Exhibit 10.1

 

JOINDER AND AMENDMENT NO. 2 TO LOAN DOCUMENTS

 

Rocky Brands, Inc., an Ohio corporation (“Parent”), Lehigh Outfitters, LLC, a
Delaware limited liability company (“Lehigh”), Lifestyle Footwear, Inc., a
Delaware corporation (“Lifestyle”), Rocky Brands Wholesale LLC, a Delaware
limited liability company (“Rocky Wholesale”), Rocky Brands International, LLC,
an Ohio limited liability company (“Rocky International”), and Rocky Canada,
Inc., a corporation formed under the laws of the Province of Ontario (“Rocky
Canada”), and Creative Recreation, LLC, an Ohio limited liability company
(“Creative”) (Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International,
Rocky Canada, and Creative collectively, the “Borrowers” and individually a
“Borrower”), the Lenders listed on the signatures pages hereto (collectively,
the “Lenders” and individually a “Lender”) and PNC Bank, National Association,
as Agent for the Lenders (“PNC”) (PNC, in such capacity, the “Agent”), agree as
follows effective as of December 13, 2013 (the “Effective Date”):

 

1.Recitals.

 

1.1As of October 20, 2010, certain of Borrowers, Lenders, and Agent, entered
into a Revolving Credit, Guaranty, and Security Agreement (as amended, extended,
modified, or restated, the “Loan Agreement”). Capitalized terms used herein and
not otherwise defined will have the meanings given such terms in the Loan
Agreement as amended. The Loan Agreement, the Other Documents, and all related
loan and/or security documents related thereto are referred to herein as the
“Loan Documents”.

 

1.2The Loan Documents were amended effective as of May 9, 2013 pursuant to
Amendment No. 1 to Loan Agreement.

 

1.3Parent has formed Creative as a Subsidiary to acquire the assets of
Kommonwealth, Inc., a California corporation, in a Permitted Acquisition.
Accordingly, Creative is hereby joining the Loan Documents as a Borrower. In
addition, Borrowers, Lenders, and Agent, have agreed to amend the Loan Agreement
on the terms and subject to the conditions set forth herein.

 

2.Joinder.

 

2.1As of the Effective Date, Creative assumes all the obligations of a
“Borrower” under the Loan Agreement and Notes, and agrees that it is a Borrower
and bound as a Borrower under the terms of the Loan Agreement and Notes, as if
it had been an original signatory to the Loan Agreement and Notes. Creative
shall be jointly and severally liable for the Obligations with each of the other
Borrowers. All references in the other Loan Documents to a “Borrower”,
“Grantor”, “Debtor”, “Loan Party”, “Obligor” or similar terms will include
Creative, and Creative is hereby made a party to each of such documents as if
Creative had been an original signatory to the Loan Documents.

 

2.2Creative hereby assigns, pledges and grants to the Agent a security interest
in all of its right, title and interest in and to the Collateral to secure the
Obligations. Creative acknowledges that Agent is authorized to file such UCC
Financing Statements with respect to the Collateral as it shall determine are
necessary or advisable.

 

2.3Creative represents and warrants to Agent that the representations and
warranties set forth in the Loan Agreement applicable to it are true and correct
in all material respects as of the date hereof.

 

 

 

 

 

2.4Creative’s address for notices under the Agreement shall be the address of
the Borrowers set forth in Section 16.6 of the Agreement.

 

3.Amendment.

 

3.1The Schedules to the Loan Agreement are hereby amended to add the
supplemental disclosures set forth on the schedules attached hereto.

 

3.2Section 1.2 of the Loan Agreement is hereby amended to add the following
defined terms in alphabetical order:

 

“EBITDA Adjustment” means the lesser of (a) $750,000, and (b) the amount of the
non-recurring transaction expenses incurred in connection with the Permitted
Acquisition by Creative, to the extent such expenses have been included as
expenses in the determination of net income, have not been capitalized, and have
been paid in cash prior to, or within 60 days after the closing thereof.

 

“Suppressed Availability” means, as of any day, the lesser of (a) $5,000,000,
and (b) the amount by which (i) the Formula Amount exceeds (ii) the Maximum
Revolving Advance Amount less the Maximum Undrawn Amount of all Letters of
Credit.

 

3.3The defined terms “Average Availability,” “Fixed Charge Coverage Ratio,”
“Quarterly Liquidity,” “Satisfaction Event,” and "Triggering Event", each set
forth in Section 1.2 of the Loan Agreement are hereby deleted and replaced with
the following:

 

“Average Availability” shall mean, as of the date of determination, the sum of
Undrawn Availability, plus Qualified Cash, plus Suppressed Availability for each
day of the sixty (60) day period ending on such date, divided by sixty (60).

 

“Fixed Charge Coverage Ratio” shall mean and include for any fiscal period, for
Parent and its Subsidiaries on a consolidated basis, the ratio of (a) EBITDA,
plus non-cash charges against net income other than write-downs of Eligible
Accounts, Eligible Inventory and Eligible Real Property, minus Unfinanced
Capital Expenditures made, minus expenses for income or franchise taxes included
as an expense in the determination of net income (other than any provision for
deferred taxes), minus payment of deferred taxes relating to income and
franchise taxes accrued in any prior period, plus the EBITDA Adjustment, to (b)
Senior Debt Payments made, plus the amount of each reduction to the Amortizing
Tranche required under Section 2.4, plus dividends paid by Parent, plus
aggregate payments made on account of pension-related obligations to the extent
not deducted as an expense in the determination of EBITDA during such fiscal
period, all for the same fiscal period.

 

“Quarterly Liquidity” shall mean, for any fiscal quarter, an amount equal to (a)
the daily average (as of the end of each Business Day) during such fiscal
quarter of the sum of: (i) the lesser of (A) the Formula Amount minus the
outstanding amount of the Revolving Advances, or (B) the Maximum Revolving
Advance Amount, plus Suppressed Availability, minus the Maximum Undrawn Amount
of all Letters of Credit, minus the outstanding amount of the Revolving
Advances, plus (ii) Qualified Cash, minus (b) all amounts owing to Borrowers’
trade creditors which are 60 days or more past due as of the end of such fiscal
quarter.

 

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“Satisfaction Event” shall mean the first (1st) date after a Triggering Event on
which both of the following conditions are satisfied: (a) the sum of Undrawn
Availability, plus Qualified Cash, plus Suppressed Availability, has equaled
more than $15,000,000 for a period of ninety (90) or more consecutive calendar
days after such Triggering Event, and (b) no Default or Event of Default is
continuing.

 

“Triggering Event” shall mean any one of the following: (a) the occurrence of an
Event of Default, (b) the first (1st) date after the Closing Date (or the most
recent Satisfaction Event if a Triggering Event has previously occurred) on
which the sum of Undrawn Availability, plus Qualified Cash, plus Suppressed
Availability, has equaled less than $10,000,000 for a period of ten (10) or more
consecutive days, or (c) any date on which the sum of Undrawn Availability, plus
Qualified Cash, plus Suppressed Availability, equals less than $7,500,000.

 

3.4Section 7.7 of the Loan Agreement is hereby deleted and replaced with the
following:

 

7.7 Dividends. Declare, pay or make any dividend or distribution on any shares
of the Equity Interests of Parent (other than dividends or distributions payable
in its stock, or split-ups or reclassifications of its stock) or apply any of
its funds, property or assets to the purchase, redemption or other retirement of
any Equity Interests, or of any options to purchase or acquire any such Equity
Interests of Parent, except that Parent shall be permitted to pay dividends to
its shareholders or apply any of its funds to such purchase, redemption,
retirement or acquisition each fiscal quarter, provided that (a) after giving
effect to the payment of any of the foregoing there shall not exist any Event of
Default or Default, (b) a notice of termination with regard to this Agreement
shall not be outstanding, (c) the sum of Undrawn Availability, plus Qualified
Cash, plus Suppressed Availability will be at least $10,000,000 immediately
after giving effect to each such payment, (d) Average Availability will be at
least $10,000,000 immediately after giving effect to each such payment, (e) the
proforma Fixed Charge Coverage Ratio of Parent and its Subsidiaries on a
consolidated basis will be at least 1.25 to 1.00 for the twelve (12) month
period ending on the last day of the fiscal quarter immediately prior to the
fiscal quarter of the proposed payment, after giving effect to such payment, as
evidenced by a pro-forma Compliance Certificate delivered by the Borrowing
Agent, and (f) each such payment may be made only after Agent shall have
received a Compliance Certificate for such immediately prior fiscal quarter. All
calculations and projections to be made pursuant to this Section shall be
subject to the Agent’s approval and provided to the Agent prior to the making of
the applicable payment.

 

3.5The second sentence of Section 9.2 of the Loan Agreement is hereby deleted
and replaced with the following:

 

Commencing upon the sum of Undrawn Availability, plus Qualified Cash, plus
Suppressed Availability being less than $15,000,000 for a period in excess of
five (5) consecutive days, unless waived by Agent in its sole discretion or
until the sum of Undrawn Availability, plus Qualified Cash, plus Suppressed
Availability exceeds $17,000,000 for a period in excess of ten (10) consecutive
days thereafter), deliver to Agent on or before the second (2nd) Business Day of
each week as and for the prior week, a report of sales, credits, and collections
(which shall be calculated as of the last day of the prior week and which shall
not be binding upon Agent or restrictive of Agent’s rights under this
Agreement).

 

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3.6The Security Agreement - Limited Liability Company Membership (the “Security
Agreement”) between Parent and Agent and dated as of the Closing Date is hereby
amended to include Creative within the definition of “Limited Liability Company”
set forth in Section 1 of the Security Agreement. Parent hereby grants to Agent
a security interest in and Lien upon 100% of the Equity Interests in Creative to
secure the Obligations. By its execution of this Amendment, Creative joins the
Acknowledgement attached to the Security Agreement as a “Limited Liability
Company” and agrees to be bound by the terms thereof as if Creative had been an
original signatory thereto.

 

4.Consents.

 

4.1Notwithstanding the requirements of Section 4.15(h) of the Loan Agreement,
remittances with respect to Receivables acquired in the Permitted Acquisition by
Creative shall not be required to be paid to an account that is a Blocked
Account or Collection Account until January 31, 2014 and thereafter. Receivables
and Inventory acquired in the Permitted Acquisition by Creative shall not
constitute Eligible Receivables or Eligible Inventory unless Agent agrees
otherwise in writing.

 

4.2Notwithstanding the requirements of Sections 9.7 and 9.9 of the Loan
Agreement, the financial results of Creative shall not be required to be
consolidated with the Borrowers until December 31, 2013 and thereafter.

 

5.Representations, Warranties and Covenants. To induce Agent and Lenders to
enter into this Amendment, each Borrower represents, warrants, and covenants, as
applicable, as follows:

 

5.1Representations and Warranties. The representations and warranties of
Borrowers contained in the Loan Documents are deemed to have been made again on
and as of the date of execution of this Amendment, except to the extent that
such representations and warranties were expressly limited to an earlier date.

 

5.2No Defaults. No Event of Default or Default exists on the date hereof.

 

5.3No Claims. Each Borrower represents and warrants that, to its knowledge, it
has no claims, counterclaims, setoffs, actions or causes of actions, damages or
liabilities of any kind or nature whatsoever whether at law or in equity, in
contract or in tort, existing as of the date of this Amendment (collectively,
“Claims”) against Agent or Lenders, their direct or indirect parent corporations
or any direct or indirect Affiliates of such parent corporations, or any of the
foregoing's respective directors, officers, employees, agents, attorneys and
legal representatives, or the heirs, administrators, successors or assigns of
any of them (collectively, “Lender Parties”) that directly or indirectly arise
out of, are based upon or are in any manner connected with any Prior Related
Event. As an inducement to Agent and Lenders to enter into this Amendment, each
Borrower on behalf of itself, and all of its respective successors and assigns
hereby knowingly and voluntarily releases and discharges all Lender Parties from
any and all Claims, whether known or unknown in existence as of the date hereof,
that directly or indirectly arise out of, are based upon or are in any manner
connected with any Prior Related Event. As used herein, the term “Prior Related
Event” means any transaction, event, circumstance, action, failure to act,
occurrence of any sort or type, whether known or unknown, which occurred,
existed, was taken, permitted or begun at any time prior to the Effective Date
or occurred, existed, was taken, was permitted or begun in accordance with,
pursuant to or by virtue of any of the terms of the Loan Documents or any
documents executed in connection with the Loan Documents or which was related to
or connected in any manner, directly or indirectly to the extension of credit
represented by the Loan Documents.

 

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5.4Authorization. This Amendment and the related documents have been duly
authorized by each Borrower. Each Borrower has the full right, power and
authority to enter into this Amendment and perform its respective obligations
hereunder.

 

5.5No Misrepresentations. No information or material submitted to Agent in
connection with this Amendment contains any material misstatement or
misrepresentation nor omits to state any material fact or circumstance.

 

5.6No Conflicts. The execution and delivery of this Amendment and all deliveries
required hereunder, and the performance by each Borrower of its obligations
hereunder do not and will not conflict with any provision of law or the
organizational documents of Borrowers or of any agreement binding upon
Borrowers.

 

5.7Enforceability. This Amendment and each of the related documents is a legal
and valid and binding obligation of Borrowers, enforceable against Borrowers in
accordance with its terms.

 

5.8Ratification. Except as expressly modified herein, the Loan Agreement, as
amended, is and remain in full force and effect. The Loan Documents are hereby
ratified and confirmed as the continuing obligation of Borrowers.

 

6.Conditions Precedent. The closing of this Amendment is subject to the
following conditions precedent:

 

6.1Fees and Expenses. Borrowers will pay to Agent for the benefit of Lenders an
amendment fee in the amount of $15,000, plus all reasonable and documented
attorneys’ fees and expenses of Agent incurred in connection with this
Amendment. Such fees and expenses may be charged to Borrowers by Agent as a
Revolving Advance.

 

6.2Closing Memorandum. Borrowers will have delivered (and executed to the extent
applicable) each of the documents listed on the Closing Memorandum attached
hereto as Exhibit 6.2 in form and substance satisfactory to Agent and its
counsel.

 

6.3Other. All corporate and other proceedings, and all documents, instruments
and other legal matters in connection with this Amendment and the related
documentation shall be satisfactory in form and substance to Agent and its
counsel.

 

6.4The representations and warranties of Borrowers in Section 5 herein will be
true.

 

7.General.

 

7.1This Amendment is an “Other Document” as defined in the Loan Agreement.

 

7.2Nothing contained herein will be construed as waiving any Default or Event of
Default under the Loan Documents or will affect or impair any right, power or
remedy of Agent or Lenders under or with respect to the Loan Documents, as
amended, or any agreement or instrument guaranteeing, securing or otherwise
relating to any of the Advances.

 

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7.3All representations and warranties made by Borrowers herein will survive the
execution and delivery of this Amendment.

 

7.4This Amendment will be binding upon and inure to the benefit of Borrowers,
Agent, and Lenders and their respective successors and assigns.

 

7.5This Amendment will in all respects be governed and construed in accordance
with the laws of the State of Ohio.

 

7.6This Amendment and the documents and instruments to be executed hereunder
constitute the entire agreement among the parties with respect to the subject
matter hereof and shall not be amended, modified or terminated except by a
writing signed by the party to be charged therewith.

 

7.7Each Borrower agrees to execute such other instruments and documents and
provide Agent with such further assurances as Agent may reasonably request to
more fully carry out the intent of this Amendment.

 

7.8This Amendment may be executed in a number of identical counterparts. If so,
each such counterpart shall collectively constitute one agreement. Any signature
delivered by a party by facsimile transmission or other electronic means shall
be deemed to be an original signature hereto.

 

7.9No provision of this Amendment is intended or shall be construed to be for
the benefit of any third party.

 

Signature Page Follows

 

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Signature Page to Joinder and Amendment No. 2 to Loan Documents

 

Executed as of the Effective Date

 

  Rocky Brands, Inc.,   Lifestyle Footwear, Inc.,   Rocky Brands Wholesale LLC,
  Lehigh Outfitters, LLC,   Rocky Brands International, LLC,   Rocky Canada,
Inc.,   Creative Recreation, LLC   as Borrowers               By: /s/ James E.
McDonald     James E. McDonald     Executive Vice President and     Chief
Financial Officer of each Borrower         PNC Bank, National Association,   as
Agent and a Lender               By: /s/ Christopher Tully     Christopher Tully
    Vice President         U.S. Bank National Association,   as a Lender        
      By: /s/ Aaron R. Sceva     Aaron R. Sceva     Assistant Vice President

 

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