Document:

EX-10.1

 

Exhibit 10.1

AMENDMENT NO. 3

TO

LOAN AND SECURITY AGREEMENT

     THIS AMENDMENT NO. 3 (“Amendment No. 3”) is entered into as of June 28, 2006, 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, 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, jointly and severally, “Borrower”), the financial
institutions party thereto (each a “Lender” and collectively, the “Lenders”), and GMAC COMMERCIAL
FINANCE LLC, as administrative agent and sole lead arranger for the Lenders (in such capacities,
the “Agent”).

BACKGROUND

     Borrowers, Agent and Lenders are parties to a Loan and Security Agreement dated as of January
6, 2005 (as amended by Amendment No. 1 to Loan and Security Agreement and Consent dated as of
January 19, 2005 and Amendment No. 2 to Loan and Security Agreement dated as of April 30, 2006, and
as further amended, restated, supplemented or otherwise modified from time to time, the “Loan
Agreement”) pursuant to which Agent and Lenders provide Borrowers with certain financial
accommodations.

     Borrowers have requested Lenders to consent to the prepayment to ACAS of the principal sum of
$15,000,000 (representing 50% of the outstanding amount of Term Loan B), utilizing the proceeds of
a $15,000,000 Term Loan C to be provided by Lenders. Term Loan C would constitute an Obligation
secured by the Collateral in the same priority as Term Loan A and the Revolving Loans.

     Accordingly, Borrowers have requested that Lenders increase the aggregate credit facility to
$122,468,572.04, to consist of (a) Term Loan A which, as of the date of this Amendment No. 3, is in
the outstanding principal balance of $7,468,572.09, (b) a new Term Loan C which would be in the
original principal sum of $15,000,000, and (c) the Revolving Loans in the maximum amount of
$100,000,000. Upon the terms and conditions set forth in this Amendment No. 3,
Agent and Lenders have so agreed to amend the Loan Agreement to provide for such increased
credit facility on the terms and conditions set forth herein.

 

 

     Borrowers have also requested Lenders to reset the financial covenants, and to amend certain
other provisions of the Loan Agreement; Lenders have agreed to effectuate such modifications to the
Loan Agreement on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of any loan or advance or grant of credit heretofore or
hereafter made to or for the account of Borrowers by Agent and Lenders, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:

     1. Definitions. All capitalized terms not otherwise defined herein shall have the
meanings given to them in the Loan Agreement.

     2. Amendment to Loan Agreement. Subject to satisfaction of the conditions precedent
set forth in Section 3 below, the Loan Agreement is amended as follows:

          (a) The words “ROCKY SHOES & BOOTS, INC., a corporation organized and existing under the laws
of the State of Ohio (‘Parent’)” appearing in the introductory paragraph to the Loan Agreement are
hereby amended and restated as follows:

ROCKY BRANDS, INC. (formerly known as ROCKY SHOES & BOOTS, INC.), a
corporation organized and existing under the laws of the State of Ohio
(“Parent”)

          (b) Section 1.1 of the Loan Agreement is amended by inserting the following defined terms in
their appropriate alphabetical order:

“Adjusted Indebtedness of Rocky on a Consolidated Basis” shall mean total
Indebtedness of Rocky on a Consolidated Basis, provided that
for purposes of determining Adjusted Indebtedness of Rocky on a Consolidated
Basis as of the end of any fiscal period, the outstanding balance of
Revolving Loans and Letter of Credit Liabilities as of the end of such
period shall be deemed to be the average outstanding balance of Revolving
Loans and Letter of Credit Liabilities as of the end of the four most
recently ended fiscal quarter periods, including the period then just ended.

“Amendment No. 3” shall mean Amendment No. 3 to this Agreement dated as
of June 28, 2006.

“Amendment No. 3 Closing Date” shall mean the date upon which all of the
conditions precedent to the effectiveness of Amendment No. 3 have been
satisfied.

“Term Loan C” means the Advances made pursuant to Section 2.1(B-1).

“Term Loan C Commitment” means (a) as to any Lender, the commitment of such
Lender to make its Pro Rata share of Term Loan C in the maximum aggregate
amount set forth on the signature page of

2

 

Amendment No. 3 opposite such
Lender‘s signature or in the most recent Assignment and Acceptance
Agreements, if any, executed by such Lender and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Term Loan C.

“Term Note A” means each promissory note of Borrower in form and substance
satisfactory to Agent, issued to evidence the Term Loan A Commitment.

“Term Note C” means each promissory note of Borrower in form and substance
satisfactory to Agent, issued to evidence the Term Loan C Commitment.

          (c) The following defined terms in Section 1.1 are amended in their entirety to provide as
follows:

“Applicable Margin” for each type of Loan shall mean, commencing as of the
Amendment No. 3 Closing Date and continuing, until the First Adjustment Date
(as hereafter defined), the applicable percentage specified below:

	 	 	 	 	 	 	 	 	 
	 	 	APPLICABLE	 	APPLICABLE
	 	 	MARGIN FOR	 	MARGIN FOR
	 	 	DOMESTIC RATE	 	LIBOR RATE
	TYPE OF LOAN	 	LOANS	 	LOANS
	Revolving Advances
	 	 	0.75	%	 	 	2.25	%
	Term Loan A
	 	 	1.50	%	 	 	3.00	%
	Term Loan C
	 	 	1.50	%	 	 	3.00	%

Thereafter on a quarterly basis, effective as of the first day following
receipt by Agent of the internal financial statements of Rocky on a
Consolidated Basis required under Section 5.1(E)(b) for the previous fiscal
quarter (each day of such delivery, an “Adjustment Date”),
commencing with the first Business Day following receipt by Agent of the
internal financial statements of Rocky on a Consolidated Basis for the
fiscal quarter ending June 30, 2006 required under Section 5.1(E)(b) (the
“First Adjustment Date”), the Applicable Margin for each type of
Loan shall be adjusted, if necessary, to the applicable percent per annum
set forth in the pricing table set forth below corresponding to the Total
Leverage Ratio for the trailing twelve month period ending on the last day
of the most recently completed fiscal quarter prior to the applicable
Adjustment Date (each such period, a “Calculation Period”):

3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	APPLICABLE MARGIN FOR	 	APPLICABLE MARGIN FOR
	TOTAL	 	DOMESTIC RATE LOANS	 	LIBOR RATE LOANS
	LEVERAGE	 	Revolving	 	Term	 	Term	 	Revolving	 	Term	 	Term
	RATIO	 	Advances	 	Loan A	 	Loan C	 	Advances	 	Loan A	 	Loan C
	Greater than or
equal to 4.0 to 1.0
	 	 	1.25	%	 	 	2.00	%	 	 	2.00	%	 	 	2.75	%	 	 	3.50	%	 	 	3.50	%
	Greater than or
equal to 3.0 to 1.0
but less than 4.0
to 1.0
	 	 	1.00	%	 	 	1.75	%	 	 	1.75	%	 	 	2.50	%	 	 	3.25	%	 	 	3.25	%
	Greater than or
equal to 2.0 to 1.0
but less than 3.0
to 1.0
	 	 	0.75	%	 	 	1.50	%	 	 	1.50	%	 	 	2.25	%	 	 	3.00	%	 	 	3.00	%
	Less than 2.0 to 1.0
	 	 	0.50	%	 	 	1.25	%	 	 	1.25	%	 	 	2.00	%	 	 	2.75	%	 	 	2.75	%

If Borrower shall fail to timely deliver the financial statements,
certificates and/or other information required under Section 5.1(E)(b), each
Applicable Margin shall be conclusively presumed to equal the highest
Applicable Margin specified in the pricing table set forth above for the
period commencing on the required delivery date of such financial
statements, certificates and/or other information until the delivery
thereof.

“Commitment” or “Commitments” means the commitment or commitments of Lenders
to make Loans as set forth in Sections 2.1(A), 2.1(B) and/or 2.1(B-1) and to
provide Lender Letters of Credit as set forth in Section 2.1(E).

“Excess Cash Flow” means, for any period, the greater of (a) zero (0); or
(b) without duplication, the total of the following for Rocky on a
Consolidated Basis, each calculated for such period: (i) EBITDA;
plus (ii) tax refunds actually received, to the extent not remitted
to Agent pursuant to Section 2.4(B)(5) and applied in prepayment of Term
Loan A and/or Term Loan C; less (iii) Capital Expenditures (to the
extent actually made in cash and/or due to be made in cash within such
period, excluding any Capital Expenditures under or with respect to Capital
Leases to the extent of the amount financed thereby, but in no event more
than the amount permitted in Section 5.3(E); less (iv) income and
franchise taxes paid or accrued excluding any provision for deferred taxes
included in the determination of net income; less (v) decreases in
deferred income taxes resulting from payments of deferred taxes accrued in
prior periods; less (vi) Cash Interest Expense; less (vii)
voluntary prepayments made under Section 2.4(C); less (viii)
mandatory prepayments from Proceeds of Asset Dispositions made under Section
2.4(B)(2), but only to the extent that the transaction that precipitated the
mandatory prepayment increased net income of Borrower, as determined in
accordance with GAAP; less (ix)

4

 

payments of principal paid in cash with respect to all long-term
Indebtedness (other than Revolving Loans) and Capital Leases.

“Loan” or “Loans” means an advance or advances under the Term Loan A
Commitment, the Term Loan C Commitment or the Revolving Loan Commitment.

“Term Note” means, jointly and severally, Term Note A and Term Note C.

“Total Loan Commitment” means as to any Lender the aggregate commitments of
such Lender with respect to its Revolving Loan Commitment, Term Loan A
Commitment and Term Loan C Commitment.

          (d) The last sentence of the definition of “Borrowing Base” appearing in Section 1.1 of the
Loan Agreement is amended and restated in its entirety as follows:

The calculation of the actual advance rates, utilizing the formulae provided
in this definition of Borrowing Base, with respect to different categories
of Eligible Inventory, shall be set forth on Exhibit D, which shall
be subject to modification from time to time by Agent, including without
limitation on the Amendment No. 3 Closing Date (as set forth on Exhibit
D to Amendment No. 3) and thereafter following each appraisal conducted
by Agent.

          (e) Clauses (2) and (3) of the definition of “Eligible Accounts” appearing in Section 1.1 of
the Loan Agreement are each amended by adding the following proviso at the end thereof:

provided, however, that with respect to Accounts due HM
Lehigh, such Accounts shall not be considered ineligible due to the
provisions of this clause unless the applicable Accounts remain unpaid for
more than sixty (60) days after the due date specified in the original
invoice or for more than ninety (90) days after the invoice date if no due
date was specified;

          (f) Clause (8) of the definition of “Interest Period” appearing in Section 1.1 of the Loan
Agreement is amended by deleting the word “five (5)” and by inserting “seven (7)” in lieu thereof.

          (g) The definition of “Senior Debt” appearing in Section 1.1 of the Loan Agreement is amended
and restated in its entirety as follows:

“Senior Debt” shall mean Adjusted Indebtedness of Rocky on a Consolidated
Basis other than (a) Indebtedness under Term Loan B and (b) any unsecured
Indebtedness of Rocky on a Consolidated Basis.

5

 

          (h) The definition of the term “Senior Term Loans” appearing in Section 1.1 of the Loan
Agreement is deleted in its entirety.

          (i) The definition of “Total Leverage Ratio” appearing in Section 1.1 of the Loan Agreement is
amended and restated in its entirety as follows:

“Total Leverage Ratio” shall mean, for any period, the ratio of (x) Adjusted
Indebtedness of Rocky on a Consolidated Basis as of the end of such period
to (y) EBITDA for such period.

          (j) Section 2.1(B) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

(B) Term Loan A. On the Closing Date, each Lender extended a loan
to Borrower, equal to its Pro Rata Share of the Term Loan A Commitment
which, as of the Closing Date, was in the aggregate amount of $18,000,000.
The outstanding principal balance of Term Loan A as of the Amendment No. 3
Closing Date of this Agreement is $7,468,572.09, which sum remains due and
owing by Borrowers. Amounts borrowed under this Section 2.1(B) and repaid
may not be reborrowed. Commencing after the Amendment No. 3 Closing Date,
Borrower shall make principal payments in the amount of the applicable
Scheduled Installment of Term Loan A (or such lesser principal amount as
shall then be outstanding) on the dates set forth below:

(B-1) Term Loan C. Each Lender, severally, agrees to lend to
Borrower, on the Amendment No. 3 Closing Date, its Pro Rata Share of the
Term Loan C Commitment which is in the aggregate amount of $15,000,000.
Amounts borrowed under this Section 2.1(B-1) and repaid may not be
reborrowed. Borrower shall make principal payments in the amount of the
applicable Scheduled Installment of Term Loan C (or such lesser principal
amount as shall then be outstanding) on the dates set forth below:

“Scheduled Installment“ means, for each date set forth below, the amount set
forth opposite such date.

	 	 	 	 	 	 	 	 	 
	 	 	Scheduled	 	Scheduled
	 	 	Installment – Term	 	Installment – Term
	Date	 	Loan A	 	Loan C
	June 30, 2006
	 	$	1,500,000.00	 	 	 	 	 
	September 30, 2006
	 	$	1,500,000.00	 	 	$	247,381.01	 
	December 31, 2006
	 	$	1,500,000.00	 	 	$	247,381.01	 
	March 31, 2007
	 	$	1,500,000.00	 	 	$	247,381.01	 
	June 30, 2007
	 	$	1,468,572.09	 	 	$	278,808.92	 
	September 30, 2007
	 	 	 	 	 	$	1,747,381.01	 
	December 31, 2007
	 	 	 	 	 	$	1,747,381.01	 

6

 

	 	 	 	 	 	 	 	 	 
	 	 	Scheduled	 	Scheduled
	 	 	Installment – Term	 	Installment – Term
	Date	 	Loan A	 	Loan C
	March 31, 2008
	 	 	 	 	 	$	1,747,381.01	 
	June 30, 2008
	 	 	 	 	 	$	1,747,381.01	 
	September 30, 2008
	 	 	 	 	 	$	1,747,381.01	 
	December 31, 2008
	 	 	 	 	 	$	1,747,381.00	 
	March 31, 2009
	 	 	 	 	 	$	1,747,381.00	 
	June 30, 2009
	 	 	 	 	 	$	1,747,381.00	 

          (k) Section 2.4(B)(3) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

(3) Prepayments from Excess Cash Flow. Except with respect to the
Fiscal Year ending December 31, 2005, until repayment in full of Term Loan A
and Term Loan C, on or prior to June 30 of each year, the Borrowers shall
prepay the Obligations in an amount equal to 50% of Excess Cash Flow for
such prior Fiscal Year (“Cash Flow Prepayments”) calculated on the basis of
the audited financial statements for such Fiscal Year delivered to Agent
pursuant to Section 5.1(E)(a). All Cash Flow Prepayments shall be applied
to the Loans in accordance with Section 2.4(E). Concurrently with the
making of any such payment, Parent shall deliver to Agent and Lenders a
certificate of Parent’s chief executive officer or chief financial officer
demonstrating its calculation of the amount required to be paid. In the
event that any such financial statement is not so delivered, then a
calculation based upon estimated amounts shall be made by Agent upon which
calculation the Borrowers shall make the prepayment required by this Section
2.4(B)(3), subject to adjustment when the financial statement is delivered
to Agent as required hereby. The calculation made by Agent shall not be
deemed a waiver of any rights Agent or Lenders may have as a result of the
failure by Loan Parties to deliver such financial statement.

          (l) Section 2.4(C) of the Loan Agreement is hereby amended by inserting the words “or Term
Loan C” immediately following the words “Term Loan A” appearing therein.

          (m) Section 2.4(E) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

(E) Application of Prepayment Proceeds. Except as otherwise
provided therein, all prepayments described in Sections 2.4(B)(2) through
2.4(B)(7) shall first be applied in payment of Scheduled Installments of
Term Loan A and Term Loan C, on a pro rata basis, in the inverse order of
maturity, and at any time after Term Loan A and Term Loan C shall have been
repaid in full, such payments shall be applied (a) if, after giving effect
to any such payment (i) no Default or Event of Default has occurred which is
then continuing, and (ii) Undrawn Availability shall not be less than
$12,500,000, in prepayment and satisfaction of Term Loan B, including both
principal and interest accrued thereon and then (b) to

7

 

reduce the outstanding principal balance of the Revolving Loans but not as a
permanent reduction of the Revolving Loan Commitment; provided,
however, that (x) the application of any proceeds from the issuance
of proceeds of the issuance of securities described in Section 2.4(B)(4) (an
“Issuance”) shall be applied as follows: (i) first, in full prepayment and
satisfaction of Term Loan A, including both principal and interest accrued
thereon, (ii) second, in full prepayment and satisfaction of Term Loan C,
including both principal and interest accrued thereon, (iii) third in full
prepayment and satisfaction of Term Loan B, including both principal and
interest accrued thereon, and (iv) fourth, in the event any excess proceeds
remain following the payment of underwriting fees and other reasonable
professional fees associated with the Issuance, to pay any applicable
prepayment premiums associated with the prepayment of Term Loan A, Term Loan
B and Term Loan C and (v) fifth, to repay outstanding Revolving Loans, but
not as a permanent reduction of the Revolving Loan Commitment and (y) the
application of any proceeds of tax refunds described in Section 2.4(B)(5)
which consist of tax refunds anticipated to be received each year by the
applicable Borrower in its ordinary course of doing business, as reasonably
determined by Agent, shall be applied to reduce the outstanding principal
balance of the Revolving Loans but not as a permanent reduction of the
Revolving Loan Commitment. Considering each type of Loan being prepaid
separately, any such prepayment shall be applied first to Base Rate Loans of
the type required to be prepaid before application to LIBOR Loans of the
type required to be prepaid.

          (n) Section 2.7(A) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

(A) Grant of Liens in the Collateral. To secure the payment and
performance of the Obligations, including all renewals, extensions,
restructurings and refinancings of any or all of the Obligations, each Loan
Party hereby grants to Agent, for the benefit of Agent and Lenders, a
continuing security interest in, lien and mortgage in and to, right of
setoff against and collateral assignment of all of such Loan Party’s assets,
other than Excluded Property, in each case, whether now owned or existing or
hereafter acquired or arising and regardless of where located including,
without limitation, all: (1) Accounts; (2) Chattel Paper; (3) Commercial
Tort Claims, including those specified on Schedule 2.7(A); (4) Deposit
Accounts and cash and other monies and property of such Loan Party in the
possession or under the control of Agent, any Lender or any participant of
any Lender in the Loans; (5) Documents; (6) Equipment; (7) Fixtures; (8)
General Intangibles (including Intellectual Property); (9) Goods; (10)
Instruments; (11) Inventory; (12) Investment Property; (13) Letter-of-Credit
Rights and Supporting Obligations; (14) other Personal Property whether or
not subject to the UCC; and (15) Additional Mortgaged Property; together
with all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data

8

 

processing software that at any time evidence or contain information
relating to any of the property described above or are otherwise necessary
or helpful in the collection thereof or realization thereon; and Proceeds
and products of all or any of the property described above (all of the above
being collectively referred to as the “Collateral“).

          (o) Clause (g) of Section 5.1(E) of the Loan Agreement is hereby amended and restated in its
entirety as follows:

(g) Borrowing Base Certificate. On a weekly basis (or more
frequently if required by Agent), on Tuesday of each week (unless a
different day or more frequent days are required by Agent) a Borrowing Base
Certificate calculated as of the last Business Day of the immediately
preceding week; provided, however, that the information set
forth on each Borrowing Base Certificate with respect to Eligible Inventory
shall be updated on a monthly basis not later than thirty (30) days after
the end of each calendar month.

          (p) Section 5.2(R) of the Loan Agreement is hereby amended and restated in its entirety as
follows:

(R) Changes Relating to Note Purchase Documents; Prepayments. The
Loan Parties shall not change or amend the terms of the Note Purchase
Agreement or any Term Note B, if such amendment shall not be permitted in
accordance with the terms of the Intercreditor Agreement, as amended from
time to time, nor shall Loan Parties make any prepayments in any Fiscal Year
in respect of Term Note B except, (x) subsequent to the making of Cash Flow
Prepayments to Agent in accordance with Section 2.4(B)(3), (y) in aggregate
amounts equal to not more than 25% of Excess Cash Flow for the applicable
prior Fiscal Year and (z) in the aggregate amount equal to $15,000,000, on
or about the Amendment No. 3 Closing Date.

          (q) Section 5.3 of the Loan Agreement is hereby amended and restated in its entirety as
follows:

5.3. Financial Covenants. Parent covenants that, so long as any of
the Commitments hereunder shall be in effect and until indefeasible payment
in full, in cash of all Obligations and termination of all Lender Letters of
Credit, it shall maintain, on a consolidated basis, the following:

          (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:

9

 

	 	 	 	 	 
	Period	 	Fixed Charge 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:

10

 

	 	 	 	 	 
	Period	 	Minimum EBITDA
	Four Quarters ending June 30, 2006
	 	$	30,000,000	 
	Four Quarters ending September 30, 2006
	 	$	30,000,000	 
	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 Rocky
on a Consolidated Basis during any Fiscal Year set forth below, in the
aggregate together with all expenditures in respect of Capital 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:

11

 

	 	 	 	 	 
	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	 

          (F) Undrawn Availability. At all times Undrawn Availability
shall not be less than $5,000,000.

          (r) Section 9.4(A) of the Loan Agreement is hereby amended by inserting the words “or Term
Loan C” immediately following the words “Term Loan A” appearing in the last sentence thereof.

     3. Conditions of Effectiveness. This Amendment No. 3 shall become effective upon
satisfaction of the following conditions precedent:

          (a) Agent shall have received eight (8) copies of this Amendment No. 3 duly executed by each
Borrower and each Lender;

          (b) Agent shall have received, for the pro rata benefit of the Lenders based upon their
respective Term Loan C Commitments, the sum of $37,500 representing a one-quarter of one-percent
(0.25%) funding fee with respect to Term Loan C, which shall be fully earned on the Amendment No. 3
Closing Date and not subject to rebate, refund, proration and/or reduction for any reason;

          (c) Agent shall have received a Term Note C dated as of the Amendment No. 3 Closing Date for
each Lender, evidencing Borrowers’ Obligations with respect to each such Lender’s respective Term
Loan C Commitments as of such date, in the form annexed hereto as Exhibit A, properly
completed with respect to the applicable amount due each Lender;

          (d) Agent shall have received evidence, in form and substance acceptable to Agent, of a
$15,000,000 cash prepayment of Term Loan B;

          (e) Agent shall have received eight (8) copies of Amendment No. 1 to Intercreditor Agreement
in the form annexed hereto as Exhibit B dated as of the Amendment No. 3 Closing Date duly
executed by ACAS;

          (f) Agent shall have received a true and correct copy of an amendment to the Note Purchase
Agreement in form and substance satisfactory to Agent in all respects;

          (g) Undrawn Availability shall be not less than $6,000,000 after giving effect to all
transactions contemplated herein on the Amendment No. 3 Closing Date;

          (h) Agent shall have received Secretary’s Certificates from each Borrower authorizing the
execution, delivery and performance of Amendment No. 3 in form and substance acceptable to Agent;
and

12

 

          (i) Agent shall have received opinions of counsel from counsel to each Borrower in form and
substance satisfactory to Agent.

     4. Representations and Warranties. Each Borrower hereby represents and warrants as
follows:

          (a) This Amendment No. 3 and the Loan Agreement, as amended hereby, constitute legal, valid
and binding obligations of Borrowers and are enforceable against each Borrower in accordance with
their respective terms.

          (b) Upon the effectiveness of this Amendment No. 3, each Borrower hereby reaffirms all
covenants, representations and warranties made in the Loan 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 No. 3, except to the extent any such
representation or warranty expressly relates to an earlier date.

          (c) No Event of Default or Default has occurred and is continuing or would exist after giving
effect to this Amendment No. 3.

          (d) No Borrower has any defense, counterclaim or offset with respect to the Loan Agreement.

          (e) The issuance of this Amendment No. 3 is permitted pursuant to all applicable law and all
material agreements, documents and instruments to which any Loan Party is a party or by which any
of their respective properties or assets are bound.

     5. Effect on the Loan Agreement.

          (a) Upon the effectiveness of Section 2 hereof, each reference in the Loan Agreement to “this
Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference
to the Loan Agreement as amended hereby.

          (b) Except as specifically amended herein, the Loan 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 No. 3 shall not operate as a
waiver of any right, power or remedy of Agent or Lenders, nor constitute a waiver of any provision
of the Loan Agreement, or any other documents, instruments or agreements executed and/or delivered
under or in connection therewith.

     6. Release. Each Borrower hereby acknowledges and agrees that: (a) neither it nor any
of its Affiliates has any claim or cause of action against Agent or any Lender (or any of their
respective Affiliates, officers, directors, employees, attorneys, consultants or agents) and (b)
Agent and each Lender has heretofore properly performed and satisfied in a timely manner all of its
obligations to Borrowers under the Loan Agreement and the other Loan Documents. Notwithstanding
the foregoing, Agent and the Lenders wish (and Borrowers agree) to eliminate any possibility that
any past conditions, acts, omissions, events or circumstances would impair or

13

 

otherwise adversely affect any of the Agent’s and the Lenders’ rights, interests, security
and/or remedies under the Loan Agreement and the other Loan Documents. Accordingly, for and in
consideration of the agreements contained in this Amendment and other good and valuable
consideration, each Borrower (for itself and its Affiliates and the successors, assigns, heirs and
representatives of each of the foregoing) (collectively, the “Releasors”) does hereby
fully, finally, unconditionally and irrevocably release and forever discharge Agent and each Lender
and each of their respective Affiliates, officers, directors, employees, attorneys, consultants and
agents (collectively, the “Released Parties”) from any and all debts, claims, obligations,
damages, costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and causes of
action, in each case, whether known or unknown, contingent or fixed, direct or indirect, and of
whatever nature or description, and whether in law or in equity, under contract, tort, statute or
otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against
any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done on
or prior to the Amendment No. 3 Closing Date arising out of, connected with or related in any way
to this Amendment No. 3, the Loan Agreement or any other Loan Document, or any act, event or
transaction related or attendant thereto, or the agreements of Agent or any Lender contained
therein, or the possession, use, operation or control of any of the assets of any Borrower, or the
making of any Advance, or the management of such Advance or the Collateral.

     7. Governing Law. This Amendment No. 3 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 New York.

     8. Headings. Section headings in this Amendment No. 3 are included herein for
convenience of reference only and shall not constitute a part of this Amendment No. 3 for any other
purpose.

     9. Counterparts; Facsimile. This Amendment No. 3 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.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

14

 

Exhibit 10.1

IN WITNESS WHEREOF, this Amendment No. 3 has been duly executed as of the day and year first
written above.

	 	 	 	 	 	 	 
	 	 	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 Borrowers	 	 
	 
	 	 	 	 	 	 
	 	 	GMAC COMMERCIAL FINANCE LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:     /s/ Thomas Brent
 

	 	 
	 

	 	Name:
	 	Thomas Brent
	 	 
	 

	 	Title:
	 	Director	 	 
	 
	 	 	 	 	 	 
	 	 	Revolving Loan Commitment:	 	 
	 	 	$27,118,640.00	 	 
	 	 	Term Loan A Commitment:	 	 
	 	 	$2,025,375.18	 	 
	 	 	Term Loan C Commitment:	 	 
	 	 	$4,067,796.00	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:     /s/ William J. Wilson
 

	 	 
	 

	 	Name:
	 	William J. Wilson
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Revolving Loan Commitment:	 	 
	 	 	$21,186,440.00	 	 
	 	 	Term Loan A Commitment:	 	 
	 	 	$1,582,324.54	 	 
	 	 	Term Loan C Commitment:	 	 
	 	 	$3,177,966.00	 	 

1216024 — Signature Page to Amendment No. 3

 

 

	 	 	 	 	 	 	 
	 	 	CHARTER ONE BANK, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:     /s/ James G. Zamborsky
 

	 	 
	 

	 	Name:
	 	James G. Zamborsky
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Revolving Loan Commitment:	 	 
	 	 	$17,796.610.00	 	 
	 	 	Term Loan A Commitment:	 	 
	 	 	$1,329,152.65	 	 
	 	 	Term Loan C Commitment:	 	 
	 	 	$2,669,491.50	 	 
	 
	 	 	 	 	 	 
	 	 	PNC BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:     /s/ Peter Redington
 

	 	 
	 

	 	Name:
	 	Peter Redington
	 	 
	 

	 	Title:
	 	A-V.P.	 	 
	 
	 	 	 	 	 	 
	 	 	Revolving Loan Commitment:	 	 
	 	 	$17,796.610.00	 	 
	 	 	Term Loan A Commitment:	 	 
	 	 	$1,329,152.65	 	 
	 	 	Term Loan C Commitment:	 	 
	 	 	$2,669,491.50	 	 
	 
	 	 	 	 	 	 
	 	 	COMERICA BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:      /s/ Harold Dalton
 

	 	 
	 

	 	Name:
	 	Harold Dalton
	 	 
	 

	 	Title:
	 	 V.P.	 	 
	 
	 	 	 	 	 	 
	 	 	Revolving Loan Commitment:	 	 
	 	 	$16,101,700.00	 	 
	 	 	Term Loan A Commitment:	 	 
	 	 	$1,202,567.07	 	 
	 	 	Term Loan C Commitment:	 	 
	 	 	$2,415,255.00	 	 

1216024 — Signature Page to Amendment No. 3EX-10.2

 

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.

1

 

     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.

2

 

     (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

3

 

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:

4

 

	 	 	 	 	 
	 	 	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	 

5

 

	 	 	 	 	 
	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:

6

 

	 	 	 	 	 
	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.

7

 

     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.

8

 

     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,

*       
*        *

9

 

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]

 

 

	 	 	 	 	 	 	 
	 	 	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]

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