, contribution, or indemnity of such Borrower against the other Borrowers or other guarantors or sureties, and (b) absent the waiver given by such Borrower, such an election would prevent Bank from enforcing this Agreement and the Loan Documents to which Borrowers are a party against such Borrower.  Understanding the foregoing, and understanding that such Borrower is hereby relinquishing a defense to the enforceability of this Agreement and the Loan Documents to which Borrowers are a party, such Borrower hereby waives any right to assert against Bank any defense to the enforcement of this Agreement and the Loan Documents to which Borrowers are a party, whether denominated “estoppel” or otherwise, based on or arising from an election by Bank nonjudicially to foreclose any such mortgage or deed of trust.  Each Borrower understands that the effect of the foregoing waiver may be that each Borrower may have liability hereunder for amounts with respect to which such Borrower may be left without rights of subrogation, reimbursement, contribution, or indemnity against the other Borrower or other guarantors or sureties.  Each Borrower also agrees that the “fair market value” provisions of Section 580a of the California Code of Civil Procedure shall have no applicability with respect to the determination of such Borrower’s liability under this Agreement and the Loan Documents to which Borrowers are a party.

 

(f)           Each Borrower hereby absolutely, unconditionally, knowingly, and expressly waives:  (i) any right of subrogation such Borrower has or may have as against the other Borrowers with respect to the Obligations; (ii) any right to proceed against the other Borrowers or any other Person, now or hereafter, for contribution, indemnity, reimbursement, or any other suretyship rights and claims, whether direct or indirect, liquidated or contingent, whether arising under express or implied contract or by operation of law, which such Borrower may now have or hereafter have as against the other Borrowers with respect to the Obligations; and (iii) any right to proceed or seek recourse against or with respect to any property or asset of the other Borrowers.< /font>

 

(g)           WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, EACH BORROWER HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c, 580d, AND 726, CALIFORNIA UNIFORM COMMERCIAL CODE SECTIONS 3116, 3118, 3119, 3419, AND 3605, AND CHAPTER 2 OF TITLE 14 OF PART 4 OF DIVISION 3 OF THE CALIFORNIA CIVIL CODE.

 

 

11.6           Settlement or Releases.  Each Borrower consents and agrees that without notice to or by such Borrower, and without affecting or impairing the liability of such Borrower hereunder, Bank may, by action or inaction:

 

(a)           compromise, settle, extend the duration or the time for the payment of, or discharge the performance of, or may refuse to or otherwise not enforce this Agreement and the Loan Documents, or any part thereof, with respect to the other Borrowers or any Guarantor;

 

(b)           release the other Borrowers or any Guarantor or grant other indulgences to the other Borrowers or any Guarantor in respect thereof; or

 

(c)           release or substitute any Guarantor, if any, of the Obligations, or enforce, exchange, release, or waive any security for the Obligations or any other guaranty of the Obligations, or any portion thereof.

 

11.7           No Election.  Bank shall have the right to seek recourse against each Borrower to the fullest extent provided for herein, and no election by Bank to proceed in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of Bank’s right to proceed in any other form of action or proceeding or against other parties unless Bank has expressly waived such right in writing.  Specifically, but without limiting the generality of the foregoing, no action or proceeding by Bank under this Agreement and the Loan Documents shall serve to diminish the liability of any Borro wer under this Agreement and the Loan Documents to which Borrowers are a party except to the extent that Bank finally and unconditionally shall have realized indefeasible payment by such action or proceeding.

 

11.8           Indefeasible Payment.  The Obligations shall not be considered indefeasibly paid unless and until all payments to Bank are no longer subject to any right on the part of any Person, including any Borrower, any Borrower as a debtor in possession, or any trustee (whether appointed pursuant to the Bankruptcy Code, or otherwise) of any Borrower’s Assets to invalidate or set aside such payments or to seek to recoup the amount of such payments or any portion thereof, or to declare same to be fraudulent or preferential.  Upon such full and final performance and indefeasible payment of the Obligations, Bank sha ll have no obligation whatsoever to transfer or assign its interest in this Agreement and the Loan Documents to any Borrower.  In the event that, for any reason, any portion of such payments to Bank is set aside or restored, whether voluntarily or involuntarily, after the making thereof, then the obligation intended to be satisfied thereby shall be revived and continued in full force and effect as if said payment or payments had not been made, and any Borrower shall be liable for the full amount Bank is required to repay plus any and all costs and expenses (including attorneys’ fees and attorneys’ fees incurred in proceedings brought under the Bankruptcy Code) paid by Bank in connection therewith.

 

 

11.9           Single Loan Account.  At the request of Borrowers to facilitate and expedite the administration and accounting processes and procedures of the Loans and Borrowings, Bank have agreed, in lieu of maintaining separate loan accounts on Bank’s books in the name of each of the Borrowers, that Bank may maintain a single loan account under the name of all of both Borrowers (the “Loan Account”).  All Loans shall be made jointly and severally to Borrowers and shall be charged to the Loan Account, together with all interest and other charges as permitted under and pursuant to this Agreement.  0;The Loan Account shall be credited with all repayments of Obligations received by Bank, on behalf of Borrowers, from either Borrower pursuant to the terms of this Agreement.

 

11.10           Apportionment of Proceeds of Loans.  Each Borrower expressly agrees and acknowledges that Bank shall have no responsibility to inquire into the correctness of the apportionment or allocation of or any disposition by any of Borrowers of (a) the Loans or any Borrowings, or (b) any of the expenses and other items charged to the Loan Account pursuant to this Agreement.  The Loans and all such Borrowings and such expenses and other item shall be made for the collective, joint, and several account of Borrowers and shall be charged to the Loan Account.

 

11.11           Bank Held Harmless.  Each Borrower agrees and acknowledges that the administration of this Agreement on a combined basis, as set forth herein, is being done as an accommodation to Borrowers and at their request, and that Bank shall incur no liability to Borrowers as a result thereof.  To induce Bank to do so, and in consideration thereof, each Borrower hereby agrees to indemnify and hold Bank harmless from and against any and all liability, expense, loss, damage, claim of damage, or injury, made against Bank by Borrowers or by any other person or entity, arising from or incurred by reason of such administra tion of the Agreement.

 

11.12           Borrowers’ Integrated Operations.  Each Borrower represents and warrants to Bank that the collective administration of the Loans is being undertaken by Bank pursuant to this Agreement because Borrowers are integrated in their operation and administration and require financing on a basis permitting the availability of credit from time to time to Borrowers.  Each Borrower will derive benefit, directly and indirectly, from such collective administration and credit availability because the successful operation of each Borrower is enhanced by the continued successful performance of the integrated group.

 

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*    *    *

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above writ­ten.

 

DECKERS OUTDOOR CORPORATION

By           /s/ Thomas A. George                                                                

Name: Thomas A. George

Title: Chief Financial Officer

Address for notices:

Deckers Outdoor Corporation

495-A South Fairview Avenue

Goleta, California  93117

Attn:  Chief Financial Officer

Telephone:   ###-###-####, Ext. 185

Facsimile:   ###-###-####

TSUBO, LLC

By: Deckers Outdoor Corporation, its Manager

By           /s/ Thomas A. George 

Name: Thomas A. George

Title: Chief Financial Officer

Address for notices:

Tsubo, LLC

c/o Deckers Outdoor Corporation

495 A South Fairview Avenue

Goleta, California  93117

Attn:  Chief Financial Officer

Telephone:   ###-###-####, Ext. 185

Facsimile:   ###-###-####

 

 

COMERICA BANK

By           /s/ Isabel Barreiro                                                                

Name: Isabel Barreiro

Title: Assistant Vice President

Address for notices and Lending Office:

Comerica Bank

15303 Ventura Boulevard

Sherman Oaks, California  91403

Attn:  Isabel Barreiro

Telephone:   ###-###-####

Facsimile:   ###-###-####

 

 

Schedule 5.6

 

To

 

Second Amended and Restated Credit Agreement

 

Debt

 

 None.

 

 

Schedule 5.7

 

To

 

Second Amended and Restated Credit Agreement

 

Litigation

 

 

 

None that could individually or in the aggregate result in a Material Adverse Effect.

 

 

Schedule 5.9

 

To

 

Second Amended and Restated Credit Agreement

 

Subsidiaries

 

Subsidiary Name	Jurisdiction		Borrower’s Ownership %
Tsubo, LLC	Delaware			100	%
Deckers Consumer Direct Corporation	Arizona			100	%
Mozo, Inc.	Colorado			100	%
Mozo, Inc.	Delaware			100	%

 

Schedule 5.12

 

To

 

Second Amended and Restated Credit Agreement

 

ERISA

 

The following ERISA plans exist:

 

1)

401(k) Plan

 

2)

125 Benefits Plan

 

3)

423 Stock Purchase Plan (Plan currently discontinued)

 

4)

Nonqualified Deferred Compensation Plan (unfunded for purposes of Title I of ERISA)

 

5)

Health & Welfare Plans

 

In 2000, certain 401(k) contributions were remitted after the required time period, resulting in an ERISA Event.  The Company voluntarily made an additional contribution to the plan of less than $100 in efforts to resolve the situation.

 

 

Schedule 7.5

 

To

 

Second Amended and Restated Credit Agreement

 

Intentionally Omitted.