Exhibit 10.2
EXECUTION COPY
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
     THIS FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT (this “Amendment”), dated
as of June 28, 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”).
RECITALS
     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 for the
purpose of facilitating the Acquisition.
     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. 3 to the GMAC Credit Agreement (the “Third Credit Agreement
Amendment”), pursuant to which a new term loan in the original principal sum of
$15,000,000 (the “New Term Loan”) will be provided to the Loan Parties.
     WHEREAS, the Loan Parties have requested Agent and the Purchasers to
consent to the New Term Loan and to utilizing the proceeds of such loan to
prepay $15,000,000 of the Senior Term Notes (the “Prepayment”), which is an
amount equal to fifty percent (50%) of the outstanding principal amount of the
Senior Term Notes, and Agent and the Purchasers are willing to do so on the
terms and conditions set forth herein.

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     WHEREAS, in connection with the Third Credit Agreement Amendment and the
Prepayment, the Loan Parties have requested Agent and the Purchasers to amend
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. Consent to Third Credit Agreement Amendment. Subject to satisfaction of
the conditions precedent set forth in Section 4 below, Agent and Purchaser
hereby consent to the New Term Loan.
     3. Amendments to 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 words “ROCKY SHOES & BOOTS, Inc., an Ohio corporation, (‘Parent’)”
appearing in the preamble to the Note Purchase Agreement are hereby amended and
restated as follows:
ROCKY BRANDS, INC. (formerly known as Rocky Shoes & Boots, Inc.), an Ohio
corporation, (“Parent”)
     (b) Section 1.1 of the Note Purchase Agreement is hereby amended by
inserting the following new defined terms in the appropriate alphabetical order:
“Adjusted Indebtedness of Parent on a Consolidated Basis” shall mean total
Indebtedness of Parent on a Consolidated Basis, provided that for purposes of
determining Adjusted Indebtedness of Parent on a Consolidated Basis as of the
end of any fiscal period, the outstanding balance of the Revolving Financing and
Letter of Credit Liabilities (as defined in the GMAC Credit Agreement) as of the
end of such period shall be deemed to be the average outstanding balance of the
Revolving Financing and Letter of Credit Liabilities (as defined in the GMAC
Credit Agreement) as of the end of the four (4) most recently ended fiscal
quarter periods, including the period then just ended.
“First Amendment” shall mean the First Amendment to this Agreement dated as of
the First Amendment Closing Date by and among the Loan Parties, Agent, and the
purchasers party thereto.
“First Amendment Closing Date” shall mean June 28, 2006.

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     (c) Clause (ii) in the definition of “Excess Cash Flow” appearing in
Section 1.1 of the Note Purchase Agreement is hereby amended and restated in its
entirety to provide as follows:
“(ii) tax refunds actually received, to the extent not remitted pursuant to the
GMAC Credit Agreement;”.
     (d) The definition of “Term Financing” appearing in Section 1.1 of the Note
Purchase Agreement is hereby amended by deleting the number “$18,000,000” and
replacing it with “$22,468,573”.
     (e) The defined terms “Senior Debt” and “Total Leverage Ratio” appearing in
Section 1.1 are hereby amended in their entireties to provide as follows:
“Senior Debt” shall mean Adjusted Indebtedness of Parent on a Consolidated Basis
other than (a) senior Indebtedness under the Senior Term Notes and (b) any
unsecured Indebtedness of Parent on a Consolidated Basis.
“Total Leverage Ratio” shall mean, for any period, the ratio of (x) Adjusted
Indebtedness of Parent on a Consolidated Basis as of the end of such period to
(y) EBITDA for such period.
     (f) Section 2.1 of the Note Purchase Agreement is hereby amended and
restated to read as follows:
“Senior Term Notes. On the Closing Date, the Loan Parties duly authorized the
issuance to the Purchasers designated on Annex A of $30,000,000 aggregate
principal amount of the Loan Parties’ Senior Secured Term B Notes due January 6,
2011 (together with any promissory notes issued in substitution therefor
pursuant to Sections 6.3 and 6.4, the “Senior Term Notes”) substantially in the
form of the promissory notes made by the Loan Parties in favor of the Purchasers
thereof in the form attached hereto as Exhibit A. The outstanding principal
balance of the Senior Term Notes as of the First Amendment Closing Date is
$30,000,000. On the First Amendment Closing Date, the Loan Parties, pursuant to
Section 3.3 of this Agreement, will make to Agent, for the ratable benefit of
the Purchasers, a principal payment in the aggregate amount of $15,000,000 of
the Senior Term Notes.”
     (g) Section 3.1(a) of the Note Purchase Agreement is hereby amended and
restated to read as follows:
“(a) Senior Term Notes. The Loan Parties, jointly and severally, covenant and
agree to make payments to Agent, for the ratable benefit of the Purchasers
holding Senior Term Notes, of accrued interest on the Senior Term Notes monthly
in arrears on the first LIBOR Business Day of each month, commencing on July 1,
2006 through the date of repayment in full of the Senior Term Notes. The Senior
Term Notes shall bear interest on the

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outstanding principal thereof at a rate equal to the LIBOR Rate, as such rate
may adjust from time to time, plus six and one-half percent (6.5%).”
     (h) Section 3.2 of the Note Purchase Agreement is hereby amended and
restated to read as follows:
“Repayment of Senior Term Notes. The Loan Parties, jointly and severally,
covenant and agree to repay to Agent, for the ratable benefit of the Purchasers
holding Senior Term Notes, the Senior Term Notes in accordance with the
following amortization schedule:

          Payment Date   Payment Amount
August 1, 2009
  $ 833,333.33  
September 1, 2009
  $ 833,333.33  
October 1, 2009
  $ 833,333.33  
November 1, 2009
  $ 833,333.33  
December 1, 2009
  $ 833,333.33  
January 1, 2010
  $ 833,333.33  
February 1, 2010
  $ 833,333.33  
March 1, 2010
  $ 833,333.33  
April 1, 2010
  $ 833,333.33  
May 1, 2010
  $ 833,333.33  
June 1, 2010
  $ 833,333.33  
July 1, 2010
  $ 833,333.33  
August 1, 2010
  $ 833,333.33  
September 1, 2010
  $ 833,333.33  
October 1, 2010
  $ 833,333.33  
November 1, 2010
  $ 833,333.33  
December 1, 2010
  $ 833,333.33  

In addition to the foregoing, the Loan Parties, jointly and severally, covenant
and agree to repay any and all unpaid principal on the Senior Term Notes,
together with all accrued and unpaid interest, fees and other amounts due in
connection with the Senior Term Notes upon maturity of the Senior Term Notes on
January 6, 2011 (the ‘Maturity Date’).”
     (i) Sections 7.3(a), 7.3(b), 7.3(c) and 7.3(d) of the Note Purchase
Agreement are hereby amended and restated to read as follows:
“(a) Fixed Charge Coverage. A minimum Fixed Charge Coverage Ratio as of the end
of each period set forth below of not less than the respective ratio set forth
below:

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              Fixed Charge Period   Coverage Ratio
Four Quarters ending June 30, 2006
    1.00 to 1.00  
Four Quarters ending September 30, 2006
    1.00 to 1.00  
Four Quarters ending December 31, 2006
    1.00 to 1.00  
Four Quarters ending March 31, 2007
    1.00 to 1.00  
Four Quarters ending June 30, 2007
    1.00 to 1.00  
Four Quarters ending September 30, 2007
    1.00 to 1.00  
Four Quarters ending December 31, 2007
    1.00 to 1.00  
Four Quarters ending March 31, 2008
    1.00 to 1.00  
Four Quarters ending June 30, 2008
    1.00 to 1.00  
Four Quarters ending September 30, 2008
    1.00 to 1.00  
Four Quarters ending December 31, 2008
    1.00 to 1.00  
Each four Quarter period ending thereafter
    1.00 to 1.00 ”

“(b) Total Leverage. A Total Leverage Ratio as of the end of each period set
forth below in a ratio not greater than the respective ratio set forth below:

          Period   Total Leverage Ratio
Four Quarters ending June 30, 2006
    3.80 to 1.00  
Four Quarters ending September 30, 2006
    3.80 to 1.00  
Four Quarters ending December 31, 2006
    3.80 to 1.00  
Four Quarters ending March 31, 2007
    3.75 to 1.00  
Four Quarters ending June 30, 2007
    3.65 to 1.00  
Four Quarters ending September 30, 2007
    3.55 to 1.00  
Four Quarters ending December 31, 2007
    3.40 to 1.00  
Four Quarters ending March 31, 2008
    3.35 to 1.00  
Four Quarters ending June 30, 2008
    3.30 to 1.00  
Four Quarters ending September 30, 2008
    3.25 to 1.00  
Four Quarters ending December 31, 2008
    3.10 to 1.00  
Four Quarters ending March 31, 2009
    3.00 to 1.00  
Four Quarters ending June 30, 2009
    3.00 to 1.00  
Four Quarters ending September 30, 2009
    3.00 to 1.00  
Each four Quarter period ending thereafter
    2.90 to 1.00 ”

“(c) Minimum EBITDA. EBITDA as of the end of each period set forth below in an
amount not less than the respective amount set forth below:

          Period   Minimum EBITDA
Four Quarters ending June 30, 2006
  $ 30,000,000  
Four Quarters ending September 30, 2006
  $ 30,000,000  

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          Period   Minimum EBITDA
Four Quarters ending December 31, 2006
  $ 30,000,000  
Four Quarters ending March 31, 2007
  $ 30,000,000  
Four Quarters ending June 30, 2007
  $ 30,000,000  
Four Quarters ending September 30, 2007
  $ 30,000,000  
Four Quarters ending December 31, 2007
  $ 30,600,000  
Four Quarters ending March 31, 2008
  $ 30,600,000  
Four Quarters ending June 30, 2008
  $ 30,600,000  
Four Quarters ending September 30, 2008
  $ 30,600,000  
Four Quarters ending December 31, 2008
  $ 31,400,000  
Four Quarters ending March 31, 2009
  $ 31,400,000  
Four Quarters ending June 30, 2009
  $ 31,400,000  
Four Quarters ending September 30, 2009
  $ 31,400,000  
Each four Quarter period ending thereafter
  $ 32,200,000 ”

“(d) Senior Leverage Ratio. A Senior Leverage Ratio as of the end of each period
set forth below in a ratio not greater than the respective ratio set forth
below:

          Period   Senior Leverage Ratio
Four Quarters ending June 30, 2006
    3.30 to 1.00  
Four Quarters ending September 30, 2006
    3.30 to 1.00  
Four Quarters ending December 31, 2006
    3.30 to 1.00  
Four Quarters ending March 31, 2007
    3.25 to 1.00  
Four Quarters ending June 30, 2007
    3.15 to 1.00  
Four Quarters ending September 30, 2007
    3.05 to 1.00  
Four Quarters ending December 31, 2007
    2.90 to 1.00  
Four Quarters ending March 31, 2008
    2.85 to 1.00  
Four Quarters ending June 30, 2008
    2.80 to 1.00  
Four Quarters ending September 30, 2008
    2.75 to 1.00  
Four Quarters ending December 31, 2008
    2.60 to 1.00  
Four Quarters ending March 31, 2009
    2.50 to 1.00  
Four Quarters ending June 30, 2009
    2.50 to 1.00  
Four Quarters ending September 30, 2009
    2.50 to 1.00  
Each four Quarter period ending thereafter
    2.40 to 1.00 ”

“(e) Capital Expenditures. Capital Expenditures made by Parent on a Consolidated
Basis during any Fiscal Year set forth below, in the aggregate together with all
expenditures in respect of Capitalized Leases, that would exceed the amount set
forth opposite each Fiscal Year below; provided, that any unused portion of any
such annual amount in each Fiscal Year, up to twenty-five percent (25%) of such
maximum amount set forth below may be carried over solely to the immediately
succeeding Fiscal Year:

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          Period   Maximum Capital Expenditures
Fiscal Year ending December 31, 2005
  $ 6,500,000  
Fiscal Year ending December 31, 2006
  $ 6,500,000  
Fiscal Year ending December 31, 2007
  $ 6,500,000  
Fiscal Year ending December 31, 2008
  $ 6,500,000 ”

     (j) Section 10.17 of the Note Purchase Agreement is hereby amended by
inserting the words “as amended or otherwise modified from time to time in
accordance with its terms,” immediately after the “(“ appearing therein.
     4. Conditions of Effectiveness. This Amendment shall become effective upon
satisfaction of the following conditions precedent, each of which shall be in
form and substance reasonably satisfactory to Agent:
     (a) Agent shall have received six (6) copies of this Amendment duly
executed by the Loan Parties and Required Purchasers;
     (b) The Loan Parties shall have paid to Agent, for the ratable benefit of
the Purchasers, a $15,000,000 cash prepayment of Senior Term Notes;
     (c) The Loan Parties shall have paid to Agent, for the ratable benefit of
the Purchasers, all accrued and unpaid interest, as of the First Amendment
Closing Date. on all Senior Term Notes, whether or not subject to prepayment
pursuant to this Amendment.
     (d) The Loan Parties shall have paid to Agent, for the ratable benefit of
the Purchasers, a fee in the amount of $225,000, which is an amount equal to one
and one-half percent (1.5%) of the aggregate outstanding principal amount of the
Senior Term Notes, after giving effect to all prepayments under this Amendment,
earned as of the date hereof and payable in full in cash;
     (e) Agent shall have received a copy of the resolutions in form and
substance reasonably satisfactory to Agent, of the Board of Directors (or
equivalent authority) of each Loan Party authorizing the execution, delivery and
performance of this Amendment and all related agreements and documents;
     (f) Agent shall have received a true and correct duly executed copy of the
Third Credit Agreement Amendment and related documents in form and substance
reasonably satisfactory to Agent;
     (g) Agent and the GMAC Agent shall have entered into an amendment to the
Intercreditor Agreement; and
     (h) Agent shall have received such other certificates, instruments,
documents, and agreements as may be reasonably required by Agent or its counsel
relating to the transactions contemplated in this Amendment.

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     5. Representations and Warranties. Each of the Loan Parties hereby
represents and warrants as follows:
     (a) This Amendment and the Note Purchase Agreement, as amended hereby,
constitute legal, valid and binding obligations of each of the Loan Parties and
are enforceable against each of the Loan Parties in accordance with their
respective terms.
     (b) Upon the effectiveness of this Amendment, each of the Loan Parties
hereby reaffirms all covenants, representations and warranties made in the Note
Purchase Agreement to the extent the same are not amended hereby, and agrees
that all such covenants, representations and warranties shall be deemed to have
been remade as of the effective date of this Amendment, except for those
representations and warranties made only as of the Closing Date or as of a
particular date prior to the date hereof.
     (c) No Event of Default or Default has occurred and is continuing or would
exist after giving effect to this Amendment.
     (d) None of the Loan Parties has any defense, counterclaim or offset with
respect to the Note Purchase Agreement.
     6. Effect on the Note Purchase Agreement.
     (a) Upon the effectiveness of this Amendment hereof, each reference in the
Note Purchase Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or
words of like import shall mean and be a reference to the Note Purchase
Agreement as amended hereby.
     (b) Except as specifically amended herein, the Note Purchase Agreement, and
all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
     (c) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Agent or Purchasers, nor
constitute a waiver of any provision of the Note Purchase Agreement, or any
other documents, instruments or agreements executed and/or delivered under or in
connection therewith.
     7. Governing Law. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
Maryland, without regard to conflict of laws principles.
     8. Costs and Expenses. The Loan Parties agree to reimburse Agent and
Purchasers for all fees and expenses incurred in the preparation, negotiation
and execution of this Amendment and the consummation of the transaction
contemplated hereby, including without limitation, the reasonable fees and
expenses of counsel.
     9. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

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     10. Counterparts; Facsimile. This Amendment may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto,
*        *        *

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.

                  LOAN PARTIES:    
 
                ROCKY BRANDS, INC.         LIFESTYLE FOOTWEAR, INC.         EJ
FOOTWEAR LLC         HM LEHIGH SAFETY SHOE CO. LLC         GEORGIA BOOT LLC    
    GEORGIA BOOT PROPERTIES LLC         DURANGO BOOT COMPANY LLC        
NORTHLAKE BOOT COMPANY LLC         LEHIGH SAFETY SHOE CO. LLC         LEHIGH
SAFETY SHOE PROPERTIES LLC    
 
           
 
  By:             /s/ James E. McDonald
 
Name: James E. McDonald    
 
      Title:   Chief Financial Officer of each of the    
 
     
foregoing Loan Parties
   
 
                AGENT:    
 
                AMERICAN CAPITAL FINANCIAL SERVICES, INC.    
 
           
 
  By:             /s/ Kenneth E. Jones
 
Name: Kenneth E. Jones    
 
      Title:   Principal    
 
                PURCHASERS:    
 
                AMERICAN CAPITAL STRATEGIES, LTD.    
 
           
 
  By:             /s/ Kenneth E. Jones
 
Name: Kenneth E. Jones    
 
      Title:   Principal    

[Signature Page No. 1 to First Amendment to Note Purchase Agreement]

 

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                  ACAS BUSINESS LOAN TRUST 2004-1, a         Delaware statutory
trust    
 
                By: AMERICAN CAPITAL STRATEGIES, LTD., as Servicer    
 
           
 
            By:        /s/ Kenneth E. Jones
 
Name: Kenneth E. Jones    
 
      Title:   Principal    
 
                ACAS BUSINESS LOAN TRUST 2005-1, a Delaware
statutory trust    
 
                By: AMERICAN CAPITAL STRATEGIES, LTD., as Servicer    
 
           
 
            By:        /s/ Kenneth E. Jones
 
Name: Kenneth E. Jones    
 
      Title:   Principal    

[Signature Page No.2 to First Amendment to Note Purchase Agreement]