SECOND AMENDMENT TO NOTE PURCHASE
AGREEMENT AND WAIVER
THIS SECOND
AMENDMENT TO NOTE PURCHASE AGREEMENT AND WAIVER (this “
Amendment and Waiver ”), dated as of
November 8, 2006, is by and among ROCKY BRANDS, INC. (formerly
known as Rocky Shoes & Boots, Inc.), a corporation organized
and existing under the laws of the State of Ohio (“
Parent ”), LIFESTYLE FOOTWEAR, INC., a
corporation organized and existing under the laws of the State of
Delaware, EJ FOOTWEAR LLC, a limited liability company organized
and existing under the laws of the State of Delaware, HM LEHIGH
SAFETY SHOE CO. LLC, a limited liability company organized and
existing under the laws of the State of Delaware, GEORGIA BOOT LLC,
a limited liability company organized and existing under the laws
of the State of Delaware, GEORGIA BOOT PROPERTIES LLC, a limited
liability company organized and existing under the laws of the
State of Delaware, DURANGO BOOT COMPANY LLC, a limited liability
company organized and existing under the laws of the State of
Delaware, NORTHLAKE BOOT COMPANY LLC, a limited liability company
organized and existing under the laws of the State of Delaware,
LEHIGH SAFETY SHOE CO. LLC, a limited liability company organized
and existing under the laws of the State of Delaware, LEHIGH SAFETY
SHOE PROPERTIES LLC, a limited liability company organized and
existing under the laws of the State of Delaware (the foregoing
entities and together with Parent, collectively, the “
Loan Parties ”, and each a “ Loan
Party ”), the note purchasers that are now and
hereafter at any time parties hereto and are listed in Annex
A attached to the Note Purchase Agreement (as defined below) or
any amendment or supplement thereto (each a “
Purchaser ” and collectively, the “
Purchasers ”), and AMERICAN CAPITAL FINANCIAL
SERVICES, INC., as administrative and collateral agent for the
Purchasers (in such capacity “ Agent
”).
WHEREAS, the Loan
Parties, American Capital Strategies, Ltd. (the “
Initial Purchaser ”) and Agent are parties to a
Note Purchase Agreement dated as of January 6, 2005 (as
amended, restated, supplemented or otherwise modified from time to
time in accordance with its terms, the “ Note Purchase
Agreement ”), pursuant to which the Loan Parties sold
Senior Secured Term B Notes to the Initial Purchaser in the
aggregate principal amount of $30,000,000.
WHEREAS, the
Initial Purchaser has sold or contributed certain of the Senior
Term Notes to the current Purchasers.
WHEREAS, as of the
date hereof, the Loan Parties are entering into an Amendment
No. 4 and Waiver to the GMAC Credit Agreement (the “
Fourth Credit Agreement Amendment ”), pursuant
to which the Loan Parties will be provided with certain financial
accommodations.
WHEREAS, the Loan
Parties have notified Agent and Purchasers that certain Events of
Default have occurred which are continuing due to (a) the
failure of the Loan Parties to comply with the provisions of
Section 7.3(b) of the Note Purchase Agreement as a result of
Total Leverage Ratio of Rocky on a Consolidated Basis for the four
fiscal quarter accounting period ended September 30, 2006,
being 3.89 to 1.00, which exceeds the required Total Leverage Ratio
for such period of 3.80 to 1.00, (a) the failure of the Loan
Parties to comply with the provisions of Section 7.3(c) of the
Note Purchase Agreement as a result of EBITDA of Rocky on a
Consolidated
1
Basis for the
four fiscal quarter accounting period ended September 30,
2006, being $27,364,514, which is less than the required EBITDA for
such period of $30,000,000 and (c) the failure of the Loan
Parties to comply with the provisions of Section 7.3(d) of the
Note Purchase Agreement as a result of the Senior Leverage Ratio of
Rocky on a Consolidated Basis for the four fiscal quarter
accounting period ended September 30, 2006, being 3.34 to
1.00, which exceeds the required Senior Leverage Ratio for such
period of 3.30 to 1.00 (collectively, the “Designated
Defaults”). The Loan Parties have requested Agent and
Purchasers to waive the Designated Defaults, and Agent and
Purchasers are willing to do so on the terms and conditions set
forth herein.
WHEREAS, the Loan
Parties have also requested Agent and the Purchasers to reset
certain of the financial covenants, and to amend certain other
provisions of the Note Purchase Agreement, and Agent and the
Purchasers are willing to do so on the terms and conditions set
forth herein.
NOW, THEREFORE,
the parties hereto, in consideration of the promises and their
mutual covenants and agreements herein set forth and intending to
be legally bound hereby, covenant and agree as follows:
1.
Definitions . All capitalized terms used and not otherwise
defined herein shall have the meanings assigned to such terms in
the Note Purchase Agreement.
2.
Amendments to Note Purchase Agreement . Subject to
satisfaction of the conditions precedent set forth in
Section 4 below, the Note Purchase Agreement is hereby amended
as follows:
(a) The last
sentence of Section 3.1(a) of the Note Purchase Agreement is
hereby amended and restated to read as follows:
“The
Senior Term Notes shall bear interest on the outstanding principal
thereof at a rate equal to the LIBOR Rate, as such rate may adjust
from time to time, plus eight and one-half percent
(8.5%).”
(b) Section 7.3(a)
of the Note Purchase Agreement is hereby amended and restated
solely to the extent of the accounting periods commencing with the
Four Quarters ending December 31, 2006 through and including
the Four Quarters ending December 31, 2007 as
follows:
“(a)
Fixed Charge Coverage . A minimum Fixed Charge
Co
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