Revolving Credit Agreement

REVOLVING CREDIT AGREEMENT


dated as of


February 21, 2002


among


DECKERS OUTDOOR CORPORATION
and
UGG HOLDINGS, INC.,
as Borrowers,
and


COMERICA BANK -- CALIFORNIA,
as Bank


$20,000,000


================================================================================


TABLE OF CONTENTS


Page(s)
------- ARTICLE I DEFINITIONS AND INTERPRETATIONS....................................................1
1.1 Definitions...................................................................1
"ABL Borrowing Period"........................................................1
"ABL Trigger Amount"..........................................................1
"ABL Triggering Obligations"..................................................1
"Account" and "Account Debtor"................................................1
"Affiliate"...................................................................1
"Agreement"...................................................................1
"Applicable A/R Advance Rate".................................................2
"Applicable Base Lending Rate Margin".........................................2
"Applicable LIBOR Lending Rate Margin"........................................2
"Applicable Percentage".......................................................3
"Asset".......................................................................3
"Asset Sale"..................................................................3
"Audit Fee"...................................................................3
"Bank"........................................................................3
"Bankruptcy Code".............................................................3
"Base Lending Rate"...........................................................3
"Base Lending Rate Portion"...................................................4
"Base LIBOR"..................................................................4
"Base Rate"...................................................................4
"Borrowing"...................................................................4
"Borrowing Base"..............................................................4
"Borrowing Base Certificate"..................................................4
"Business Day"................................................................4
"Capital Expenditures"........................................................4
"Capital Lease"...............................................................5
"Capital Lease Obligations"...................................................5
"Capital Stock"...............................................................5
"Change of Control"...........................................................5
"Closing Date"................................................................5
"Collateral Access Agreement".................................................5
"Compliance Certificate"......................................................5
"Consolidated Effective Tangible Net Worth"...................................5
"Consolidated Net Profit" and "Consolidated Net Loss".........................5
"Consolidated Pretax Profit"..................................................5
"Consolidated Total Liabilities to Consolidated Effective Tangible Net
Worth Ratio"..............................................................5
"Currency Obligation".........................................................6
"Current Liabilities".........................................................6
"Debt"........................................................................6
"Dilution"....................................................................6


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"Distributions"...............................................................6
"Dollars" or "$"..............................................................6
"Eligible Accounts"...........................................................6
"Eligible Assignee"...........................................................8
"Eligible Inventory"..........................................................8
"ERISA".......................................................................9
"ERISA Event".................................................................9
"ERISA Group".................................................................9
"Event of Default"............................................................9
"Excluded Subsidiaries"......................................................10
"Expenses"...................................................................10
"Fees".......................................................................10
"Financial Statement(s)".....................................................10
"Foreign Exchange Agreement".................................................10
"Foreign Exchange Reserve"...................................................10
"Foreign Exchange Sublimit"..................................................11
"GAAP".......................................................................11
"Governing Documents"........................................................11
"Governmental Authority".....................................................11
"Guaranties" and "Guaranty"..................................................11
"Guarantor(s)"...............................................................11
"Hazardous Materials"........................................................11
"Indemnified Person(s)"......................................................11
"Insolvency Proceeding"......................................................12
"Intangible Assets"..........................................................12
"Interest Payment Date"......................................................12
"Interest Period"............................................................12
"Internal Revenue Code"......................................................12
"Inventory"..................................................................12
"Inventory Sublimit".........................................................12
"Inventory Turnover Ratio"...................................................13
"ISP"........................................................................13
"Knowledge"..................................................................13
"Late Payment Fee"...........................................................13
"Lending Office".............................................................13
"Letter(s) of Credit"........................................................13
"Letter of Credit Application"...............................................13
"Letter of Credit Fee".......................................................13
"Letter of Credit Sublimit"..................................................13
"Letter of Credit Usage".....................................................13
"LIBOR"......................................................................13
"LIBOR Business Day".........................................................13
"LIBOR Lending Rate".........................................................13
"LIBOR Lending Rate Portion".................................................14
"LIBOR Reserve Percentage"...................................................14


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"Lien".......................................................................14
"Loan Document(s)"...........................................................14
"Loans"......................................................................15
"Material Adverse Effect"....................................................15
"Multiemployer Plan".........................................................15
"Net Cash Proceeds"..........................................................15
"Note".......................................................................15
"Notice of Borrowing"........................................................15
"Notice of Conversion or Continuation".......................................15
"Obligations"................................................................15
"Old Lender".................................................................16
"Overadvance"................................................................16
"Participant"................................................................16
"Patent and Trademark Security Agreement"....................................16
"Pay-Off Letter".............................................................16
"PBGC".......................................................................16
"Permitted Debt".............................................................16
"Permitted Investments"......................................................16
"Permitted Liens"............................................................17
"Person".....................................................................17
"Plan".......................................................................17
"Purchase Money Lien"........................................................17
"Quick Ratio"................................................................18
"Regulation D"...............................................................18
"Reimbursement Obligations"..................................................18
"Reportable Event"...........................................................18
"Responsible Officer"........................................................18
"Retiree Health Plan"........................................................18
"Revolving Credit Commitment"................................................18
"Revolving Loans"............................................................18
"Revolving Loans Daily Balances".............................................18
"Revolving Loans Maturity Date"..............................................18
"SEC"........................................................................18
"Security Agreement".........................................................18
"Shareholder"................................................................18
"Solvent"....................................................................18
"Stock Pledge Agreement".....................................................19
"Subsidiary".................................................................19
"Swaps"......................................................................19
"Taxes"......................................................................19
"Teva License Agreement".....................................................19
"Teva Option Agreement"......................................................19
"UCC"........................................................................19
"Uniform Customs"............................................................20
"Unmatured Event of Default".................................................20


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"Unused Revolving Commitment Fee"............................................20
1.2 Accounting Terms and Determinations..........................................20
1.3 Computation of Time Periods..................................................20
1.4 Construction.................................................................20
1.5 Exhibits and Schedules.......................................................20
1.6 No Presumption Against Any Party.............................................20
1.7 Independence of Provisions...................................................21


ARTICLE II TERMS OF THE CREDIT..............................................................21
2.1 Revolving Loans..............................................................21
2.2 Foreign Exchange Forward Contracts..........................................21
2.3 Reserved.....................................................................22
2.4 Interest Rates; Payments of Interest.........................................22
2.5 Notice of Borrowing Requirements.............................................23
2.6 Conversion or Continuation Requirements......................................24
2.7 Additional Costs.............................................................25
2.8 Illegality; Impossibility....................................................26
2.9 Disaster.....................................................................26
2.10 Increased Risk-Based Capital Cost............................................27
2.11 Note; Statements of Obligations..............................................27
2.12 Holidays.....................................................................27
2.13 Time and Place of Payments...................................................27
2.14 Mandatory Principal Reductions...............................................28
2.15 Fees.........................................................................28


ARTICLE III LETTERS OF CREDIT...............................................................29
3.1 Letters of Credit............................................................29
3.2 Procedure for Issuance of Letters of Credit..................................30
3.3 Fees, Commissions and Other Charges..........................................30
3.4 Reimbursement Obligations....................................................30
3.5 Obligations Absolute.........................................................31
3.6 Letter of Credit Payments....................................................31
3.7 Outstanding Letters of Credit Following Event of Default.....................32
3.8 Letter of Credit Applications................................................32


ARTICLE IV CONDITIONS PRECEDENT.............................................................32
4.1 Conditions to Initial Loans or Letter(s) of Credit...........................32
4.2 Conditions to all Loans and Letters of Credit................................34


ARTICLE V REPRESENTATIONS AND WARRANTIES....................................................34
5.1 Legal Status.................................................................35
5.2 No Violation; Compliance.....................................................35
5.3 Authorization; Enforceability................................................35
5.4 Approvals; Consents..........................................................36
5.5 Liens........................................................................36
5.6 Debt.........................................................................36


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5.7 Litigation...................................................................36
5.8 No Default...................................................................36
5.9 Subsidiaries.................................................................36
5.10 Taxes........................................................................36
5.11 Correctness of Financial Statements..........................................37
5.12 ERISA........................................................................37
5.13 Other Obligations............................................................37
5.14 Public Utility Holding Company Act...........................................37
5.15 Investment Company Act.......................................................37
5.16 Patents, Trademarks, Copyrights, and Intellectual Property, etc..............37
5.17 Environmental Condition......................................................38
5.18 Solvency.....................................................................38
5.19 Eligible Accounts............................................................38
5.20 Eligible Inventory...........................................................39


ARTICLE VI AFFIRMATIVE COVENANTS............................................................39
6.1 Punctual Payments............................................................39
6.2 Books and Records; Collateral Audits.........................................39
6.3 Collateral Reporting and Financial Statements................................40
6.4 Existence; Preservation of Licenses; Compliance with Law.....................41
6.5 Insurance....................................................................41
6.6 Assets.......................................................................42
6.7 Taxes and Other Liabilities..................................................42
6.8 Notice to Bank...............................................................43
6.9 Employee Benefits............................................................43
6.10 Further Assurances...........................................................44
6.11 Bank Accounts................................................................44
6.12 Environment..................................................................44
6.13 Additional Collateral........................................................45
6.14 Guarantors...................................................................45
6.15 Returns......................................................................45


ARTICLE VII NEGATIVE COVENANTS..............................................................45
7.1 Use of Funds; Margin Regulation..............................................45
7.2 Debt.........................................................................46
7.3 Liens........................................................................46
7.4 Merger, Consolidation, Transfer of Assets....................................46
7.5 Leases.......................................................................46
7.6 Sales and Leasebacks.........................................................46
7.7 Asset Sales..................................................................47
7.8 Investments..................................................................47
7.9 Character of Business........................................................47
7.10 Distributions................................................................48
7.11 Guaranty.....................................................................48
7.12 Capital Expenditures.........................................................48
7.13 Transactions with Affiliates.................................................48


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7.14 Stock Issuance...............................................................49
7.15 Financial Condition..........................................................49
7.16 Transactions Under ERISA. Directly or indirectly:...........................49


ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES.................................................50
8.1 Events of Default............................................................50
8.2 Remedies.....................................................................52
8.3 Setoff.......................................................................53
8.4 Appointment of Receiver or Trustee...........................................53
8.5 Remedies Cumulative..........................................................53


ARTICLE IX TAXES............................................................................53
9.1 Taxes on Payments............................................................53
9.2 Indemnification For Taxes....................................................54
9.3 Evidence of Payment..........................................................54


ARTICLE X MISCELLANEOUS.....................................................................54
10.1 Notices......................................................................54
10.2 No Waivers...................................................................54
10.3 Expenses; Documentary Taxes; Indemnification.................................55
10.4 Amendments and Waivers.......................................................55
10.5 Successors and Assigns; Participations; Disclosure...........................56
10.6 Confidentiality..............................................................57
10.7 Counterparts; Effectiveness; Integration.....................................57
10.8 Severability.................................................................57
10.9 Knowledge....................................................................57
10.10 Additional Waivers...........................................................58
10.11 Destruction Of Borrowers' Documents..........................................58
10.12 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...................................58


ARTICLE XI JOINT AND SEVERAL LIABILITY; SINGLE LOAN ACCOUNT.................................59
11.1 Joint and Several Liability..................................................59
11.2 Primary Obligation; Waiver of Marshalling....................................60
11.3 Financial Condition of Borrowers.............................................60
11.4 Continuing Liability.........................................................60
11.5 Additional Waivers...........................................................60
11.6 Settlement or Releases.......................................................63
11.7 No Election..................................................................63
11.8 Indefeasible Payment.........................................................63
11.9 Single Loan Account..........................................................64
11.10 Apportionment of Proceeds of Loans...........................................64
11.11 Bank Held Harmless...........................................................64
11.12 Borrowers' Integrated Operations.............................................64


vi


EXHIBITS AND SCHEDULES


Exhibit 1.1B - Form of Borrowing Base Certificate


Exhibit 1.1L-1 - Form of Commercial Letter of Credit Application and Agreement


Exhibit 1.1L-2 - Form of Standby Letter of Credit Application and Agreement


Exhibit 2.5(b) - Form of Notice of Borrowing


Exhibit 2.6(b) - Form of Notice of Conversion or Continuation


Exhibit 4.1(b) - Form of Opinions of Borrowers' Counsel


Exhibit 6.3(d) - Form of Compliance Certificate


Schedule 1.1E - Locations of Eligible Inventory


Schedule 5.6 - Permitted Debt


Schedule 5.7 - Litigation


Schedule 5.9 - Subsidiaries


Schedule 5.12 - Employee Benefit Plans


Schedule 7.5 - Leases


REVOLVING CREDIT AGREEMENT


This REVOLVING CREDIT AGREEMENT, dated as of February 21, 2002, is entered into among Deckers Outdoor Corporation, a Delaware corporation ("Parent"), and UGG HOLDINGS, INC., California corporation ("UGG") (collectively sometimes referred to herein as "Borrowers" and individually as a "Borrower"), on the one hand, and Bank, on the other hand.


The parties hereto hereby agree as follows:


ARTICLE I


DEFINITIONS AND INTERPRETATIONS


1.1 Definitions. The following terms, as used herein, shall have the following meanings:


"ABL Borrowing Period" means any fiscal quarter of Parent in which the outstanding ABL Triggering Obligations as of the first day of such fiscal quarter, after giving effect to any Borrowings made, Letters of Credit issued and/or Currency Obligations incurred on such date, are equal to or greater than Ten Million Dollars ($10,000,000).


"ABL Trigger Amount" means Ten Million Dollars ($10,000,000).


"ABL Triggering Obligations" means, as of the date of determination, the sum of (i) the principal amount of all outstanding Revolving Loans, (ii) the outstanding Letter of Credit Usage, and (iii) the Foreign Exchange Reserve.


"Account" and "Account Debtor" have the meanings given to such terms in the Security Agreement.


"Affiliate" means any Person (i) that, directly or indirectly, controls, is controlled by or is under common control with any Borrower or any Subsidiary; (ii) which to the Knowledge of Parent, directly or indirectly beneficially owns or ...