Document:

Exhibit 10.27

 

Execution Version

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

DATED AS OF MAY 25, 2007

 

between

 

ROCKY BRANDS, INC.,

LIFESTYLE FOOTWEAR, INC.,

ROCKY BRANDS WHOLESALE LLC

AND

ROCKY BRANDS RETAIL LLC

as Borrowers,

 

GMAC COMMERCIAL FINANCE LLC,

as Agent and as Lender, and

 

The Financial Institution(s) Listed

on the Signature Pages Hereof,

as Lenders

 

  

  

  

 

TABLE OF CONTENTS

   

	 	 	Page
	 	 	 
	
SECTION 1.

	
DEFINITIONS AND ACCOUNTING TERMS

	 	
3

	
1.1.

	
Certain Defined Terms

	 	
3

	
1.2.

	
UCC Defined Terms

	 	
29

	
1.3.

	
Accounting Terms

	 	
30

	
1.4.

	
Other Definitional Provisions

	 	
30

	
SECTION 2.

	
LOANS AND COLLATERAL

	 	
31

	
2.1.

	
Loans

	 	
31

	  	
(A)

	
Revolving Loan

	 	
31

	  	
(B)

	
[Reserved.]

	 	
31

	  	
(C)

	
[Reserved.]

	 	
31

	  	
(D)

	
Borrowing Mechanics

	 	
31

	  	
(E)

	
Notes

	 	
32

	  	
(F)

	
Letters of Credit

	 	
32

	  	  	
(1)

	
Maximum Amount

	 	
32

	  	  	
(2)

	
Reimbursement

	 	
32

	  	  	
(3)

	
Request for Letters of Credit

	 	
32

	  	
(G)

	
Other Letter of Credit Provisions

	 	
33

	  	  	
(1)

	
Obligations Absolute

	 	
33

	  	  	
(2)

	
Nature of Lender’s Duties

	 	
34

	  	  	
(3)

	
Liability

	 	
34

	  	
(H)

	
Availability of a Lender’s Pro Rata Share

	 	
34

	  	  	
(1)

	
Lender’s Amounts Available on a Funding Date

	 	
34

	  	  	
(2)

	
Lender’s Failure to Fund

	 	
34

	  	  	
(3)

	
Payments to a Defaulting Lender

	 	
35

	  	  	
(4)

	
Defaulting Lender’s Right to Vote

	 	
35

	
2.2.

	
Interest

	 	
35

	  	
(A)

	

Rate of Interest

	 	
35

	  	
(B)

	

Computation and Payment of Interest

	 	
36

	  	
(C)

	

Interest Laws

	 	
36

	  	
(D)

	

Conversion or Continuation

	 	
36

	
2.3.

	
Fees

	 	
37

	  	
(A)

	
Unused Line Fee

	 	
37

	  	
(B)

	
Letter of Credit Fees

	 	
38

	  	
(C)

	
Audit Fees

	 	
38

	  	
(D)

	
Other Fees and Expenses

	 	
38

	  	
(E)

	
Fee Letter

	 	
38

	
2.4.

	
Payments and Prepayments

	 	
38

	  	
(A)

	
Manner and Time of Payment

	 	
38

	  	
(B)

	
Mandatory Prepayments

	 	
38

	  	  	
(1)

	
Over Formula Advance

	 	
38

	  	  	
(2)

	
Prepayments from Proceeds of Asset Dispositions

	 	
39

	  	  	
(3)

	
Prepayments from Issuance of Securities

	 	
39

 

  

i

  

 

	  	  	
(4)

	
Prepayments from Tax Refunds

	 	
39

	  	  	
(5)

	
Change of Control

	 	
39

	  	
(C)

	
Voluntary Prepayments and Repayments

	 	
39

	  	
(D)

	
Payments on Business Days

	 	
40

	  	
(E)

	
Application of Prepayment Proceeds

	 	
40

	
2.5.

	
Term of this Agreement

	 	
40

	
2.6.

	
Statements

	 	
40

	
2.7.

	
Grant of Security Interest

	 	
41

	  	
(A)

	
Grant of Liens in the Collateral

	 	
41

	  	
(B)

	
Loan Parties Remain Liable

	 	
41

	
2.8.

	
Yield Protection

	 	
41

	  	
(A)

	
Capital Adequacy and Other Adjustments

	 	
41

	  	
(B)

	
Increased LIBOR Funding Costs

	 	
42

	
2.9.

	
Taxes

	
42

	  	
(A)

	
No Deductions

	 	
42

	  	
(B)

	
Changes in Tax Laws

	 	
42

	  	
(C)

	
Foreign Lenders

	 	
43

	
2.10.

	
Required Termination and Prepayment

	 	
44

	
2.11.

	
Optional Prepayment/Replacement of Lenders

	 	
44

	  	
(A)

	
Replacement of an Affected Lender

	 	
44

	  	
(B)

	
Prepayment of an Affected Lender

	 	
44

	
2.12.

	
Compensation

	 	
45

	
2.13.

	
Booking of LIBOR Loans

	 	
45

	
2.14.

	
Assumptions Concerning Funding of LIBOR Loans

	 	
45

	
2.15.

	
Endorsement; Insurance Claims

	 	
45

	
SECTION 3.

	
CONDITIONS TO LOANS

	 	
45

	  	
(A)

	
Closing Deliveries

	 	
46

	  	
(B)

	
Security Interests

	 	
46

	  	
(C)

	
Closing Date Availability

	 	
46

	  	
(D)

	
Representations and Warranties

	 	
46

	  	
(E)

	
Fees

	 	
46

	  	
(F)

	
No Default

	 	
46

	  	
(G)

	
Performance of Agreements

	 	
46

	  	
(H)

	
No Prohibition

	 	
46

	  	
(I)

	
No Litigation

	 	
46

	  	
(J)

	
Second Priority Senior Secured Note Investment

	 	
47

	  	
(K)

	
Refinancing Transactions

	 	
47

	
SECTION 4.

	
REPRESENTATIONS, WARRANTIES OF THE LOAN PARTIES

	 	
47

	
4.1.

	
Representations and Warranties of Loan Parties

	 	
47

	  	
(A)

	
Organization and Power

	 	
47

	  	
(B)

	
Principal Business

	 	
47

	  	
(C)

	
Financial Statements and Financial Projections

	 	
48

	  	  	
(1)

	
Financial Statements; Historical Statements

	 	
48

	  	  	
(2)

	
Pro Forma Balance Sheet

	 	
48

	  	  	
(3)

	
Financial Projections

	 	
48

	  	  	
(4)

	
Accuracy of Financial Statements

	 	
48

 

  

ii

  

 

	  	
(D)

	
Capitalization and Related Matters

	 	
49

	  	
(E)

	
Subsidiaries

	 	
49

	  	
(F)

	
Authorization; No Breach

	 	
49

	  	
(G)

	
Governmental Approvals

	 	
49

	  	
(H)

	
Enforceability

	 	
49

	  	
(I)

	
No Material Adverse Change

	 	
49

	  	
(J)

	
Litigation

	 	
50

	  	
(K)

	
Compliance with Laws

	 	
50

	  	
(L)

	
Environmental Protection

	 	
50

	  	
(M)

	
Legal Investments; Use of Proceeds

	 	
51

	  	
(N)

	
Taxes

	 	
51

	  	
(O)

	
Labor and Employment

	 	
51

	  	
(P)

	
Investment Company Act; Public Utility Holding Company Act

	 	
51

	  	
(Q)

	
Properties; Security Interests

	 	
51

	  	
(R)

	
Intellectual Property; Licenses

	 	
51

	  	
(S)

	
Solvency

	 	
52

	  	
(T)

	
Complete Disclosure

	 	
52

	  	
(U)

	
Side Agreements

	 	
52

	  	
(V)

	
Broker’s or Finder’s Commissions

	 	
53

	  	
(W)

	
Material Contracts

	 	
53

	  	
(X)

	
Foreign Assets Control Regulations, Etc.

	 	
53

	  	
(Y)

	
Parent SEC Reports

	 	
54

	  	
(Z)

	
Current Business Practices

	 	
54

	
4.2.

	
Absolute Reliance on the Representations and Warranties

	 	
54

	
SECTION 5.

	
COVENANTS

	 	
55

	
5.1.

	
Affirmative Covenants

	 	
55

	  	
(A)

	
Existence

	 	
55

	  	
(B)

	
Businesses and Properties; Compliance with Laws

	 	
55

	  	
(C)

	
Insurance

	 	
56

	  	
(D)

	
Obligations and Taxes

	 	
56

	  	
(E)

	
Financial Statements; Reports.  Parent will furnish to Agent:

	 	
57

	  	  	
(1)

	
Annual Financial Statements

	 	
57

	  	  	
(2)

	
Quarterly Financial Statements

	 	
57

	  	  	
(3)

	
Monthly Financial Statements

	 	
58

	  	  	
(4)

	
Reserved

	 	
58

	  	  	
(5)

	
Projections

	 	
58

	  	  	
(6)

	
Variances From Operating Budget

	 	
58

	  	  	
(7)

	
Borrowing Base Certificate

	 	
58

	  	  	
(8)

	
Collateral Reports

	 	
59

	  	  	
(9)

	
Additional Information

	 	
59

	  	  	
(10)

	
Reconciliation Statements

	 	
59

	  	  	
(11)

	
Inventory Location Statements

	 	
60

	  	
(F)

	
Litigation and Other Notices

	 	
60

	  	  	
(1)

	
Orders; Injunctions

	 	
60

	  	  	
(2)

	
Litigation

	 	
60

	  	
(G)

	
Environmental Matters

	 	
60

 

  

iii

  

 

	  	
(H)

	
Default; Material Occurrences

	 	
60

	  	
(I)

	
ERISA

	 	
61

	  	
(J)

	
Maintaining Records; Access to Premises and Inspections

	 	
61

	  	
(K)

	
Other Reports

	 	
61

	  	
(L)

	
Patriot Act Compliance

	 	
61

	  	
(M)

	
SEC Filings; Press Release

	 	
62

	
5.2.

	
Negative Covenants

	 	
62

	  	
(A)

	
Indebtedness

	 	
62

	  	
(B)

	
Negative Pledge; Liens

	 	
63

	  	
(C)

	
Contingent Liabilities

	 	
65

	  	
(D)

	
Intentionally Omitted

	 	
65

	  	
(E)

	
Mergers, etc.

	 	
65

	  	
(F)

	
Affiliate Transactions

	 	
66

	  	
(G)

	
Dividends

	 	
66

	  	
(H)

	
Advances, Investments and Loans

	 	
66

	  	
(I)

	
Use of Proceeds

	 	
68

	  	
(J)

	
Press Release; Public Offering Materials

	 	
68

	  	
(K)

	
Amendment of Charter Documents

	 	
68

	  	
(L)

	
Subsidiaries

	 	
68

	  	
(M)

	
Business

	 	
68

	  	
(N)

	
Fiscal Year; Accounting

	 	
68

	  	
(O)

	
Establishment of New or Changed Business Locations

	 	
69

	  	
(P)

	
Business Practices

	 	
69

	  	
(Q)

	
Sale or Discount of Accounts

	 	
69

	  	
(R)

	
Changes Relating to Note Purchase Documents; Prepayments

	 	
69

	
5.3.

	
Financial Covenants

	 	
69

	  	
(A)

	
Fixed Charge Coverage

	 	
70

	  	
(B)

	
Capital Expenditures

	 	
70

	  	
(C)

	
Undrawn Availability

	 	
70

	
SECTION 6.

	
ADDITIONAL REPRESENTATIONS AND COVENANTS

	 	
70

	
6.1.

	
Representations

	 	
70

	  	
(A)

	
Accounts Warranties and Covenants

	 	
71

	  	
(B)

	
Inventory Warranties and Covenants

	 	
71

	  	
(C)

	
Equipment Warranties and Covenants

	 	
72

	  	
(D)

	
Chattel Paper Warranties and Covenants

	 	
72

	  	
(E)

	
Instruments Warranties and Covenants

	 	
72

	  	
(F)

	
Investment Property Warranties and Covenants

	 	
72

	  	
(G)

	
Letters of Credit Warranties and Covenants

	 	
73

	  	
(H)

	
General Intangibles Warranties and Covenants

	 	
73

	  	
(I)

	
Intellectual Property Covenants

	 	
73

	  	
(J)

	
Commercial Tort Claims Warranties and Covenants

	 	
74

	  	
(K)

	
Deposit Accounts; Bank Accounts Warranties and Covenants

	 	
74

	  	
(L)

	
Bailees

	 	
74

	  	
(M)

	
Collateral Description; Use of Collateral

	 	
74

	  	
(N)

	
Collateral Filing Requirements; Collateral Records

	 	
75

	  	
(O)

	
Federal Claims

	 	
75

 

  

iv

  

 

	  	
(P)

	
Agent Authorized

	 	
75

	  	
(Q)

	
Names and Locations

	 	
75

	  	
(R)

	
Additional Mortgaged Property

	 	
75

	  	
(S)

	
Disclosure of Material Matters

	 	
76

	
6.2.

	
Access to Accountants and Management

	 	
76

	
6.3.

	
Amendment of Schedules

	 	
76

	
6.4.

	
Collection of Accounts and Payments

	 	
76

	
6.5.

	
Further Assurances

	 	
77

	
SECTION 7.

	
DEFAULT, RIGHTS AND REMEDIES

	 	
77

	
7.1.

	
Event of Default

	 	
77

	  	
(A)

	
Payment

	 	
77

	  	
(B)

	
Default in Other Agreements

	 	
77

	  	
(C)

	
Breach of Certain Provisions

	 	
77

	  	
(D)

	
Breach of Warranty

	 	
78

	  	
(E)

	
Other Defaults Under Loan Documents

	 	
78

	  	
(F)

	
Change in Control

	 	
78

	  	
(G)

	
Involuntary Bankruptcy; Appointment of Receiver, etc.

	 	
78

	  	
(H)

	
Voluntary Bankruptcy; Appointment of Receiver, etc.

	 	
78

	  	
(I)

	
Liens

	 	
78

	  	
(J)

	
Judgment and Attachments

	 	
78

	  	
(K)

	
Dissolution

	 	
79

	  	
(L)

	
Solvency

	 	
79

	  	
(M)

	
Injunction

	 	
79

	  	
(N)

	
Invalidity of Loan Documents

	 	
79

	  	
(O)

	
Failure of Security

	 	
79

	  	
(P)

	
Damage, Strike, Casualty

	 	
79

	  	
(Q)

	
Licenses and Permits

	 	
79

	  	
(R)

	
Forfeiture

	 	
79

	
7.2.

	
Suspension of Commitments

	 	
80

	
7.3.

	
Acceleration

	 	
80

	
7.4.

	
Remedies

	 	
80

	
7.5.

	
Appointment of Attorney-in-Fact

	 	
81

	
7.6.

	
Limitation on Duty of Agent and Lenders with Respect to Collateral

	 	
81

	
7.7.

	
Application of Proceeds

	 	
82

	
7.8.

	
License of Intellectual Property

	 	
82

	
7.9.

	
Waivers; Non-Exclusive Remedies

	 	
82

	
SECTION 8.

	
GUARANTY

	 	
83

	
SECTION 8A.

	
 BORROWING AGENCY

	 	
88

	
8A.1.

	
Borrowing Agency Provisions

	 	
88

	
8A.2.

	
Waiver of Subrogation

	 	
89

	
SECTION 9.

	
AGENT

	 	
89

	
9.1.

	
Agent

	 	
89

	  	
(A)

	
Appointment

	 	
89

	  	
(B)

	
Nature of Duties

	 	
90

	  	
(C)

	
Rights, Exculpation, Etc.

	 	
90

 

  

v

  

 

	  	
(D)

	
Reliance

	 	
91

	  	
(E)

	
Indemnification

	 	
91

	  	
(F)

	
GMAC CF Individually

	 	
91

	  	
(G)

	
Successor Agent

	 	
91

	  	  	
(1)

	
Resignation

	 	
91

	  	  	
(2)

	
Appointment of Successor

	 	
92

	  	  	
(3)

	
Successor Agent

	 	
92

	  	
(H)

	
Collateral Matters

	 	
92

	  	  	
(1)

	
Release of Collateral

	 	
92

	  	  	
(2)

	
Confirmation of Authority; Execution of Releases

	 	
92

	  	  	
(3)

	
Absence of Duty

	 	
93

	  	
(I)

	
Agency for Perfection

	 	
93

	  	
(J)

	
Exercise of Remedies

	 	
93

	
9.2.

	
Notice of Default

	 	
94

	
9.3.

	
Action by Agent

	 	
94

	
9.4.

	
Amendments, Waivers and Consents

	 	
94

	  	
(A)

	
Percentage of Lenders Required

	 	
94

	  	
(B)

	
Specific Purpose or Intent

	 	
94

	  	
(C)

	
Failure to Give Consent; Replacement of Non-Consenting Lender

	 	
95

	
9.5.

	
Assignments and Participations in Loans

	 	
95

	  	
(A)

	
Assignments

	 	
95

	  	
(B)

	
Participations

	 	
96

	  	
(C)

	
No Relief of Obligations; Cooperation; Ability to Make LIBOR Loans

	 	
96

	  	
(D)

	
Security Interests; Assignment to Affiliates

	 	
97

	  	
(E)

	
Recording of Assignments

	 	
97

	
9.6.

	
Set Off and Sharing of Payments

	 	
97

	
9.7.

	
Disbursement of Funds

	 	
98

	
9.8.

	
Settlements, Payments and Information

	 	
98

	  	
(A)

	
Revolving Advances and Payments; Fee Payments

	 	
98

	  	  	
(1)

	
Fluctuation of Revolving Loan Balance

	 	
98

	  	  	
(2)

	
Settlement Dates

	 	
98

	  	  	
(3)

	
Settlement Definitions

	 	
98

	  	  	
(4)

	
Settlement Payments

	 	
99

	  	
(B)

	
Return of Payments

	 	
99

	  	  	
(1)

	
Recovery after Non-Receipt of Expected Payment

	 	
99

	  	  	
(2)

	
Recovery of Returned Payment

	 	
100

	
9.9.

	
Discretionary Advances

	 	
100

	
9.10.

	
Other Agents

	 	
100

	
SECTION 10.

	
MISCELLANEOUS

	 	
100

	
10.1.

	
Expenses and Attorneys’ Fees

	 	
100

	
10.2.

	
Indemnity

	 	
101

	
10.3.

	
Notices

	 	
101

	
10.4.

	
Survival of Representations and Warranties and Certain Agreements

	 	
102

	
10.5.

	
Indulgence Not Waiver

	 	
102

	
10.6.

	
Marshaling; Payments Set Aside

	 	
103

	
10.7.

	
Entire Agreement

	 	
103

 

  

vi

  

 

	
10.8.

	
Severability

	 	
103

	
10.9.

	
Lenders’ Obligations Several; Independent Nature of Lenders’ Rights

	 	
103

	
10.10.

	
Headings

	 	
103

	
10.11.

	
APPLICABLE LAW

	 	
103

	
10.12.

	
Successors and Assigns

	 	
104

	
10.13.

	
No Fiduciary Relationship; No Duty; Limitation of Liabilities

	 	
104

	  	
(A)

	
No Fiduciary Relationship

	 	
104

	  	
(B)

	
No Duty

	 	
104

	  	
(C)

	
Limitation of Liabilities

	 	
104

	
10.14.

	
CONSENT TO JURISDICTION

	 	
104

	
10.15.

	
WAIVER OF JURY TRIAL

	 	
105

	
10.16.

	
Construction

	 	
105

	
10.17.

	
Counterparts; Effectiveness

	 	
105

	
10.18.

	
Confidentiality

	 	
105

	
10.19.

	
Publication.

	 	
106

  

vii

  

 

EXHIBITS

 

	
A.

	
Assignment and Acceptance Agreement

	
B.

	
Borrowing Base Certificate

	
C.

	
Compliance and Pricing Certificate

	
D.

	
Calculation of initial Advance Rates for Eligible Inventory

	
E.

	
Form of Notes

	
F.

	
Notice of Borrowing

 

SCHEDULES

 

	
Schedule 1.1

	
Excluded Property

	
Schedule 2.7(A)

	
Commercial Tort Claims

	
Schedule 3

	
List of Closing Documents

	
Schedule 4.1(A)

	
Organizational Schedule

	
Schedule 4.1(D)

	
Capitalization Schedule

	
Schedule 4.1(F)

	
Authorization; No Breach

	
Schedule 4.1(G)

	
Governmental Approvals

	
Schedule 4.1(J)

	
Litigation Schedule

	
Schedule 4.1(L)

	
Environmental Schedule

	
Schedule 4.1(R)

	
Intellectual Property Schedule

	
Schedule 4.1(W)

	
Material Contracts

	
Schedule 4.1(Q)

	
Properties Schedule

	
Schedule 4.1(U)

	
Side Agreements

	
Schedule 4.1(Z)

	
Current Business Practices

	
Schedule 5.2(A)

	
Permitted Indebtedness Schedule

	
Schedule 5.2(B)

	
Permitted Liens Schedule

	
Schedule 6.1(K)

	
Deposit Accounts

	
Schedule 6.1(L)

	
Bailees

	
Schedule 6.1(Q)

	
Names and Locations

 

  

viii

  

 

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

This AGREEMENT is dated as of May 25, 2007 and entered into among ROCKY BRANDS, 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, ROCKY BRANDS WHOLESALE LLC, a limited liability company organized and existing under the laws of the State of Delaware, and ROCKY BRANDS RETAIL LLC, a limited liability company organized and existing under the laws of the State of Delaware (the foregoing entities, jointly and severally, as the context requires, “Borrower” or “Borrowers”), the financial institution(s) listed on the signature pages hereof and
their respective successors and Eligible Assignees (each individually a “Lender” and collectively, “Lenders”), GMAC COMMERCIAL FINANCE LLC, a Delaware limited liability company (in its individual capacity, “GMAC CF”), as administrative agent and sole lead arranger for the Lenders (in such capacities, the “Agent”) and BANK OF AMERICA, N.A., as syndication agent (in such capacity, the “Syndication Agent”) and CHARTER ONE BANK, N.A., as documentation agent (in such capacity, the “Documentation Agent”).

 

WHEREAS, Parent, certain Borrowers and GMAC CF were parties to that certain Loan and Security Agreement (as amended, supplemented or otherwise modified prior to the date hereof, the “Original Financing Agreement”) dated as of January 6, 2005 (the “Initial Closing Date”) and related agreements and documents pursuant to which GMAC CF established a revolving loan and term loan credit facility in an amount of up to One Hundred and Eighteen Million Dollars ($118,000,000) in the aggregate, consisting of Revolving Loans of up to $100,000,000 and a Term Loan A in the original principal sum of $18,000,000 (“Term Loan A”); and

 

WHEREAS, to secure Borrower’s obligations under the Loan Documents, Borrower granted to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon substantially all of Borrower’s personal property and certain real property; and

 

WHEREAS, Borrower may from time to time have Subsidiaries that benefit from the credit facility described above (jointly and severally, as the context requires, “Guarantor”), and in consideration of such benefits will guaranty all of the obligations of Borrower to Agent and Lenders under the Loan Documents and grant to Agent, for the benefit of Agent and Lenders, a security interest in substantially all personal property and certain real property of Guarantor to secure such guaranty;

 

WHEREAS, contemporaneous with the entering into of the Original Financing Agreement, Parent and certain Borrowers entered into a Note Purchase Agreement with American Capital Financial Services, Inc. (“ACFS”), as agent for the purchasers thereunder and American Capital Strategies, Ltd. (“ACSL”) pursuant to which ACSL extended a Term Loan B in the original principal sum of $30,000,000 (“Term Loan B”) to certain Borrowers, and ACFS, as agent, entered into an Intercreditor Agreement with GMAC CF setting forth the relative priorities and other rights of the secured parties in the Collateral (the “Original Intercreditor Agreement”); and

 

  

  

  

 

WHEREAS, pursuant to certain Assignment and Acceptance Agreements by and among GMAC CF and other Lenders from time to time, a portion of the Commitment of GMAC CF was assigned to other Lenders and, as of the date hereof, the respective Commitment of each of the Lenders is as set forth on the signature page hereof; and

 

WHEREAS, pursuant to Amendment No. 3 to the Original Financing Agreement, dated as of June 28, 2006, Agent and Lenders increased the amount available under the credit facility by extending a Term Loan C in the original principal sum of $15,000,000 (“Term Loan C”); and

 

WHEREAS, Borrower has entered into a Note Purchase Agreement with Purchasers and Second Priority Agent pursuant to which Borrower will issue, and Purchasers will purchase, second priority secured notes in the aggregate original principal sum of $40,000,000 (“Second Priority Senior Secured Notes”), the proceeds of which will be utilized to satisfy in full all of the outstanding indebtedness under Term Loan A, Term Loan B and Term Loan C (the “Refinancing Transactions”), as well as pay certain fees and expenses incurred in connection with the Refinancing Transactions, and reduce the outstanding Revolving Loans with the balance of such proceeds; and

 

WHEREAS, in connection with the issuance of the New Notes, Borrower has requested Agent and Lenders to (a) enter into a new Intercreditor Agreement with Second Priority Agent, which agreement shall replace the Original Intercreditor Agreement and (b) amend and modify the Original Financing Agreement to reflect the prepayment Term Loan A, Term Loan B and Term Loan C, delete certain financial covenants, and more generally amend and restate the Original Financing Agreement; and

 

WHEREAS, under the terms and conditions hereof, Borrowers, Agent and Lenders have agreed to amend and restate the Original Financing Agreement, as provided herein.

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrower, Agent and Lenders agree as follows:

 

AMENDMENT AND RESTATEMENT

 

As of the date of this Amended and Restated Loan and Security Agreement among Parent, Borrower, Agent, Lenders, Syndication Agent and Documentation Agent, the terms, conditions, covenants, agreements, representations and warranties contained in the Original Financing Agreement shall be deemed amended and restated in their entirety as follows, and the Original Financing Agreement shall be consolidated with and into and superseded by this Amended and Restated Loan and Security Agreement without breaking continuity; provided, however, that nothing contained in this Amended and Restated Loan and Security Agreement shall impair, limit or affect the security interests heretofore granted, pledged and or assigned to
Agent as security for the Obligations under the Original Financing Agreement, and this Amended and Restated Loan and Security Agreement does not constitute a novation of the Original Financing Agreement or the security interests granted in connection therewith.

 

  

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SECTION 1.          DEFINITIONS AND ACCOUNTING TERMS

 

1.1.           Certain Defined Terms.

 

  The capitalized terms not otherwise defined in this Agreement shall have the meanings set forth below:

 

“ACFS” has the meaning assigned to that term in the fourth WHEREAS clause of this Agreement.

 

“ACSL” has the meaning assigned to that term in the fourth WHEREAS clause of this Agreement.

 

“Additional Mortgaged Property” means all real property owned by any Loan Party which is unencumbered by a mortgage or deed of trust in favor of a Person which provides financing (not in excess of the purchase price therefor) for the acquisition thereof by such Loan Party, and in which after the Closing Date, Agent requires a mortgage to secure the Obligations.

 

“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.

 

“Adjustment Date” has the meaning assigned to that term in the definition of Applicable Margin.

 

“Advance” shall mean an advance under the Revolving Loan.

 

“Affected Lender” has the meaning assigned to that term in Section 2.11.

 

“Affiliate” means any Person (other than Agent or any Lender): (a) directly or indirectly controlling, controlled by, or under common control with, any Loan Party; (b) directly or indirectly owning or holding ten percent (10%) or more of any equity interest in any Loan Party; (c) ten percent (10%) or more of whose stock or other equity interest having ordinary voting power for the election of directors or the power to direct or cause the direction of management, is directly or indirectly owned or held by any Loan Party; or (d) which has a senior officer who is also a senior officer of any Loan Party.  For purposes of this definition, “control” (including with correlative
meanings, the terms “controlling”, “controlled by” and “under common control with”) means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or other equity interest, or by contract or otherwise.

 

“Agent” means GMAC CF in its capacity as agent for the Lenders under the Loan Documents and any successor in such capacity appointed pursuant to Section 9.1(G).

 

“Agent’s Account” means JPMorgan Chase Bank, N.A., New York, New York.

 

  

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	ABA No.         021000021
	Account No.    3613249-84
	Account Name:          GMAC Commercial Finance
	Reference:      Rocky Shoes & Boots

 

“Agreement” means this Loan and Security Agreement as it may be amended, restated, supplemented or otherwise modified from time to time.

 

“Applicable Margin” for each type of Loan shall mean, commencing as of the Closing Date and continuing, until the First Adjustment Date (as hereafter defined), the applicable percentage specified below:

 

	
TYPE OF LOAN

	  	
APPLICABLE MARGIN FOR

DOMESTIC RATE LOANS

	  	
APPLICABLE MARGIN FOR

LIBOR RATE LOANS

	  	  	  	  	  
	
Revolving Advances

	
  

	
1.25%

	
  

	
2.75%

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, 2007 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”):

 

	
TOTAL LEVERAGE

RATIO

	  	
APPICATION MARGIN FOR

DOMESTIC RATE LOANS

	  	
APPLICATION MARGIN FOR

LIBOR RATE LOANS

	 	 	 	 	 
	
Greater than or equal

to 4.0 to 1.0

	  	
1.25%

	  	
2.75%

	
Greater than or equal to 3.0 to 1.0 but less than 4.0 to 1.0

	  	
1.00%

	  	
2.50%

	
Greater than or equal to 2.0 to 1.0 but less than 3.0 to 1.0

	  	
0.75%

	  	
2.25%

	
Less than 2.0 to 1.0

	
  

	
0.50%

	
  

	
2.00%

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.

 

  

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“Asset Disposition” means the disposition, whether by sale, lease, transfer, loss, damage, destruction, condemnation or otherwise, of any or all of the assets of any Loan Party other than the sale or other disposition of Inventory, sale or transfer of property of any Loan Party to any other Loan Party (to the extent not otherwise prohibited by this Agreement) and assignments and licenses of Intellectual Property, all of the foregoing in the ordinary course of business, and subleases of leases or leases of property not then being utilized in the Business.

 

“Assignment and Acceptance Agreement” shall mean an Assignment and Acceptance Agreement substantially in the form of Exhibit A.

 

“Bank Letter of Credit” means each Letter of Credit issued by a bank acceptable to and approved by Agent for the account of a Borrower and supported by guaranty or risk participation agreement issued by GMAC CF or Agent.

 

“Base Rate” means a variable rate of interest per annum equal to the higher of (a) the rate of interest from time to time published by the Board of Governors of the Federal Reserve System as the “Bank Prime Loan” rate in Federal Reserve Statistical Release H.15(519) entitled “Selected Interest Rates” or any successor publication of the Federal Reserve System reporting the Bank Prime Loan rate or its equivalent, or (b) the Federal Funds Effective Rate plus fifty (50) basis points.  The statistical release generally sets forth a Bank Prime Loan rate for each Business Day.  The applicable Bank Prime Loan rate for any date not set forth shall be the rate set
forth for the last preceding date.  In the event the Board of Governors of the Federal Reserve System ceases to publish a Bank Prime Loan rate or its equivalent, the term “Base Rate” shall mean a variable rate of interest per annum equal to the highest of the “prime rate”, “reference rate”, “base rate”, or other similar rate announced from time to time by any of the three largest banks (based on combined capital and surplus) headquartered in New York, New York (with the understanding that any such rate may merely be a reference rate and may not necessarily represent the lowest or best rate actually charged to any customer by any such bank).

 

“Base Rate Loans” means Loans bearing interest at rates determined by reference to the Base Rate.

 

“Blocked Account Agreement” has the meaning assigned to that term in Section 6.4.

 

“Blocked Accounts” has the meaning assigned to that term in Section 6.4.

 

“Borrower” has the meaning assigned to that term in the introductory paragraph of this Agreement.

 

“Borrower’s Accountants” means the independent certified public accountants selected by Borrower and its Subsidiaries and reasonably acceptable to Agent.

 

  

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“Borrowing Base” means, as of any date of determination, an amount equal to the sum of (a) up to 85% of Eligible Accounts less the Dilution Reserve, plus (b) the lesser of (i) $50,000,000, or (ii) the sum of (A) the lesser of (1) up to 40% of Eligible Inventory consisting of raw materials or (2) 85% times the Net Orderly Liquidation Percentage of such Eligible Inventory, plus (B) the lesser of (1) up to 75% of Eligible Inventory consisting of finished goods or (2) 85% times the Net Orderly Liquidation Percentage of such Eligible Inventory, plus (C) the lesser of (1) up to 75% of Eligible Inventory consisting of eligible retail Inventory or (2) 85% times the Net Orderly Liquidation Percentage of such
Eligible Inventory and less, in each case, such reserves as Agent in its reasonable credit judgment may elect to establish; provided, however, that Advances with respect to Eligible Inventory shall also not exceed, at any time, (x) $8,000,000 with respect to Eligible In-Transit Inventory and (y) $2,000,000 with respect to finished goods located in Puerto Rico.  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 following each appraisal conducted by Agent.

 

“Borrowing Agent” means Parent.

 

“Borrowing Base Certificate” means a certificate and schedule duly executed by an officer of Borrowing Agent appropriately completed and in substantially the form of Exhibit B.

 

“Business” shall mean the principal business of the Loan Parties as set forth in Section 4.1(B) herein and as such shall continue to be conducted following the consummation of the Transactions.

 

“Business Day” means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the States of New York or Michigan or is a day on which banking institutions located in any such state are closed, or for the purposes of LIBOR Loans only, a London Banking Day.

 

“Capital Expenditures” means, with respect to any Person, all expenditures for, or contracts for expenditures with respect to any fixed assets or improvements, or for replacements, substitutions or additions thereto, that, in accordance with GAAP, either would be required to be capitalized on the balance sheet of such Person, or would be classified and accounted for as capital expenditures on a statement of cash flows of such Person.

 

“Capital Lease” means any lease of any property (whether real, personal or mixed) that, in conformity with GAAP, should be accounted for as a capital lease.

 

“Cash Interest Expense” means, without duplication, for any period, for Rocky on a Consolidated Basis:  interest expenses deducted in the determination of net income (excluding (a) the amortization of fees and costs with respect to the Initial Transactions which have been capitalized as transaction costs in accordance with the provisions of Section 1.3; (b) any non-cash charges and/or amortization of other capitalized fees and costs subsequent to the Initial Transactions and (c) interest paid in kind).

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9604, et seq.), as amended, and rules, regulations and standards, promulgated thereunder.

 

“Certificate of Exemption” has the meaning assigned to that term in Section 2.9(C).

 

  

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“Change of Control” shall mean the occurrence of any of the following:

 

(a)         any transaction or series of related transactions resulting in the sale or issuance of securities or any rights to securities of Parent by Parent representing in the aggregate more than fifty percent (50%) of its issued and outstanding securities entitled to vote for the election of directors of Parent, or any transaction or series of related transactions resulting in the sale, transfer, assignment or other conveyance or disposition of any securities or any rights to securities of Parent by any holder or holders thereof representing in the aggregate more than fifty percent (50%) of the issued and outstanding securities entitled to vote for the election of
directors of Parent;

 

(b)         a merger, consolidation, reorganization, recapitalization or share exchange (whether or not Parent is the surviving and continuing corporation) in which the stockholders of Parent immediately prior to such transaction own, as a result of such transaction, less than fifty percent (50%) of the securities entitled to vote for the election of directors of the resulting corporation or less than fifty percent (50%) of the capital stock of the resulting corporation;

 

(c)         a sale, transfer or other disposition of all or substantially all of the assets of Parent and its Subsidiaries, on a consolidated basis; and

 

(d)         any sale or issuance or series of sales or issuances of the Common Stock or any other voting security (or security convertible into, exchangeable for, or exercisable for any other voting security) of Parent within a twelve (12) month period that results in a transfer of more than fifty percent (50%) of the issued and outstanding shares of voting stock of Parent or a transfer of more than fifty percent (50%) of the voting power of Parent.

 

“Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other Governmental Authority, domestic or foreign (including, without limitation, the PBGC or any environmental agency or
superfund), upon the Collateral, the Loan Parties or any of their Affiliates.

 

“Charter Documents” shall mean, with respect to any Person, the Articles of Incorporation, Certificate of Incorporation, certificate of limited partnership, certificate of limited liability company, charter or analogous organic instrument filed with the appropriate Governmental Authorities of such Person, as applicable, including all amendments and supplements thereto.

 

“Closing Date” means May 25, 2007.

 

“Collateral” has the meaning assigned to that term in Section 2.7(A).

 

“Collecting Banks” has the meaning assigned to that term in Section 6.4.

 

  

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

 

“Common Stock” shall mean the common stock, without par value, of Parent.

 

“Compliance and Pricing Certificate” means a certificate duly executed by the chief executive officer or chief financial officer of Borrower appropriately completed and in substantially the form of Exhibit C.

 

“Condition” shall mean any condition that results in or otherwise relates to any Environmental Liabilities.

 

“Conformed Bills of Lading” means original clean on-board negotiable bills of lading with respect to any shipment of Inventory which (a) are issued by the carrier of the Inventory described in such bills of lading or by a freight forwarder acting on behalf of such carrier; (b) consign such Inventory to Agent (either directly or by means of endorsement); (c) are accompanied by all commercial invoices describing such Inventory and all necessary certificates of inspection, origin and insurance; (d) adequately describe such Inventory; (e) contain language expressly incorporating The International Convention for the Unification of Certain Rules Relating to Bills of Lading for the Carriage of Goods by Sea
or The Carriage of Goods by Sea Act; (f) contain standard industry or trade association delivery terms (along with a reference to the particular publication in which said terms are defined); and (g) do not contain any reservation of title clause.

 

“Control” means “control” as defined in the UCC with respect to a particular item of Collateral.

 

“Controlled Group” shall mean the “controlled group of corporations” as that term is defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which the Loan Parties are a part from time to time.

 

“Copyright Security Agreement” means any Copyright Security Agreement executed and delivered by a Loan Party to Agent, as the same may be amended and in effect from time to time.

 

“Copyrights” means, collectively, all of the following (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations and copyright applications, including those listed in the schedules to any Copyright Security Agreement; (b) all renewals of any of the foregoing; (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including damages or payments for past, present or future infringements of any of the foregoing; (d) the right to sue for past, present and future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing
throughout the world.

 

“Daily Interest Amount” has the meaning assigned to that term in Section 9.8(A)(3).

 

  

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“Daily Interest Rate” has the meaning assigned to that term in Section 9.8(A)(3).

 

“Daily Loan Balance” has the meaning assigned to that term in Section 9.8(A)(3).

 

“Default” means a condition, act or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition, act or event were not cured or removed within any applicable grace or cure period.

 

“Default Rate” has the meaning assigned to that term in Section 2.2(A).

 

“Defaulted Amount” means, with respect to any Lender at any time, any amount required to be paid hereunder or under any other Loan Document by such Lender to the Agent or any other Lender which has not been so paid.

 

“Defaulting Lender” means, at any time, any Lender that owes a Defaulted Amount.

 

“Dilution Reserve” means, as of any date of determination, a reserve for the amount by which the total dilution of Accounts exceeds five percent (5%); with dilution referring to all actual and reasonably anticipated offsets to Accounts, including, without limitation, customer payment and/or volume discounts, write-offs, credit memoranda, returns and allowances, and billing errors.  The Dilution Reserve shall be adjusted after each field examination audit of the Collateral conducted by Agent or any authorized representative designated by Agent.

 

“Documentation Agent” has the meaning assigned to that term in the Recitals section of this Agreement.

 

“EBITDA” means, for any period, without duplication, the total of the following for Rocky on a Consolidated Basis, each calculated for such period: (a) net income determined in accordance with GAAP; plus, to the extent included in the calculation of net income, (b) the sum of (i) income and franchise taxes paid or accrued; (ii) interest expenses, net of interest income, paid or accrued; (iii) amortization and depreciation, (iv) Non-Recurring Charges and (v) any non-cash intellectual property impairment charges, non-cash stock compensation expense charges and other non-cash charges (excluding accruals for cash expenses made in the ordinary course of business); less, to the extent included in the
calculation of net income, and (c) the sum of (i) the income of any Person (other than wholly-owned Subsidiaries of Parent) in which Parent or a wholly-owned Subsidiary of Parent has an ownership interest except to the extent such income is received by Parent or such wholly-owned Subsidiary in a cash distribution during such period; (ii) gains or losses from sales or other dispositions of assets (other than Inventory in the normal course of business); and (iii) extraordinary gains.

 

“Eligible Accounts” means, as at any date of determination, the aggregate of all Accounts that Agent, in its reasonable credit judgment, deems to be eligible for borrowing purposes.  Without limiting the generality of the foregoing, the Agent may determine that the following of Borrower’s Accounts are not Eligible Accounts:

 

  

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(1)           Accounts which do not consist of accounts receivable or contract receivables, each owed to and owned by any Borrower arising or resulting from the sale of goods or the rendering of services by such Borrower;

 

(2)           With respect to Accounts having payment terms of net forty-five (45) days or less, any such Account which remains unpaid more than ninety (90) days from the date on which the original invoice rendered in connection with such Account was issued; provided, however, that with respect to Accounts due Rocky Brands Retail LLC, 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;

 

(3)           With respect to Accounts having payment terms in excess of forty-five (45) days, (a) any such Account which remains unpaid more than thirty (30) days past due or (b) any such Account which remains unpaid more than one hundred and eighty (180) days from the date on which the original invoice rendered in connection with such Account was issued; provided, however, that with respect to Accounts due Rocky Brands Retail LLC, 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;

 

(4)           Accounts which are otherwise eligible with respect to which the Person obligated on such Account is owed a credit by Borrower, but only to the extent of such credit;

 

(5)           Accounts due from a Person whose principal place of business is located outside the US unless such Account is backed by a Letter of Credit, in form and substance acceptable to Agent and issued or confirmed by a bank that is organized under the laws of the US or a State thereof, that is acceptable to Agent; provided that such Letter of Credit has been delivered to Agent as additional Collateral;

 

(6)           Accounts due from a Person which Agent has notified Borrower does not have a satisfactory credit standing;

 

(7)           Accounts with respect to which the Account Debtor or the Person obligated with respect thereto is the US, any state or any municipality, or any department, agency or instrumentality thereof, unless Borrower has, with respect to such Account, complied with the Federal Assignment of Claims Act of 1940 as amended (31 U.S.C. Section 3727 et seq.) or any applicable statute or municipal ordinance of similar purpose and effect;

 

(8)           Accounts with respect to which the Person obligated is an Affiliate of Borrower or a director, officer, agent, stockholder, member or employee of Borrower or any of its Affiliates;

 

(9)           Accounts due from a Person if more than fifty percent (50%) of the aggregate amount of Accounts of such Person are not eligible under the criteria specified in clauses (2) or (3) above;

 

  

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(10)         Accounts with respect to which there is any unresolved dispute with the respective Account Debtor or the Person obligated on such Account (but only to the extent of such dispute);

 

(11)         Accounts evidenced by an Instrument or Chattel Paper not in the possession of Agent, for the benefit of itself and Lenders;

 

(12)         Accounts with respect to which Agent, on behalf of itself and Lenders, does not have a valid, first priority and fully perfected security interest;

 

(13)         Accounts subject to any Lien except those in favor of Agent, for the benefit of itself and Lenders, and Second Priority Agent;

 

(14)         Accounts with respect to which the Account Debtor or the Person obligated on the Account is the debtor under any bankruptcy or other insolvency proceeding;

 

(15)         Accounts due from a Person to the extent that such Accounts exceed in the aggregate an amount equal to twenty percent (20%) of the aggregate of all Accounts at said date;

 

(16)         Accounts with respect to which the obligation to pay is conditional or subject to a repurchase obligation or right to return or with respect to which the goods or services giving rise to such Accounts have not been delivered (or performed, as applicable) and accepted by the Account Debtor or the Person obligated on such Account, including progress billings, bill and hold sales, guarantied sales, sale or return transactions, sales on approval or consignments;

 

(17)         Accounts with respect to which the Account Debtor or the Person obligated on the Account is located in New Jersey, or any other state denying out of state creditors access to its courts in the absence of a Notice of Business Activities Report or other similar filing, unless the respective Borrower has either qualified as a foreign entity authorized to transact business in such state or has filed a Notice of Business Activities Report or similar filing with the applicable state agency for the then current year;

 

(18)         Accounts with respect to which the Account Debtor or the Person obligated on Account is a creditor of any Borrower; provided, however, that any such Account shall only be ineligible as to that portion of such Account which is less than or equal to the amount owed by such Borrower to such Person.

 

“Eligible Assignee” shall mean (a) a commercial bank organized under the laws of the US, or any state thereof, and having a combined capital and surplus of at least $250,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the US; (c) any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one
of its businesses, including but not limited to, insurance companies, mutual funds and lease financing companies, (d) a Related Fund, and (e) a Person that is primarily engaged in the business of lending that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; provided, however, that no Affiliate of any Loan Party shall be an Eligible Assignee.

 

  

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“Eligible In-Transit Inventory” means, at any date of determination, the value (determined at the lower of cost or market on a first-in, first-out basis) of all Inventory owned by any Borrower that does not qualify as Eligible Inventory solely because it is in transit to Borrower or an agent or contractor of or for Borrower and that Agent, in its reasonable credit judgment, deems to be eligible for borrowing purposes.  Without limiting the generality of the foregoing, Agent may determine that any of the following is not Eligible In-Transit Inventory: (1) Inventory that is not in transit to a location identified pursuant to Section 6.1(Q) or Section 5.2(O) or such location is not a vendor or
consignee location, or the location of a warehouseman, bailee, processor or similar third party that has not executed a satisfactory waiver of interest satisfactory to Agent); (2) title to such Inventory has not passed to Borrower; (3) Inventory which is not insured against types of loss, damage, hazards and risks, and in amounts, satisfactory to Agent; (4) such Inventory is not subject to a Conformed Bill of Lading; (5) each original of the applicable Conformed Bill of Lading is not in the possession of Agent or a Person acting as Agent’s agent for purposes of perfecting Agent’s security interest, on behalf of itself and Lenders, in such Conformed Bill of Lading; and (6) Inventory which is not finished goods Inventory.

 

“Eligible Inventory” means, as at any date of determination, the value (determined at the lower of cost or market on a first-in, first-out basis) of all Inventory owned by Borrower and located in the US (including Puerto Rico) that Agent, in its reasonable credit judgment, deems to be eligible for borrowing purposes.  Without limiting the generality of the foregoing, the Agent may determine that any of the following is not Eligible Inventory:  (1) work-in-process that is not readily marketable in its current form; (2) Inventory which Agent determines, is unacceptable for borrowing purposes due to age, quality, type, category and/or quantity; (3) packaging, shipping materials or
supplies consumed in Borrower’s business; (4) Inventory with respect to which Agent, on behalf of itself and Lenders, does not have a valid, first priority and fully perfected security interest; (5) Inventory with respect to which there exists any Lien in favor of any Person other than Agent, on behalf of itself and Lenders and Second Priority Agent; (6) Inventory produced in violation of the Fair Labor Standards Act and subject to the so-called “hot goods” provisions contained in Title 29 U.S.C. Section 215 (a)(i) or any replacement statute; (7) Inventory located at any location other than those identified pursuant to Section 6.1(Q) or Section 5.2(O); (8) Inventory located at a vendor’s location or with a consignee which is not subject to a bailee’s waiver or other agreement satisfactory to Agent; (9) Inventory located with a warehouseman, bailee,
processor or similar third party, unless such Person has executed a waiver of interest satisfactory to Agent; and (10) unless otherwise agreed to by Agent, Inventory in any location leased by Borrower for which Agent has not received a Landlord Waiver.

 

“Environmental Laws” shall mean any Laws that address, are related to or are otherwise concerned with environmental, health or safety issues, including any Laws relating to any emissions, releases or discharges of Pollutants into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling, clean-up or control of Pollutants or any exposure or impact on worker health and safety.

 

  

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“Environmental Liabilities” shall mean any obligations or Liabilities (including any claims, suits or other assertions of obligations or Liabilities) that are:

 

(a)           related to environmental, health or safety issues (including on-site or off-site contamination by Pollutants of surface or subsurface soil or water, and occupational safety and health); and

 

(b)           based upon or related to (i) any provision of past, present or future US or foreign Environmental Law (including CERCLA and RCRA), common law or treaty of which the US is a signatory, or (ii) any judgment, order, writ, decree, permit or injunction imposed by any court, administrative agency, tribunal or otherwise.

 

The term “Environmental Liabilities” includes:  (i) fines, penalties, judgments, awards, settlements, losses, damages (including foreseeable and unforeseeable consequential damages), costs, fees (including reasonable attorneys’ and consultants’ fees), expenses and disbursements; (ii) defense and other responses to any administrative or judicial action (including claims, notice letters, complaints, and other assertions of liability); and (iii) financial responsibility for (1) cleanup costs and injunctive relief, including any Removal, Remedial or other Response actions, and natural resource damages, and (2) any other compliance or remedial measures.

 

“EPA” shall mean the United States Environmental Protection Agency and any governmental body or agency succeeding to the functions thereof.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may from time to time be amended, and the rules and regulations of any Governmental Agency or authority, as from time to time in effect, promulgated thereunder.

 

“ERISA Affiliate” means any Loan Party and any Person who is a member of a group which is under common control with any Loan Party, who together with any Loan Party is treated as a single employer within the meaning of Section 414 of the IRC.

 

“Event of Default” has the meaning assigned to that term in Section 7.1.

 

“Excess Interest” has the meaning assigned to that term in Section 2.2(C).

 

“Excluded Property” means any of the following:

 

  

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(a)           any lease (including any fixtures or improvements on the property subject to the lease), license, contract, property right or agreement to which any Loan Party is a party or any of its rights or interests thereunder if and only for so long as the grant of a security interest under this Agreement therein shall constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to the UCC of any relevant jurisdiction (including, without limitation, under Sections 9-406, 9-407, 9-408 or 9-409 thereof) or any
other applicable law or principles of equity); provided that notwithstanding the foregoing (i) no personal property lease, license, contract, property right or agreement or any right or interest thereunder, in each instance, existing on the Closing Date shall constitute Excluded Property unless described on Schedule 1.1, (ii) no Account or money or other amounts due or to become due to any Loan Party under or with respect to any such lease, license, contract, property right or agreement or right or interest thereunder (other than (A) any such property subject to an assignment of rents containing a restriction of the type described above or (B) property described in clauses (d) or (e) of this definition) shall constitute Excluded Property, (iii) no item of tangible property owned by any Loan Party shall constitute Excluded Property unless such item is described in clauses (b), (c) or (f)
of this definition, (iv) such lease, license, contract, property right or agreement or right or interest thereunder shall be Excluded Property only to the extent and for so long as the consequences specified above shall result and shall cease to be Excluded Property and shall become subject to the security interest granted under this Agreement, immediately and automatically, at such time as such consequences shall no longer result (including, without limitation and in any event, in the case of any item of tangible property which is the subject of purchase money Indebtedness or other financing permitted hereunder when such financing has been paid in full) and (v) Lenders will be deemed to have, and at all times from and after the date hereof to have had, a security interest in the proceeds of any such Excluded Property to the extent that proceeds of such Excluded Property have come into
the possession of any Lender or otherwise constitute a portion of the Collateral;

 

(b)           any Equipment that is subject to a purchase money security interest or Capital Lease, as described on Schedule 1.1, if and only for so long as the grant of a security interest under this Agreement therein shall constitute or result in a breach, termination or default under any applicable purchase money security agreement or Capital Lease agreement (other than to the extent that any such term would be rendered ineffective pursuant to the UCC of any relevant jurisdiction (including, without limitation, under Sections 9-406, 9-407, 9-408 or 9-409 thereof) or any other applicable law or principles of equity);

 

(c)           any real estate owned or leased by the Borrower or its Subsidiaries other than any and all Additional Mortgaged Property;

 

(d)           any life insurance or life insurance policy in which the Borrower or a Subsidiary has an interest;

 

(e)           loans or advances to any officer, director, employee or agent permitted by this Agreement; and

 

(f)           Inventory not located in the US, Canada or Puerto Rico, and Intellectual Property issued under the Laws of a country other than the US or any state thereof.

 

“Federal Funds Effective Rate” means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the immediately following Business Day by the Board of Governors of the Federal Reserve System as the Federal Funds Rate or Federal Reserve Statistical Release H.15(519) entitled “Selected Interest Rates” or any successor publication of the Federal Reserve System reporting the Federal Funds Effective Rate or its equivalent or, if such rate is not published for any Business Day, the average of the quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.

 

  

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“Financial Projections” shall have the meaning assigned to such term in Section 4.1(C)(3).

 

“Financial Statements” shall have the meaning assigned to such term in Section 4.1(C)(1).

 

“Fiscal Year” means each twelve (12) month period ending on the last day of December in each year, as modified in accordance with Section 5.2(N).

 

“Fixed Charge Coverage Ratio” shall mean, for any period, the ratio of EBITDA less Capital Expenditures of Rocky on a Consolidated Basis during such period to Fixed Charges during such period.

 

“Fixed Charges” shall mean, for any period, and each calculated for such period (without duplication) with respect to Rocky on a Consolidated Basis, the sum of (a) Cash Interest Expense; (b) scheduled payments of principal with respect to all Indebtedness (other than (i) the Revolving Loan and the Letters of Credit and (ii) payments made with respect to Term Loan A and Term Loan C); (c) any provision for income or franchise taxes included in the determination of net income, excluding any provision for deferred taxes; and (d) payment of deferred taxes relating to income and franchise taxes accrued in any prior period.

 

“Foreign Lender” has the meaning assigned to that term in Section 2.9(C).

 

“Foreign Subsidiary” means, with respect to any Person, a Subsidiary of such Person, which Subsidiary is not incorporated or otherwise organized under the laws of a State of the US.

 

“Funding Date” means the date of each funding of a Loan or issuance of a Lender Letter of Credit.

 

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination.

 

“GMAC CF” has the meaning assigned to that term in the introductory paragraph of this Agreement.

 

“GMAC Transactions” shall mean the incurrence of the Obligations by the Loan Parties and the advancing of the Loans and issuance of Lender Letters of Credit, all as contemplated by this Agreement and the Loan Documents.

 

  

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“Governmental Authorities” shall mean any federal, state or municipal court or other governmental department, commission, board, bureau, agency or instrumentality, governmental or quasi-governmental, domestic or foreign.

 

“Guarantor” has the meaning assigned to that term in the third WHEREAS clause of this Agreement.

 

“Guaranty” shall mean any guaranty of the payment or performance of any Indebtedness or other obligation and any other arrangement whereby credit is extended to one obligor on the basis of any promise of another Person, whether that promise is expressed in terms of an obligation to pay the Indebtedness of such obligor, or to purchase an obligation owed by such obligor, or to purchase goods and services from such obligor pursuant to a take-or-pay contract, or to maintain the capital, working capital, solvency or general financial condition of such obligor, whether or not any such arrangement is reflected on the balance sheet of such other Person, firm or corporation, or referred to in a footnote
thereto, but shall not include (i) endorsements of items for collection in the ordinary course of business and (ii) obligations, warranties and indemnities incurred in the ordinary course of Business in connection with the sale of Inventory and not in respect of Indebtedness of any Person.  For the purpose of all computations made under this Agreement, the amount of a Guaranty in respect of any obligation shall be deemed to be equal to the maximum aggregate amount of such obligation or, if the Guaranty is limited to less than the full amount of such obligation, the maximum aggregate potential liability under the terms of the Guaranty.

 

“Indebtedness” shall mean, for any Person at the time of any determination, without duplication, all obligations, contingent or otherwise, of such Person that, in accordance with GAAP, should be classified upon the balance sheet of such Person as indebtedness, but in any event including:  (i) all obligations for borrowed money, (ii) all obligations arising from installment purchases of property or representing the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current Liabilities incurred in the ordinary course of business on terms customary in the trade), (iii)
all obligations evidenced by notes, bonds, debentures, acceptances or instruments, or arising out of letters of credit or bankers’ acceptances issued for such Person’s account, (iv) all obligations, whether or not assumed, secured by any Lien or payable out of the proceeds or production from any property or assets now or hereafter owned or acquired by such Person, (v) all obligations for which such Person is obligated pursuant to a Guaranty which are classified under GAAP as indebtedness, (vi) the capitalized portion of lease obligations under Capitalized Leases, (vii) all obligations for which such Person is obligated pursuant to any Interest Rate Protection Agreements or derivative agreements or arrangements, (viii) all factoring arrangements and (ix) all obligations of such Person upon which interest charges are customarily paid or accrued.

 

“Indemnified Liabilities” has the meaning assigned to that term in Section 10.2.

 

“Indemnities” has the meaning assigned to that term in Section 10.2.

 

“Initial Closing Date” has the meaning ascribed to that term in the first WHEREAS clause of this Agreement.

 

  

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“Initial Transactions” means the incurrence of the Obligations by the Loan Parties under the Original Financing Agreement, the incurrence by the Loan Parties of Term Loan B and the consummation of the acquisition by Parent of the equity interests of Borrower and the related transactions occurring on or about the Initial Closing Date.

 

“Intangible Assets” means all intangible assets (determined in conformity with GAAP) including, without limitation, goodwill, Intellectual Property, Software, licenses, organizational costs, deferred amounts, covenants not to compete, unearned income and restricted funds.

 

“Intellectual Property” means, collectively, all: Copyrights, Patents and Trademarks.

 

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Closing Date to be executed by Second Priority Agent, in a form acceptable to Agent.

 

“Interest Period” means, in connection with each LIBOR Loan, an interest period which Borrowing Agent shall elect to be applicable to such Loan, which Interest Period shall be either (a) a one (1), two (2), three (3), or six (6) month period or (b) a one (1), two (2) or three (3) week period; provided in each case that:

 

(1)           the initial Interest Period for any LIBOR Loan shall commence on the Funding Date of such Loan;

 

(2)           in the case of successive Interest Periods, each successive Interest Period shall commence on the day on which the immediately preceding Interest Period expires;

 

(3)           if an Interest Period expiration date is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period expiration date is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on  the immediately preceding Business Day;

 

(4)          any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to part (5) below, end on the last Business Day of a calendar month;

 

(5)           no Interest Period shall extend beyond the Termination Date;

 

(6)           no Interest Period may extend beyond a scheduled principal payment date of any Loan, unless the aggregate principal amount of such Loan that is a Base Rate Loan or that has Interest Periods expiring on or before such scheduled principal payment date equals or exceeds the principal amount required to be paid on such Loan on such scheduled principal payment date; and

 

(7)           there shall be no more than five (5) Interest Periods relating to LIBOR Loans outstanding at any time.

 

  

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“Interest Rate” has the meaning assigned to that term in Section 2.2(A).

 

“Interest Rate Protection Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or similar agreement or arrangement designed to protect Loan Parties against fluctuations in interest rates.

 

“Interest Ratio” has the meaning assigned to that term in Section 9.8(A)(3)(d).

 

“Interest Settlement Date” has the meaning assigned to that term in Section 9.8(A)(4).

 

“Investment” as applied to any Person shall mean the amount paid or agreed to be paid or loaned, advanced or contributed to other Persons, and in any event shall include, without limitation, (i) any direct or indirect purchase or other acquisition of any notes, obligations, instruments, stock, securities or ownership interest (including partnership interests and joint venture interests) and (ii) any capital contribution to any other Person

 

“IRC” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.

 

“Issuing Lender” has the meaning assigned to that term in Section 2.1(F)(2).

 

“Landlord Waiver” shall mean a letter in form and substance acceptable to the Agent and executed by a landlord in respect of Personal Property of the Loan Parties located at any leased premises of the Loan Parties pursuant to which such landlord, among other things, waives or subordinates to Agent any Lien such landlord may have in respect of such Personal Property, acknowledges the Liens of the Agent, and permits the Agent access to and use of such premises.

 

“Laws” shall mean all US and foreign federal, state or local statutes, laws, rules, regulations, ordinances, codes, policies, rules of common law, and the like, now or hereafter in effect, including any judicial or administrative interpretations thereof, and any judicial or administrative orders, consents, decrees or judgments

 

“Lender” or “Lenders” has the meaning assigned to that term in the Recitals section of this agreement.

 

“Lender Letter of Credit” has the meaning assigned to that term in Section 2.1(E).

 

“Letter of Credit Liability” means, all reimbursement and other liabilities of Loan Parties or any of their respective Subsidiaries with respect to each Lender Letter of Credit, whether contingent or otherwise, including: (a) the amount available to be drawn or which may become available to be drawn; (b) all amounts which have been paid or made available by any Lender issuing a Lender Letter of Credit or any bank issuing a Bank Letter of Credit to the extent not reimbursed; and (c) all unpaid interest, fees and expenses related thereto.

 

  

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“Letter of Credit Reserve” means, at any time, an amount equal to (a) the aggregate amount of Letter of Credit Liability with respect to all Lender Letters of Credit outstanding at such time plus, without duplication, (b) the aggregate amount theretofore paid by Agent or any Lender under Lender Letters of Credit and not debited to the Revolving Loan pursuant to Section 2.1(E)(2) or otherwise reimbursed by Borrowers.

 

“Letter of Non-Exemption” has the meaning assigned to that term in Section 2.9(C).

 

“Liabilities” shall have the meaning given that term in accordance with GAAP and shall include, without limitation, Indebtedness.

 

“LIBOR” means, for each Interest Period (provided that in the case of any Interest Period having a duration of one (1), two (2) or three (3) weeks, the Interest Period with respect thereto for purposes of this  definition of LIBOR shall mean one (1) month), a rate per annum equal to:

 

(1)           the offered rate for deposits in U.S. dollars in an amount comparable to the amount of the applicable Loan in the London interbank market for the relevant Interest Period which is published by the British Bankers’ Association and currently appears on the Dow Jones Telerate Page 3750 as of 11:00 a.m. (London time) on the day which is two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, that if such a rate ceases to be available to Agent on that or any other source from the British Bankers’ Association, LIBOR shall be equal to a rate per annum equal to
the average rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which Agent determines that U.S. dollars in an amount comparable to the amount of the applicable Loans are being offered to prime banks at approximately 11:00 a.m. (London time) on the day which is two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period for settlement in immediately available funds by leading banks in the London interbank market selected by Agent; divided by

 

(2)           a number equal to one (1.0) minus the maximum reserve percentages (expressed as a decimal fraction) (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) which are required to be maintained by any Lender by the Board of Governors of the Federal Reserve System; such rate to be rounded upwards,  if
necessary, to the nearest 1/100 of 1%.  LIBOR shall be adjusted automatically on and as of the effective date of any change in any such reserve percentage.

 

“LIBOR Loans” means at any time that portion of the Loans bearing interest at rates determined by reference to LIBOR.

 

“Lien” means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest.

 

  

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“Loan” or “Loans” means an advance or advances under the Revolving Loan Commitment.

 

“Loan Documents” means this Agreement and all other documents, instruments and agreements executed by or on behalf of any Loan Party and delivered concurrently herewith or at any time hereafter to or for Agent or any Lender in connection with the Loans, any Lender Letter of Credit, and any other transaction contemplated by this Agreement, all as amended, restated, supplemented or modified from time to time.

 

“Loan Party” means each of Borrower and Guarantor and each Subsidiary of Borrower which is or becomes a Borrower or Guarantor pursuant to the terms of this Agreement or pursuant to any Loan Document.

 

“Loan Year” means each period of twelve (12) consecutive months commencing on the Closing Date and on each anniversary thereof.

 

“London Banking Day”  means any day on which dealings in deposits in U.S. dollars are transacted in the London Interbank market.

 

“Manage” and “Management” shall mean generation, production, handling, distribution, processing, use, storage, treatment, operation, transportation, recycling, reuse and/or disposal, as those terms are defined in CERCLA, RCRA and other Environmental Laws (including as those terms are further defined, construed, or otherwise used in rules, regulations, standards, guidelines and publications issued pursuant to, or otherwise in implementation of, such Environmental Laws).

 

“Material Adverse Change” shall mean any change that has a Material Adverse Effect.

 

“Material Adverse Effect” means a material adverse effect upon (a) the business, operations, prospects, properties, assets, liabilities or condition (financial or otherwise) of the Loan Parties  taken as a whole or (b) the ability of Parent, or the Loan Parties taken as a whole, to perform its (or their) obligations under any Loan Document to which it is (or they are) a party or (c) the ability of Agent or any Lender to enforce or collect any of the Obligations.

 

“Material Contracts” shall have the meaning assigned to such term in Section 4.1(W).

 

“Material License Agreements” shall mean and include each of the following: (a) Trademark License Agreement between Georgia Boot LLC, as Licensee and W.L Gore & Associates (“Gore”), W.L. Gore & Associates Gmbh, and Japan Gore-Tex, Inc., collectively as Licensor, dated May 20, 2002, (b) Trademark License Agreement between Rocky, as Licensee and Gore, as Licensor, dated July 11, 2001 and (c) Certified Manufacturer Agreement between Rocky and Gore dated July 11, 2001.

 

“Maximum Rate” has the meaning assigned to that term in Section 2.2(C).

 

  

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“Maximum Revolving Loan Amount” means, as of any date of determination, the lesser of (a) the aggregate of the Revolving Loan Commitments of all Lenders less the sum of the Letter of Credit Reserve and (b) the Borrowing Base less the sum of the Letter of Credit Reserve.

 

“Mortgage” means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents delivered by any Loan Party to Agent, on behalf of Agent and Lenders, with respect to Additional Mortgaged Property, all in form and substance satisfactory to Agent.

 

“Multiemployer Plan” shall mean a multiemployer plan (within the meaning of Section 3(37) of ERISA) that is maintained for the benefit of the employees of the Loan Parties or any member of the Controlled Group or an ERISA Affiliate.

 

“Net Cash Proceeds” shall mean the proceeds, received in cash or cash equivalents, of any applicable Asset Disposition, minus (i) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by such obligated party in connection therewith (in each such case, paid to non-Affiliates), (ii) transfer taxes, (iii) amounts payable to holders of Liens (to the extent such Liens constitute Permitted Liens hereunder and such Liens are senior to the Liens of Agent and the Lenders), if any, on the property subject to the Asset Disposition to the extent the documentation governing such senior Liens required such payment to such holders
upon such Asset Disposition and (iv) an appropriate reserve for income taxes in accordance with GAAP in connection therewith.

 

“Net Orderly Liquidation Percentage” means, with respect to any class of Inventory of a Borrower at any time, the ratio (expressed as a percentage) computed by dividing (i) (x) if such percentage is being determined on the Closing Date or on any date prior to the delivery of an appraisal of such Borrower’s Inventory (containing such class of Inventory) conducted pursuant to Section 2.3(C), the net recovery value of such class of Inventory of such Borrower (which in any event shall give effect to all costs and expenses of liquidation), as set forth in such appraisal of such Borrower’s Inventory (containing such class of Inventory) delivered to Agent prior to the Closing Date and (y) if such
percentage is being determined on or after the date of the first delivery of an appraisal of such Borrower’s Inventory (containing such class of Inventory) conducted pursuant to Section 2.3(C), the net recovery value of such class of Inventory of such Borrower (which in any event shall give effect to all costs and expenses of liquidation), as set forth in the appraisal of such Borrower’s Inventory (containing such class of Inventory) most recently delivered to Agent pursuant to Section 2.3(C) by (ii) the value of such class of Inventory of such Borrower, valued at net book value, as set forth in the corresponding appraisal.

 

“Non-Recurring Charges” shall mean the sum of the aggregate amount of fees, expenses, financing costs and other expenses incurred in connection (a) with the Initial Transactions, to the extent paid substantially contemporaneously with, on or about the Initial Closing Date, and (b) with the Transactions, to the extent paid substantially contemporaneously with, on or about the Closing Date.

 

  

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“Note” or “Notes” means the Revolving Notes.

 

“Note Purchase Agreement” means the Note Purchase Agreement dated as of May 25, 2007 by and among Borrowers, Second Priority Agent and certain Purchasers named therein pursuant to which each Second Priority Senior Secured Note shall have been issued, as amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions of this Agreement and the Intercreditor Agreement.

 

“Note Purchase Documents” means the Note Purchase Agreement, the Security Documents (as defined therein) and each Second Priority Senior Secured Note.

 

“Notice of Borrowing” means a notice duly executed by an authorized representative of Borrower appropriately completed and in the form of Exhibit F.

 

“Obligations” means all Liabilities and other obligations of every nature of each Loan Party from time to time owed to Agent or to any Lender under the Loan Documents (whether incurred before or after the Termination Date) including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing pursuant to any Loan Document, due or payable including, without limitation, all interest, fees, cost and expenses accrued or incurred after the filing of any petition under any bankruptcy or insolvency law,
together with all Liabilities of any Loan Party to any Lender under any Interest Rate Protection Agreements, and under any banking and cash management arrangements and agreements with any Lender.

 

“Organizational Schedule” has the meaning assigned to that term in Section 4.1(A).

 

“Original Financing Agreement” has the meaning assigned to that term in the first WHEREAS clause of this Agreement.

 

“Original Intercreditor Agreement” has the meaning assigned to this term in the WHEREAS clause of this Agreement.

 

“Parent” has the meaning assigned to that term in the introductory paragraph of this Agreement.

 

“Parent SEC Reports” has the meaning assigned to that term in Section 4.1(Y).

 

“Patent Security Agreement” means any Patent Security Agreement executed and delivered by each Loan Party to Agent, as the same may be amended and in effect from time to time.

 

“Patents” means collectively all of the following: (a) all patents and patent applications including, without limitation, those listed on any schedule to any Patent Security Agreement and the inventions and improvements described and claimed therein, and patentable inventions; (b) the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing; (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing; (d) the right to sue for past, present and
future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the world.

 

  

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“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Title IV of ERISA, or any other Governmental Authority succeeding to the functions thereof.

 

“Permitted Acquisition” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement by which the Parent or any Subsidiary thereof (a) acquires any ongoing business or all or a substantially all of the operations or assets of any Person, any division thereof or operating unit thereof, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or in a series of transactions) at least a majority (in number of votes) of the equity interests of a Person which have ordinary voting power for the election of directors or constitute a majority (by percentage of voting power) of the outstanding equity
interests of another Person (any of the foregoing an “Acquisition”); provided that:

 

(i)           such Acquisition is made at a time when, after giving effect to such Acquisition and the related financing thereof, no Default or Event of Default exists;

 

(ii)          after giving effect to such Acquisition, (A) no Default or Event of Default exists or would occur based on a 12 month pro forma good faith prospective calculation of the covenants set forth in Sections 5.3(A) and 5.3(B) (excluding any Acquisition as a Capital Expenditure), giving effect to the EBITDA of the acquired operations or Person and any higher levels of Indebtedness associated with the acquired operations or Person and (B) Undrawn Availability is not less than $15,000,000;

 

(iii)          the acquired Person or post-merger Person (other than any Foreign Subsidiary), if such Acquisition is of equity interests, guarantees all Obligations under this Agreement and grants to Agent, for the benefit of Agent and Lenders, a first Lien upon all of the tangible and intangible personal property of such acquired Person, whether then owned or thereafter acquired or arising, subject only to Liens permitted by this Agreement;

 

(iv)         if the Acquisition is of equity interests, such Borrower or Guarantor acquiring such equity interests grants to Agent, for the benefit of Agent and Lenders, a Lien upon all such equity interests (or not less than 65% of such equity interests if a Foreign Subsidiary) pursuant to a pledge agreement or joinder in form and substance satisfactory to Agent;

 

  

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(v)          any acquired assets become subject to Liens in favor of Agent, for the benefit of Agent and Lenders, pursuant to such agreements, instruments and documents as shall be satisfactory in form and substance to Agent, and are free and clear of all other Liens except as permitted under this Agreement;

 

(vi)         Parent delivers written notice to Agent of its or such Subsidiary’s intention to make such Acquisition no less than 15 Business Days prior to the proposed closing date for such Acquisition, together with a certificate that sets forth (A) information regarding liabilities and obligations with respect to tax, ERISA and environmental matters, if any, to be incurred by such Person (including, without limitation, the acquired Person in the event of an Acquisition of equity interests) as a result of such Acquisition, any indemnities afforded under the terms of such Acquisition and the scope and results of any tax, ERISA or environmental review undertaken
by the Parent or such Subsidiary in connection therewith and (B) any available financial statements of (1) such acquired Person if such Acquisition of equity interests, and (2) operating unit or division if such Acquisition is of assets;

 

(vii)        on the date of the closing of the Permitted Acquisition and after giving effect thereto and to any Loans made to finance such Permitted Acquisition, all representations and warranties under the Loan Documents shall be true and correct in all material respects as though made on and as of such date, except to the extent that any such representation or warranty expressly relates to an earlier date;

 

(viii)       such Acquisition is of or with a Person assembling and selling specialty footwear, apparel and accessories or an industry related thereto;

 

(ix)          such Acquisition shall have been approved by the board of directors of such Person (or similar governing body if such Person is not a corporation) that is the subject of such Acquisition, and such Person shall not have announced that it will oppose such Acquisition or shall not have commenced any action which alleges that such Acquisition will violate any applicable law;

 

(x)           the consideration for the Permitted Acquisition shall have been paid only (A) in cash, (B) in deferred installment payments, provided that any indebtedness incurred in connection therewith is permitted pursuant to Section 5.2(A) or equity interests of the Parent or such Subsidiary making such Acquisition, and the purchase price for any such Acquisition, including (1) the original stated purchase price therefor, plus (2) the reasonably estimated transaction costs associated with such Acquisition, plus (3) the amount of Indebtedness for borrowed money assumed (directly or indirectly) as a result thereof, plus (4) all amounts payable of any nature whatsoever, including cost of goods sold, to the seller or any Affiliate of such seller following such Acquisition, shall not exceed the amount set forth in Section 5.2(E) (excluding any portion of any of the foregoing payable in common equity of the Parent or any Subsidiary thereof); and

 

  

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(xi)          on the funding date for any borrowing of any Loans for the purpose of consummating a Permitted Acquisition, Agent shall have received a certificate from an officer of Parent (A) certifying that (1) such Acquisition meets the requirements of the definition of Permitted Acquisition and (2) the liabilities assumed with respect to such Permitted Acquisition do not or are not reasonably likely to have a Material Adverse Effect, and (B) attaching calculations of financial covenants set forth in Section 5.3, copies of the definitive purchase agreement or most recent draft of the same, and
copies of all material, business and financial information relating to the business purchased in the Permitted Acquisition, all as Agent may reasonably request.

 

“Permitted Investment” shall have the meaning assigned to such term in Section 5.2(H).

 

“Permitted Liens” shall have the meaning assigned to such term in Section 5.2(B).

 

“Permitted Sale/Leaseback” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, on terms and conditions reasonably satisfactory to Agent, by which the Parent or any Subsidiary thereof (a) sells any of its real property and Equipment which is subject to, as of the Closing Date, a Lien in favor of General Electric Capital Business Asset Funding Corporation and, substantially simultaneously therewith, (b) leases such real property (or a portion thereof) from the purchaser thereof, or an Affiliate of such purchaser, or otherwise enters into a contractual relationship pursuant to which such purchaser (or an Affiliate thereof) provides logistics
services for one of more Borrowers at such property; provided that:

 

(i)           such sale/leaseback is made at a time when, after giving effect thereto, no Default or Event of Default exists;

 

(ii)           the entire balance of the mortgage secured by such real property is paid in full from the sale proceeds thereof;

 

(iii)         any Net Cash Proceeds thereof are remitted to Agent in accordance with Section 2.4(B)(2); and

 

(iv)         any non-cash proceeds thereof consisting of any notes or other evidence of Indebtedness are delivered to Agent as additional Collateral, together with such endorsements and/or instruments of assignment as Agent may reasonable request in connection therewith.

 

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

 

“Personal Property” shall mean, with respect to any Loan Party, now owned or hereafter acquired goods, merchandise, machinery, Equipment, furniture, fixtures, Inventory and other personal property, wherever located, of any kind, nature or description, and all documents of title or other documents representing them.

 

  

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“Plan” shall mean any employee benefit plan (within the meaning of Section 3(3) of ERISA) established or maintained by any of the Loan Parties or any member of the Controlled Group or any ERISA Affiliate or any such Plan to which any Loan Party or any ERISA Affiliate or member of the Controlled Group is required to contribute on behalf of any of its employees.

 

“Pollutant” shall include any “hazardous substance” and any “pollutant or contaminant” as those terms are defined in CERCLA; any “hazardous waste” as that term is defined in RCRA; and any “hazardous material” as that term is defined in the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), as amended (including as those terms are further defined, construed, or otherwise adopted in rules, regulations or standards, promulgated pursuant to, or otherwise in implementation of, said Environmental Laws); and including without limitation any petroleum product or byproduct, solvent, flammable or explosive material, radioactive material,
asbestos, polychlorinated biphenyls (“PCBs”), dioxins, dibenzofurans, heavy metals, and radon gas; and including any other substance or material that is reasonably determined to present a threat, hazard or risk to human health or the environment.

 

“Pro Forma Balance Sheet” shall have the meaning assigned to such term in Section 4.1(C)(iii).

 

“Pro Rata Share” means the percentage obtained by dividing (i) the particular Commitment of a Lender by (ii) all such Commitments of all Lenders, as such percentage may be adjusted by assignments permitted pursuant to Section 9.5; provided, however, if any Commitment is terminated pursuant to the terms hereof, then “Pro Rata Share” means the percentage obtained by dividing (x) the aggregate amount of such Lender’s outstanding Loans related to such Commitment by (y) the aggregate amount of all outstanding Loans related to such Commitment.

 

“Properties and Facilities” shall have the meaning assigned to such term in Section 4.1(Q).

 

“Proprietary Rights” shall mean all right, title, and interest in the following intellectual property, including both statutory and common law rights: (i) copyrights in published and unpublished works, and all applications, registrations and renewals relating thereto; (ii) registered or unregistered trademarks, service marks, domain names, logos, trade dress and other source or business identifiers, and the goodwill associated therewith; (iii) patents, patent applications, and other patent or industrial property rights in any country; and (iv) trade secrets, confidential or proprietary information, inventions, ideas, designs, concepts, compilations of information, methods, techniques, procedures,
processes, and know-how, whether or not patentable patents, trademarks, trade names, service marks, copyrights, inventions, production methods, licenses, formulas, know-how and trade secrets, regardless of whether such are registered with any Governmental Authorities, including applications therefor.

 

  

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“RCRA” shall mean the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), as amended, and all rules, regulations, standards, guidelines, and publications issued thereunder.

 

“Register” has the meaning assigned to that term in Section 9.5(E).

 

“Related Fund” shall mean, with respect to any Lender, a fund or other investment vehicle that invests in commercial loans and is managed by such Lender or by the same investment advisor that manages such Lender or by an Affiliate of such investment advisor.

 

“Release” shall mean any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, depositing, or disposing into the indoor or outdoor environment, or into or out of any property, including the abandonment or discarding of barrels, containers, and other closed receptacles containing any Pollutant.

 

“Removal,” “Remedial” and “Response” actions shall include the types of activities “covered” by CERCLA, RCRA, and other comparable Environmental Laws, and whether the activities are those that might be taken by a government entity or those that a government entity or any other person might seek to require of waste generators, handlers, distributors, processors, users, storers, treaters, owners, operators, transporters, recyclers, reusers, disposers, or other persons under “removal,” “remedial,” or other “response” actions.

 

“Reportable Event” shall mean any of the events that are reportable under Section 4043 of ERISA and the regulations promulgated thereunder, other than an occurrence for which the thirty (30) day notice contained in 29 C.F.R. § 2615.3(a) is waived.

 

“Replacement Lender” has the meaning assigned to that term in Section 2.11(A).

 

“Requisite Lenders” means Lenders, (other than a Defaulting Lender), holding or being responsible for more than 50% of the sum of the (a) outstanding Loans, (b) Letter of Credit Reserve and (c) unutilized Commitments of all Lenders which are not Defaulting Lenders.

 

“Revolving Advance” means each advance made by Lender(s) under the Revolving Loan Commitment pursuant to Section 2.1 (A).

 

“Revolving Loan” means the outstanding balance of all Revolving Advances and any amounts added to the principal balance of the Revolving Loan pursuant to this Agreement.

 

“Revolving Loan Commitment” means (a) as to any Lender, the commitment of such Lender to make Revolving Advances pursuant to Section 2.1 (A), and to purchase participations in Lender Letters of Credit pursuant to Section 2.1(E) in the aggregate amount set forth on the signature page of this Agreement opposite such Lender’s signature or in the most recent Assignment and Acceptance Agreement, if any, executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving Advances and to purchase participations in Lender Letters of Credit.  Any reduction of the aggregate Revolving Loan Commitment pursuant to Section 2.4(C) shall reduce each
Lender’s respective Revolving Loan Commitment on a Pro Rata Basis.

 

  

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“Revolving Note” means each promissory note of Borrower in form and substance reasonably acceptable to Agent, issued to evidence the Revolving Loan Commitments.

 

“Rocky on a Consolidated Basis” means the consolidation, in accordance with GAAP, of the financial accounts of Parent and its Subsidiaries.

 

“S&P” shall have the meaning assigned to such term in Section 5.2(H)(ii).

 

“SEC” shall mean the Securities and Exchange Commission and any governmental body or agency succeeding to the functions thereof.

 

“Second Priority Agent” means Laminar Direct Capital L.P. in its capacity as agent for the holders of the Second Priority Senior Secured Notes.

 

“Second Priority Senior Secured Loans” means the advances made to Borrower by the purchasers of the Senior Priority Senior Secured Notes pursuant to the Note Purchase Agreement.

 

“Second Priority Senior Secured Notes” has the meaning assigned to that term in the fourth WHEREAS clause of this Agreement.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Settlement Date” has the meaning assigned to that term in Section 9.8(A)(2).

 

“Subsidiary” means, with respect to any Person, any corporation, association or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other subsidiaries of that Person or a combination thereof.

 

“Syndication Agent” has the meaning assigned to that term in the Recitals section of this Agreement.

 

“Tax Liabilities” has the meaning assigned to that term in Section 2.9(A).

 

“Term Loan A” has the meaning assigned to that term in the first WHEREAS clause of this Agreement.

 

“Term Loan B” has the meaning assigned to that term in the fourth WHEREAS clause of this Agreement.

 

“Term Loan C” has the meaning assigned to that term in the sixth WHEREAS clause of this Agreement.

 

“Termination Date” has the meaning assigned to that term in Section 2.5.

 

  

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“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.

 

“Trademark Security Agreement” means each Trademark Security Agreement executed and delivered by a Loan Party to Agent, as the same may be amended and in effect from time to time.

 

“Trademarks” means collectively all of the following: (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith including, without limitation, those listed on any schedule to any Trademark Security Agreement; (b) all renewals thereof; (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing including damages and payments for past, present
and future infringements of any of the foregoing; (d) the right to sue for past, present and future infringements of any of the foregoing; (e) all rights corresponding to any of the foregoing throughout the world; and (f) all goodwill associated with and symbolized by any of the foregoing.

 

“Transactions” shall mean, in the aggregate, the GMAC Transactions, the incurrence of the obligations by the Loan Parties of the Second Priority Senior Secured Loans, all as contemplated by this Agreement, the Note Purchase Documents and related documents.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, to the extent the law of any other state or other jurisdiction applies to the attachment, perfection, priority or enforcement of any Lien granted to Agent in any of the Collateral, “UCC” means the Uniform Commercial Code as in effect in such other state or jurisdiction for purposes of the provisions hereof relating to such attachment, perfection, priority or enforcement of a Lien in such Collateral.  To the extent this Agreement defines the term “Collateral” by reference to terms used in the UCC, each of such terms shall have the broadest meaning given
to such terms under the UCC as in effect in any state or other jurisdiction.

 

“Undrawn Availability” means an amount at any particular date equal to (a) the Maximum Revolving Loan Amount less (b) the sum of (i) the Revolving Loan, plus (ii) all amounts due Borrower’s trade creditors with respect to accounts payable outstanding beyond customary trade terms, in accordance with the historical practices of Borrower.

 

“US” shall mean the United States of America.

 

1.2.         UCC Defined Terms.  The following terms used in this Agreement shall have the respective meanings provided for in the UCC: “Accounts”, “Account Debtor”, “Buyer in Ordinary Course of Business”, “Chattel Paper”, “Commercial Tort Claim”, “Deposit Account”, “Documents”, “Electronic Chattel Paper”, “Equipment”,
“Farm Products”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter of Credit”, “Letter-of-Credit Rights”, “Licensee in Ordinary Course of Business”, “Payment Intangibles”, “Proceeds”, “Record”, “Software”, “Supporting Obligations” and “Tangible Chattel Paper”.

 

  

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1.3.           Accounting Terms.  For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP.  Financial statements and other information furnished to Agent or any Lender pursuant to Section 5.1(E) shall be prepared in accordance with GAAP (as in effect at the time of such preparation) on a consistent basis.  In the event any “Accounting Changes” (as defined below) shall occur
and such changes affect financial covenants, standards or terms in this Agreement, then Loan Parties and Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of the Loan Parties shall be the same after such Accounting Changes as if such Accounting Changes had not been made, and until such time as such an amendment shall have been executed and delivered by Loan Parties and Requisite Lenders, (A) all financial covenants, standards and terms in this Agreement shall be calculated and/or construed as if such Accounting Changes had not been made, and (B) the Loan Parties shall prepare footnotes to each Compliance Certificate and the financial statements required to be delivered hereunder that show the differences between the
financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes). “Accounting Changes” means: (a) changes in accounting principles required by GAAP and implemented by Loan Parties; (b) changes in accounting principles recommended by Loan Parties’ Accountants; and (c) changes in carrying value of any Loan Party’s assets, Liabilities or equity accounts resulting from (i) the application of purchase accounting principles (FASB 141) to the Transactions or (ii) any other adjustments that, in each case, were applicable to, but not included in, the Pro Forma Balance Sheet.  All such adjustments resulting from expenditures made subsequent to the Closing Date (including, but not limited to, capitalization of costs and expenses or payment of pre-Closing
Date Liabilities) shall be treated as expenses in the period the expenditures are made and deducted as part of the calculation of EBITDA in such period.

 

1.4.           Other Definitional Provisions.  References to “Sections”, “subsections”, “Riders”, “Exhibits”, “Schedules” and “Addenda” shall be to Sections, subsections, Riders, Exhibits,  Schedules and Addenda, respectively, of this Agreement unless otherwise specifically provided.  Any of the terms defined in subsection 1.1 or otherwise in this Agreement may, unless the context otherwise requires, be used in
the singular or the plural depending on the reference.  In this Agreement, words importing any gender include the other genders; the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments and other modifications are not prohibited by the terms of this Agreement or any other Loan Document; references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of same and any
successor statutes and regulations.

 

  

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SECTION 2.         LOANS AND COLLATERAL

 

2.1.         Loans.

 

(A)           Revolving Loan.  Each Lender, severally, agrees to lend to Borrower from time to time its Pro Rata Share of each advance under the Revolving Loan Commitment.  The aggregate amount of the Revolving Loan Commitment shall not exceed at any time $100,000,000, as reduced by Section 2.4(C).  Amounts borrowed under this Section 2.1(A) may be repaid and reborrowed at any time prior to the earlier of (1) the termination of the Revolving Loan Commitment pursuant to Section 7.3 or (2) the Termination Date.  Except as otherwise
provided herein, no Lender shall have any obligation to make a Revolving Advance to the extent such Revolving Advance would cause the Revolving Loan (after giving effect to any immediate application of the proceeds thereof) to exceed the Maximum Revolving Loan Amount.

 

(B)           [Reserved.]

 

(C)           [Reserved.]

 

(D)           Borrowing Mechanics.  (1) LIBOR Loans made on any Funding Date shall be in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of such amount.  (2) On any day when a Borrower desires a Revolving Advance under this Section 2.1, Borrowing Agent shall give Agent written or telephonic notice of the proposed borrowing by 11:00 a.m. New York time on the Funding Date of a Base Rate Loan and three (3) Business Days in advance of the Funding Date of a LIBOR Loan, which notice shall specify the proposed Funding Date
(which shall be a Business Day), whether such Loans shall consist of Base Rate Loans or LIBOR Loans, and, for LIBOR Loans, the Interest Period applicable thereto.  Any such telephonic notice shall be confirmed with a Notice of Borrowing on the same day as such request.  Neither Agent nor Lender shall incur any liability to any Borrower for acting upon any telephonic notice or a Notice of Borrowing which Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of any Borrower or for otherwise acting in good faith under this Section 2.1(C).  Neither Agent nor Lender will be required to make any advance pursuant to any telephonic or written notice or a Notice of Borrowing, unless all of the terms and conditions set forth in Section 3 have been satisfied and Agent has also received the most
recent Borrowing Base Certificate and all other documents, to the extent required under Section 5.1(E), by 11:00 a.m. New York time on the date of such funding request.  Each Advance shall be deposited by wire transfer in immediately available funds in such account as Borrowing Agent may from time to time designate to Agent in writing.  The becoming due of any amount required to be paid under this Agreement or any of the other Loan Documents as principal, Lender Letter of Credit reimbursement obligation, accrued interest, fees, compensation or any other amounts shall be deemed irrevocably to be an automatic request by Borrowing Agent on behalf of the Borrowers for a Revolving Advance, which shall be a Base Rate Loan on the due date of, and in the amount required to pay (as set forth on Agent’s books and records), such principal, Lender Letter of Credit
reimbursement obligation, accrued interest, fees, compensation or any other amounts.

 

  

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(E)          Notes.  The Borrowers shall execute and deliver to each Lender with appropriate insertions a Note to evidence such Lender’s Commitments.  In the event of an assignment under Section 9.5, the Borrowers shall, upon surrender of the assigning Lender’s Note, issue new Notes to reflect the interest held by the assigning Lender and its Eligible Assignee.

 

(F)          Letters of Credit.  The Revolving Loan Commitments may, in addition to Revolving Advances, be utilized, upon the request of Borrowing Agent, for (1) the issuance of letters of credit by Agent; or with Agent’s consent any Lender, or (2) the issuance by GMAC CF or Agent of guaranties or risk participations to banks to induce such banks to issue Bank Letters of Credit for the account of Borrowers (each of (1) and (2) above a “Lender Letter of Credit”).  Each Lender shall be deemed to have purchased a participation in each Lender
Letter of Credit issued on behalf of Borrowers in an amount equal to its Pro Rata Share thereof.  In no event shall any Lender Letter of Credit be issued to the extent that the issuance of such Lender Letter of Credit would cause the sum of the Letter of Credit Reserve (after giving effect to such issuance), plus the Revolving Loan to exceed the lesser of (1) the Borrowing Base and (2) the Revolving Loan Commitments.

 

(1)           Maximum Amount.  The aggregate amount of Letter of Credit Liability with respect to all Lender Letters of Credit outstanding at any time shall not exceed $7,500,000.

 

(2)           Reimbursement.  The Borrowers shall be irrevocably and unconditionally obligated forthwith without presentment, demand, protest or other formalities of any kind, to reimburse Agent or the issuer for any amounts paid with respect to a Lender Letter of Credit including all fees, costs and expenses paid to any bank that issues a Bank Letter of Credit.  Each Borrower hereby authorizes and directs Agent, at Agent’s option, to debit Borrowers’ account (by increasing the
Revolving Loan) in the amount of any payment made with respect to any Lender Letter of Credit.  In the event that Agent elects not to debit Borrowers’ account and the Borrowers fail to reimburse Agent in full on the date of any payment under a Lender Letter of Credit, Agent shall promptly notify each Lender of the unreimbursed amount of such payment together with accrued interest thereon and each Lender, on the next Business Day, shall deliver to Agent an amount equal to its respective participation in same day funds.  The obligation of each Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section
3.  In the event any Lender fails to make available to Agent the amount of such Lender’s participation in such Lender Letter of Credit, Agent shall be entitled to recover such amount on demand from such Lender together with interest on such amount calculated at the Federal Funds Effective Rate.

 

(3)           Request for Letters of Credit.  Borrowing Agent shall give Agent at least three (3) Business Days prior notice specifying the date a Lender Letter of Credit is to be issued, identifying the beneficiary and describing the nature of the transactions proposed to be supported thereby.  The notice shall be accompanied by the form of the Letter of Credit being requested.  Any Letter of Credit which Borrowing Agent requests must be in such form, be for such amount, contain
such terms and support such transactions as are reasonably satisfactory to Agent.  The expiration date of each Lender Letter of Credit shall be on a date which is at least thirty (30) days prior to the Termination Date, unless otherwise agreed to by Agent.

 

  

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(G)          Other Letter of Credit Provisions.

 

(1)           Obligations Absolute.  The obligation of the Borrowers to reimburse Agent or any Lender for payments made under, and other amounts payable in connection with, any Lender Letter of Credit shall be unconditional and irrevocable and shall be paid under all circumstances strictly in accordance with the terms of this Agreement including, without limitation, the following circumstances:

 

(a)           any lack of validity or enforceability of any Lender Letter of Credit, or any other agreement;

 

(b)           the existence of any claim, set-off, defense or other right which any Borrower, any of its Subsidiaries or Affiliates or any other Person may at any time have against any beneficiary or transferee of any Lender Letter of Credit (or any Persons for whom any such transferee may be acting), Agent, any Lender, any bank issuing a Bank Letter of Credit, or any other Person, whether in connection with this Agreement, any other Loan Document, or any other related or unrelated agreements or transactions;

 

(c)           any draft, demand, certificate or any other document presented under any Lender Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

(d)           any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Loan Parties or any of their Subsidiaries;

 

(e)           any breach of this Agreement or any other Loan Document by any party thereto;

 

(f)           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing;

 

(g)           the fact that a Default or an Event of Default shall have occurred and be continuing; or

 

(h)           payment under any Lender Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Lender Letter of Credit; provided that, in the case of any payment by Agent or a Lender under any Lender Letter of Credit, Agent or such Lender has not acted with gross negligence or willful misconduct (as determined by a final non-appealable order by a court of competent jurisdiction) in determining that the demand for payment under such Lender Letter of Credit complies on its face with any applicable requirements for a demand for payment under such Lender Letter of Credit.

 

  

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(2)           Nature of Lender’s Duties.  As between any Lender that issues a Lender Letter of Credit (an “Issuing Lender”), on the one hand, and all Lenders on the other hand, all Lenders assume all risks of the acts and omissions of, or misuse of any Lender Letter of Credit by the beneficiary thereof.  In furtherance and not in limitation of the foregoing, neither Agent nor any Issuing Lender shall be responsible:  (a) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document by any party in connection with the application for and issuance of any Lender Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Lender Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (c) for failure of the beneficiary of any Lender Letter of Credit to comply fully with conditions required in order to demand payment thereunder; provided that, in the case of any payment under any such Lender Letter of Credit, any Issuing Lender has not acted with gross negligence or willful misconduct (as determined by a final non-appealable
order by a court of competent jurisdiction) in determining that the demand for payment under any such Lender Letter of Credit complies on its face with any applicable requirements for a demand for payment thereunder; (d) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (e) for errors in interpretation of technical terms; (f) for any loss or delay in the transmission or otherwise of any document required in order to make a payment under any such Lender Letter of Credit; (g) for the credit of the proceeds of any drawing under any such Lender Letter of Credit; and (h) for any consequences arising from causes beyond the control of Agent or any Lender as the case may be.

 

(3)           Liability.  In furtherance and extension of and not in limitation of, the specific provisions herein above set forth, any action taken or omitted by Agent or any Lender under or in connection with any Lender Letter of Credit, if taken or omitted in good faith, shall not put Agent or any Lender under any resulting liability to any Borrower or any other Lender.

 

(H)          Availability of a Lender’s Pro Rata Share.

 

(1)           Lender’s Amounts Available on a Funding Date.  Unless Agent receives written notice from a Lender on or prior to any Funding Date that such Lender will not make available to Agent as and when required such Lender’s Pro Rata Share of any requested Loan or Advance, Agent may assume that each Lender will make such amount available to Agent in immediately available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make
available to Borrowers on such date a corresponding amount.

 

(2)           Lender’s Failure to Fund.  A Defaulting Lender shall pay interest to Agent at the Federal Funds Effective Rate on the Defaulted Amount from the Business Day following the applicable Funding Date of such Defaulted Amount until the date such Defaulted Amount is paid to Agent.  A notice of Agent submitted to any Lender with respect to amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is not paid when due to Agent, Agent, at its option, may notify Borrowing Agent of such failure to fund and, upon demand by Agent, the Borrowers shall pay the unpaid amount to Agent for Agent’s account, together with interest thereon (without duplication and to the extent not paid in connection with such applicable Loan) for each day elapsed since the date of such borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loan made by the other Lenders on such Funding Date.  The failure of any Lender to make available any portion of its Commitment on any Funding Date or to fund its participation in a Lender Letter of Credit shall not relieve any other Lender of any obligation hereunder to fund such Lender’s Commitment on such Funding Date or to fund any such participation, but no Lender shall be
responsible for the failure of any other Lender to honor its Commitment on any Funding Date or to fund any participation to be funded by any other Lender.

 

  

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(3)           Payments to a Defaulting Lender.  Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents, Agent shall not be obligated to transfer to a Defaulting Lender any payment made by the Borrowers to Agent or any amount otherwise received by Agent for application to the Obligations nor shall a Defaulting Lender be entitled to the sharing of any interest, fees or payments hereunder.

 

(4)           Defaulting Lender’s Right to Vote.  Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents for purposes of voting or consenting to matters with respect to (a) the Loan Documents or (b) any other matter concerning the Loans, a Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitments and outstanding Loans and Advances shall be deemed to be zero.

 

2.2.         Interest.

 

(A)           Rate of Interest.  The Loans and all other Obligations shall bear interest from the date such Loans are made or such other Obligations become due to the date paid at a rate per annum equal to (1) in the case of Base Rate Loans and Obligations for which no interest rate basis is specified, the Base Rate plus the Applicable Margin and (2) in the case of LIBOR Loans, LIBOR plus the Applicable Margin (collectively the “Interest Rate”).  All Loans made on the Closing Date shall be either (x) Base Rate Loans or (y) LIBOR Loans having an
Interest Period of one month, and, in each case, shall remain so until ninety (90) days after the Closing Date or such earlier date as Agent notifies Borrower that it has completed the primary syndication of the Loans.  Such designation by Borrowing Agent may be changed from time to time pursuant to Section 2.2(D).  If on any day a Loan or a portion of any Loan is outstanding with respect to which notice has not been delivered to Agent in accordance with the terms of this Agreement specifying the basis for determining the rate of interest or if LIBOR has been specified and no LIBOR quote is available, then for that day that Loan or portion thereof shall bear interest determined by reference to the Base Rate.

 

After the occurrence and during the continuance of an Event of Default (1) the Loans and all other Obligations shall, at the election of Agent or Requisite Lenders, bear interest at a rate per annum equal to two percent (2%) plus the applicable Interest Rate (the “Default Rate”), (2) each LIBOR Loan shall automatically convert to a Base Rate Loan at the end of any applicable Interest Period and (3) no Loans may be converted to LIBOR Loans.  If an Event of Default has occurred and is continuing on an Adjustment Date, the Applicable Margin shall be set at its highest level.

 

  

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(B)           Computation and Payment of Interest.  Interest on the Loans and all other Obligations shall be computed on the daily principal balance on the basis of a three hundred sixty (360) day year for the actual number of days elapsed.   In computing interest on any  Loan, the date of funding of the Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a LIBOR Loan, the date of conversion of such LIBOR Loan to such Base Rate Loan, shall be included; and the date of
payment of such Loan or the expiration date of an Interest Period applicable to such Loan, or with respect to a Base Rate Loan being converted to a LIBOR Loan, the date of conversion of such Base Rate Loan to such LIBOR Loan, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one (1) day’s interest shall be paid on that Loan.  Interest on Base Rate Loans and all other Obligations other than LIBOR Loans shall be payable to Agent for the benefit of Lenders monthly in arrears on the first day of each month, on the date of any prepayment of Loans, and at maturity, whether by acceleration or otherwise.  Interest on LIBOR Loans shall be payable to Agent for the benefit of Lenders on the last day of the applicable Interest Period for such Loan, on the date of any prepayment of the Loans, and at maturity, whether by acceleration
or otherwise.  In addition, for each LIBOR Loan having an Interest Period longer than three (3) months, interest accrued on such Loan shall also be payable on the last day of each three (3) month interval during such Interest Period.

 

(C)           Interest Laws.  Notwithstanding any provision to the contrary contained in this Agreement or any other Loan Document, the Borrowers shall not be required to pay, and neither Agent nor any Lender shall be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by applicable law (“Excess Interest”).  If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any other Loan Document, then in such
event:  (1) the provisions of this subsection shall govern and control; (2) neither any Borrower nor any other Loan Party shall be obligated to pay any Excess Interest; (3) any Excess Interest that Agent or any Lender may have received hereunder shall be, at such Lender’s option, (a) applied as a credit against the outstanding principal balance of the Obligations or accrued and unpaid interest (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the “Maximum Rate”), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) neither any Borrower nor
any Loan Party shall have any action against Agent or any Lender for any damages arising out of the payment or collection of any Excess Interest.  Notwithstanding the foregoing, if for any period of time interest on any Obligations is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall remain at the Maximum Rate until each Lender shall have received the amount of interest which such Lender would have received during such period on such Obligations had the rate of interest not been limited to the Maximum Rate during such period.

 

(D)           Conversion or Continuation.  Subject to the other provisions of this Agreement, including, without limitation, satisfying the conditions set forth in Section 3, Borrowing Agent shall have the option to (1) convert at any time all or any part of outstanding Loans equal to $500,000 and integral multiples of $100,000 in excess of that amount from Base Rate Loans to LIBOR Loans or (2) upon the expiration of any Interest Period applicable to a LIBOR Loan, to (a) continue all
or any portion of such LIBOR Loan equal to $500,000 and integral multiples of $100,000 in excess of that amount as a LIBOR Loan or (b) convert all or any portion of such LIBOR Loan to a Base Rate Loan.  The succeeding Interest Period(s) of such continued or converted Loan commence on the last day of the Interest Period of the Loan to be continued or converted; provided that no outstanding Loan may be continued as, or be converted into, a LIBOR Loan, when any Event of Default or Default has occurred and is continuing.

 

  

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Borrowing Agent shall deliver a Notice of Borrowing with respect to any such conversion/continuation to Agent no later than 11:00 a.m. (New York time) at least three (3) Business Days in advance of the proposed conversion/continuation date.  The Notice of Borrowing with respect to such conversion/continuation shall certify:  (1) the proposed conversion/continuation date (which shall be a Business Day); (2) the amount of the Loan to be converted/continued; (3) the nature of the proposed conversion/continuation; (4) in the case of  conversion to, or a continuation of, a LIBOR Loan, the requested Interest Period; (5) that no Default or Event of Default has occurred and is continuing or
would result from the proposed conversion/continuation; and (6) that all conditions to make Loans as set forth in Section 3 have been satisfied.

 

In lieu of delivering a Notice of Borrowing with respect to any such conversion/continuation, Borrowing Agent may give Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2(D) (in such telephonic notice Borrowing Agent shall certify to the items set forth above with respect to the Notice of Borrowing); provided that such telephonic notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing (in form and substance described herein) with respect to such conversion/continuation to Agent on or before the proposed conversion/continuation date.  Once given, the Borrowers shall be bound by such telephonic notice.  Upon
the expiration of an Interest Period for a LIBOR Loan, in the absence of a new Notice of Borrowing or a telephonic notice submitted to Agent not less than three (3) Business Days prior to the end of such Interest Period, the LIBOR Loan then maturing shall be automatically converted to a Base Rate Loan.

 

Neither Agent nor any Lender shall incur any liability to any Borrower or any other Loan Party in acting upon any telephonic notice or a Notice of Borrowing referred to above that Agent believes in good faith to have been given by an officer or other person authorized to act on behalf of Borrowers or for otherwise acting in good faith under this Section 2.2(D).

 

2.3.         Fees.

 

(A)          Unused Line Fee.  The Borrowers shall pay to Agent, for the benefit of Lenders, a fee in an amount equal to the Revolving Loan Commitment less the sum of (1) the average daily balance of each of the Revolving Loan plus, (2) the average daily face amount of the Letter of Credit Reserve during the preceding month, multiplied by (3) 3/8th of 1% (0.375%) per annum.  Such fee to be calculated on the basis of a three hundred sixty (360) day year for the actual number of days elapsed and to be payable monthly in arrears on the first day of each month following
the Closing Date.

 

  

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(B)           Letter of Credit Fees.  The Borrowers shall pay to Agent a fee with respect to the Lender Letters of Credit for the benefit of all Lenders with a Revolving Loan Commitment (based on their respective Pro Rata Share) in the amount of the average daily amount of Letter of Credit Liability outstanding during such month multiplied by 2.75% per annum until the first Adjustment Date and thereafter by the applicable percentage specified as the Applicable Margin for LIBOR Rate Loans consisting of Revolving Advances.  Such fees will be calculated on the
basis of a three hundred sixty (360) day year for the actual number of days elapsed and will be payable monthly in arrears on the first day of each month.  The Borrowers shall also reimburse Agent for any and all fees and expenses, if any, paid by Agent or any Lender to the issuer of any Bank Letter of Credit.

 

(C)           Audit Fees.  The Borrowers agree to pay all fees and expenses of the firm or individual(s) engaged by Agent to perform audits and/or appraisals of Loan Parties’ assets and/or operations.  Notwithstanding the foregoing, if Agent uses its internal auditors to perform any audit, the Borrowers agree to pay to Agent, for its own account, an audit fee with respect to each such audit equal to $1,000 per internal auditor per day or any portion thereof together with all out of pocket expenses; provided, however, that prior to a Default, the Borrowers will not have to pay for more than two (2) audits per year.

 

(D)           Other Fees and Expenses.  The Borrowers shall pay to Agent, for its own account, all charges for returned items and all other bank charges incurred by Agent, as well as Agent’s standard wire transfer charges for each wire transfer made under this Agreement.

 

(E)           Fee Letter.  The Borrowers shall pay to GMAC CF, individually, the fees specified in that certain letter agreement dated December 13, 2004 between the Borrowers and GMAC CF.

 

2.4.         Payments and Prepayments.

 

(A)         Manner and Time of Payment.  In its sole discretion, Agent may elect to honor the automatic requests by Borrowing Agent for Revolving Advances, for all principal, Lender Letter of Credit reimbursement obligations, interest, fees, compensation and any other amounts due hereunder or under any of the other Loan Documents on their applicable due dates pursuant to the terms of this Agreement, and the proceeds of each such Revolving Advance, if made, shall be applied as a direct payment of the relevant Obligation.  To the extent such amounts exceed the
Revolving Loan Commitment of all Revolving Loan Lenders, or if Agent elects to bill Borrowers for any amount due hereunder or under any of the other Loan Documents, such amount shall be immediately due and payable with interest thereon accruing from the applicable due date.  All payments made by Borrowers with respect to the Obligations shall be made without deduction, defense, setoff or counterclaim.  All payments to Agent hereunder shall, unless otherwise directed by Agent, be made to Agent’s Account or in accordance with Section 6.4.  All proceeds remitted to Agent’s Account via wire transfer shall be credited to the Obligations (including for the purpose of calculating interest payable by the Borrowers on the Obligations) on the same Business Day as such proceeds were received.

 

(B)          Mandatory Prepayments.

 

(1)           Over Formula Advance.  At any time that the Revolving Loan exceeds the Maximum Revolving Loan Amount (an “Over Formula Advance”), the Borrowers shall, immediately repay the Revolving Loan to the extent necessary to eliminate the Over Formula Advance.

 

  

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(2)           Prepayments from Proceeds of Asset Dispositions.  Immediately upon receipt by any Loan Party or any of their respective Subsidiaries of Net Cash Proceeds of any Asset Disposition, which Net Cash Proceeds (together with all other Net Cash Proceeds of Asset Dispositions theretofore consummated by the Loan Parties or any of their respective Subsidiaries during any Fiscal Year) exceed $100,000 in the aggregate in any Fiscal Year (it being understood that if the Net Cash Proceeds of any Asset
Disposition exceed $50,000, the entire amount and not just the portion above $100,000 shall be subject to this Section 2.4(B)(2)), the Borrowers shall prepay the Obligations in an amount equal to such proceeds.  All such prepayments shall be applied to the Loans in accordance with Section 2.4(E).

 

(3)           Prepayments from Issuance of Securities.  Immediately upon the receipt by any Loan Party or any of their respective Subsidiaries of the proceeds of the issuance of equity securities (other than (i) as a result of the exercise of stock options under equity incentive plans of Parent and (ii) any proceeds received from another Loan Party), the Borrowers shall, except as otherwise provided in Section 2.4(E), prepay the Loans in an amount equal to such proceeds, net of underwriting discounts
and commissions and other reasonable costs associated therewith.  All such prepayments shall be applied to the Loans in accordance with Section 2.4(E).

 

(4)           Prepayments from Tax Refunds.  Immediately upon the receipt by any Loan Party or any of their respective Subsidiaries of the proceeds of any tax refund, the Borrowers shall prepay the Loans in an amount equal to such proceeds.  All such prepayments shall be applied to the Loans in accordance with Section 2.4(E).

 

(5)           Change of Control.  Immediately upon the occurrence of any Change of Control, Borrower shall prepay the Loans, together with all other then outstanding Obligations, in full, and the Commitments shall be deemed terminated.  All such prepayments shall be applied to the Loans in accordance with Section 2.4(E).

 

(C)          Voluntary Prepayments and Repayments.  Borrower may, at any time upon not less than three (3) Business Days prior notice to Agent, (a) reduce the Revolving Loan Commitment in minimum reductions of $1,000,000 and in integral multiples of $500,000 in excess thereof (but in no event to a Revolving Loan Commitment of less than $25,000,000) and/or (b) terminate the Revolving Loan Commitment in full; provided, however, the Revolving Loan Commitment may not be terminated by Borrower
until all other Obligations are paid in full.  Any reduction or termination of the Revolving Loan Commitment permitted in this Section 2.4(C) shall be subject to the payment of all fees set forth in subsection 2.3, including, without limitation, the fees set forth in the Fee Letter and the payment of any amounts owing pursuant to Section 2.12 resulting from such prepayment.  In the event any Lender Letters of Credit are outstanding at the time that Borrowers prepays the Obligations and desires to terminate the Revolving Loan Commitment, the Borrowers shall cause Agent and each Lender to be released from all liability under any Lender Letters of Credit or, at Agent’s option, the Borrowers shall (1) deposit with Agent for the benefit of all Lenders with a Revolving Loan Commitment cash in an amount equal to one hundred and five percent (105%) of the aggregate
outstanding Letter of Credit Reserve to be available to Agent to reimburse payments of drafts drawn under such Lender Letters of Credit and pay any fees and expenses related thereto and (2) prepay the fees payable under Section 2.3(B) with respect to such Lender Letters of Credit for the full remaining terms of such Lender Letters of Credit.  Upon termination of any such Lender Letter of Credit, the unearned portion of such prepaid fee attributable to such Lender Letter of Credit shall be refunded to the Borrowers.

 

  

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(D)          Payments on Business Days.  Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest or fees due hereunder.

 

(E)           Application of Prepayment Proceeds.  Except as otherwise provided therein, all prepayments described in Sections 2.4(B)(2) through 2.4(B)(5) shall be applied to reduce the outstanding principal balance of the Revolving Loans but not as a permanent reduction of the Revolving Loan Commitment; provided, however, that the application of any proceeds from the issuance of securities described in Section 2.4(B)(3) may be utilized by
Borrower to repay or prepay, in whole or in part, the Second Priority Senior Secured Notes, with any excess 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.

 

2.5.         Term of this Agreement.  This Agreement shall be effective until the earlier of (a) January 5, 2010 and (b) the acceleration of all Obligations pursuant to Section 7.3 (the “Termination Date”).  The Commitments shall terminate (unless earlier terminated pursuant to the terms hereof) upon the Termination Date and all Obligations shall become immediately due and payable without notice or demand.  Notwithstanding any termination, until all Obligations have been fully paid
and satisfied, Agent, on behalf of itself and Lenders, shall be entitled to retain security interests in and liens upon all Collateral; provided, however, that in the event that all Revolving Loans are repaid in full, and all other due and owing Obligations and all reasonably anticipated future Obligations (including reasonably anticipated contingent Obligations) are satisfied in full in a manner reasonably satisfactory to Agent, Agent shall, at the request of Borrower, terminate its Liens upon all Collateral.  Even after payment of all Obligations hereunder, each Loan Party’s obligation to indemnify Agent and each Lender in accordance with the terms hereof shall continue.

 

2.6.         Statements.  Agent shall render a monthly statement of account to Borrowing Agent within twenty (20) days after the end of each month.  Such statement of account shall constitute an account stated unless any Borrower makes written objection thereto within thirty (30) days from the date such statement is mailed to Borrowing Agent.  Agent shall record in its books and records, including computer records, (a) all Loans, interest charges and payments thereof, (b) all Letter of Credit
Liability, (c) the charging and payment of all fees, costs and expenses and (d) all other debits and credits pursuant to this Agreement.  The balance in the loan accounts shall constitute presumptive evidence, absent manifest error, of the accuracy of the information contained therein; provided, however, that any failure by Agent to so record shall not limit or affect the any Borrower’s obligation to pay.

 

  

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2.7.         Grant of Security Interest.

 

(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 ratifies and reaffirms its grant pursuant to the Original Financing Agreement and hereby further 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
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”).

 

(B)           Loan Parties Remain Liable.  Anything herein to the contrary notwithstanding: (a) each Loan Parties shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of their respective duties and obligations thereunder to the same extent as if this Agreement or the other Loan Documents had not been executed; (b) the exercise by Agent of any of the rights under this Agreement or the other Loan Documents shall not release any Loan Party from any of their respective duties or obligations to
the parties under the contracts and agreements included in the Collateral; (c) neither Agent nor any Lender shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or the other Loan Documents, nor shall Agent nor any Lender be obligated to perform any of the obligations or duties of any Loan Party thereunder or to take any action to collect or enforce any claim for payment assigned under this Agreement or the other Loan Documents; and (d) neither Agent nor any Lender shall have any liability in contract or tort for any Loan Party’s acts or omissions.

 

2.8.         Yield Protection.

 

(A)           Capital Adequacy and Other Adjustments.  In the event any Lender shall have determined that the adoption after the date hereof of any Law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from any central bank or Governmental Authority or body having jurisdiction does or shall have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender or any corporation controlling such Lender and thereby reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder, then the Borrowers shall within fifteen (15) days after notice and demand from such Lender (together with the certificate referred to in the next sentence and with a copy to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction.  A certificate as to the amount of such cost and showing the basis of the
computation of such cost submitted by such Lender to Borrowing Agent shall, absent manifest error, be conclusive and binding for all purposes.

 

  

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(B)           Increased LIBOR Funding Costs.  If, after the date hereof, the introduction of, change in or interpretation of any law, rule, regulation, treaty or directive would impose or increase reserve requirements (other than as taken into account in the definition of LIBOR) or otherwise increase the cost to any Lender of making or maintaining a LIBOR Loan, then Borrowers shall from time to time within fifteen (15) days after notice and demand from such affected Lenders (together with the certificate referred to in the next sentence and with a copy to Agent) pay
to Agent, for the account of such affected Lenders, additional amounts sufficient to compensate such Lenders for such increased cost.  A certificate as to the amount of such cost and showing the basis of the computation of such cost submitted by such affected Lenders to Borrowing Agent and Agent shall, absent manifest error, be conclusive and binding on Borrower for all purposes.

 

2.9.         Taxes.

 

(A)           No Deductions.  Any and all payments or reimbursements made hereunder shall be made free and clear of and without deduction for any and all Charges and all Liabilities with respect thereto (all such Charges and all Liabilities with respect thereto referred to herein as “Tax Liabilities”; excluding, however, taxes imposed on the net income of any Lender or Agent by the jurisdiction under the laws of which Agent or such Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the
jurisdiction of Agent’s or such Lender’s applicable lending office or any political subdivision).  If any Loan Party shall be required by law to deduct any such Tax Liabilities from or in respect of any sum payable hereunder to Agent or any Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Agent or such Lender receives an amount equal to the sum it would have received had no such deductions been made.

 

(B)           Changes in Tax Laws.  In the event that, subsequent to the Closing Date, (1) any changes in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (2) any new law, regulation, treaty or directive enacted or any interpretation or application thereof, or (3) compliance by Lender with any request or directive (whether or not having the force of law) from any Governmental Authority;

 

(a)           does or shall subject Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement, the other Loan Documents or any Loans made or Lender Letters of Credit issued hereunder, or change the basis of taxation of payments to Agent or such Lender of principal, fees, interest or any other amount payable hereunder (except for net income taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing authorities with respect to interest or commitment or other fees payable hereunder or changes in the rate of tax on the overall net income of Agent or such Lender); or

 

  

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(b)           does or shall impose on Agent or any Lender any other condition or increased cost in connection with the transactions contemplated hereby or participations herein; and the result of any of the foregoing is to increase the cost to Agent or such Lender of issuing any Lender Letter of Credit or making or continuing any Loan hereunder, as the case may be, or to reduce any amount receivable hereunder;

 

then, in any such case, the Borrowers shall pay, within fifteen (15) days after notice and demand from Agent or the affected Lender, to Agent or such Lender, upon its notice and demand, any additional amounts necessary to compensate Agent or such Lender, on an after-tax basis, for such additional cost or reduced amount receivable, as determined by Agent or such Lender with respect to this Agreement or the other Loan Documents.  If Agent or any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify Borrowing Agent of the event by reason of which Agent or such Lender has become so entitled (with any such Lender concurrently notifying
Agent).  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Agent or any Lender to Borrowing Agent shall, absent manifest error, be conclusive and binding on Borrower for all purposes.

 

(C)           Foreign Lenders.  Each Lender organized under the laws of a jurisdiction outside the US (a “Foreign Lender”) as to which payments to be made under this Agreement are exempt from US withholding tax or are subject to US withholding tax at a reduced rate under an applicable statute or tax treaty shall provide to Borrowing Agent and Agent (1) a properly completed and executed Internal Revenue Service Form W-8BEN or Form W-8ECI or other applicable form, certificate or document prescribed by the Internal Revenue Service of the US certifying as to
such Foreign Lender’s entitlement to such exemption or reduced rate of withholding with respect to payments to be made to such Foreign Lender under this Agreement, (a “Certificate of Exemption”), or (2) a letter from any such Foreign Lender stating that it is not entitled to any such exemption or reduced rate of withholding (a “Letter of Non-Exemption”).  Prior to becoming a Lender under this Agreement and within fifteen (15) days after a reasonable written request of Borrowing Agent or Agent from time to time thereafter, each Foreign Lender that becomes a Lender under this Agreement shall provide a Certificate of Exemption or a Letter of Non-Exemption to Borrowing Agent and Agent.

 

If a Foreign Lender is entitled to an exemption with respect to payments to be made to such Foreign Lender under this Agreement (or to a reduced rate of withholding) and does not provide a Certificate of Exemption to Borrowing Agent and Agent within the time periods set forth in the preceding paragraph, the Borrowers shall withhold taxes from payments to such Foreign Lender at the applicable statutory rates and no Borrower shall be required to pay any additional amounts as a result of such withholding; provided, however, that all such withholding shall cease upon delivery by such Foreign Lender of a Certificate of Exemption to Borrowing Agent and Agent.

 

  

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2.10.       Required Termination and Prepayment.  If on any date any Lender shall have reasonably determined (which determination shall be conclusive and binding upon all parties) that the making or continuation of its LIBOR Loans has become unlawful or impossible by compliance by such Lender in good faith with any law, governmental rule, regulation or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, and in any such event, that Lender shall promptly give
notice (by telephone confirmed in writing) to Borrowing Agent and Agent of that determination.  Subject to prior withdrawal of a Notice of Borrowing or prepayment of LIBOR Loans as contemplated by Section 2.12, the obligation of such Lender to make or maintain its LIBOR Loans during any such period shall be terminated at the earlier of the termination of the Interest Period then in effect or when required by law and the Borrowers shall no later than the termination of the Interest Period in effect at the time any such determination pursuant to this Section 2.10 is made or, earlier (without any breakage fee) when required by Law, repay or prepay LIBOR Loans together with all interest accrued thereon or convert LIBOR Loans to Base Rate Loans.

 

2.11.       Optional Prepayment/Replacement of Lenders.  Within fifteen (15) days after receipt by Borrowing Agent of: (a) written notice and demand from any Lender for payment or reimbursement of additional costs as provided in Section 2.8 or section 2.9, or (b) written notice of any Lender’s inability to make LIBOR Loans as provided in Section 2.10, or information that such Lender is a Defaulting Lender (any such Lender demanding such payment or having such inability or being a Defaulting Lender being referred to
herein as an “Affected Lender”), Parent may, at its option notify Agent and such Affected Lender of its intention to take one of the actions set forth herein in subparagraphs (A) or (B) below.

 

(A)           Replacement of an Affected Lender.  The Borrowers may obtain, at Borrowers’ expense, a replacement Lender (“Replacement Lender”) for an Affected Lender, which Replacement Lender shall be reasonably satisfactory to Agent.  In the event the Borrowers obtain a Replacement Lender that will purchase all outstanding Obligations owed to such Affected Lender and assume its Commitments hereunder within ninety (90) days following notice of Borrowers’ intention to do so, the Affected Lender shall sell and assign its Loans and
Commitments to such Replacement Lender in accordance with the provisions of Section 9.5; provided, however, the Borrowers have (1) reimbursed such Affected Lender for any administrative fee payable by such Affected Lender to Agent pursuant to Section 9.5 and, (2) in any case where such replacement occurs as the result of a demand for payment of certain costs pursuant to Section 2.8 or Section 2.9, paid all increased costs for which such Affected Lender is entitled to under Section 2.8 or Section 2.9 through the date of such sale and assignment; or

 

(B)           Prepayment of an Affected Lender.  Borrowers may prepay in full all outstanding Obligations owed to an Affected Lender and terminate such Affected Lender’s Commitments.  The Borrowers shall, within ninety (90) days following notice of its intention to do so, prepay in full all outstanding Obligations owed to such Affected Lender, including such Affected Lender’s increased costs for which it is entitled to reimbursement under this Agreement through the date of such prepayment, and terminate such Affected Lender’s
Commitments.

 

  

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2.12.        Compensation.  The Borrowers shall promptly compensate Agent for the benefit of Lenders (Agent’s calculation of such amounts shall, absent manifest error, be conclusive and binding upon all parties hereto), for any losses, expenses and Liabilities including, without limitation, any loss (including interest paid) sustained by such Lender in connection with the re-employment of funds: (a) if for any reason (other than a default by any Lender) a borrowing of any LIBOR Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request of borrowing by Borrowing Agent; (b) if any prepayment of any of its LIBOR Loans occurs on a date that is not the last day of an Interest Period applicable to that Loan (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise); (c) if any prepayment of any of its LIBOR Loans is not made on any date specified in a notice of prepayment given by the Borrowers; or (d) as a consequence of any other default by the Borrowers to repay its LIBOR Loans when required by the terms of this Agreement; provided, however, during the period while any such amounts have not been paid, Agent may, in its sole discretion, (i) in accordance with Section 2.4(B), elect to honor the automatic request by Borrowing Agent for a Revolving Advance for such amount pursuant to Section 2.1(A) or (ii) reserve an
equal amount from amounts otherwise available to be borrowed under the Revolving Loan.

 

2.13.        Booking of LIBOR Loans.  Each Lender may make, carry or transfer LIBOR Loans at, to, or for the account of, any of its branch offices or the office of an affiliate of such Lender.

 

2.14.        Assumptions Concerning Funding of LIBOR Loans.  Calculation of all amounts payable to each Lender under subsection 2.12 shall be made as though each Lender had actually funded its relevant LIBOR Loan through the purchase of a LIBOR deposit bearing interest at LIBOR in an amount equal to the amount of that LIBOR Loan and having maturity comparable to the relevant Interest Period and through the transfer of such LIBOR deposit from an offshore office to a domestic office in the US; provided, however, each
Lender may fund each of its LIBOR Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under Section 2.12.

 

2.15.        Endorsement; Insurance Claims.  Each Borrower hereby constitutes and appoints Agent and all Persons designated by Agent for that purpose as such Borrower’s true and lawful attorney-in-fact, with power in the place and stead of such Borrower and in the name of such Borrower (a) to endorse such Borrower’s name to any of the items of payment or proceeds described in Section 6.4 below and all proceeds of Collateral that come into Agent’s possession or under Agent’s control, including
without limitation, with respect to any drafts, Instruments, Documents and Chattel Paper, and (b) after consultation with Parent (unless an Event of Default has occurred which is then continuing) to obtain, adjust and settle insurance claims, which are required to be paid to Agent.  Each Borrower hereby ratifies and approves all acts of Agent made or taken pursuant to this Section 2.15.  Both the appointment of Agent as each Borrower’s attorney and Agent’s rights and powers are coupled with an interest and are irrevocable, 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.

 

SECTION 3.         CONDITIONS TO LOANS

 

The obligations of Agent and each Lender to make Loans and the obligation of Agent or any Lender to issue Lender Letters of Credit on the Closing Date and on each Funding Date are subject to satisfaction of all of the terms and conditions set forth  below and the accuracy of all the representations and warranties of the Borrowers and the other Loan Parties set forth herein and in the other Loan Documents:

 

  

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(A)           Closing Deliveries.  Agent shall have received, in form and substance satisfactory to Agent, all documents, instruments and information identified on Schedule 3 hereto and all other agreements, notes, certificates, orders, authorizations, financing statements, mortgages and other documents which Agent may at any time reasonably request.

 

(B)           Security Interests.  Agent shall have received satisfactory evidence that all security interests and liens granted to Agent for the benefit of Agent and Lenders pursuant to this Agreement or the other Loan Documents have been duly perfected and constitute first priority liens on the Collateral, subject only to Permitted Liens.

 

(C)           Closing Date Availability.  After giving effect to the consummation of the Transactions, and the payment by the Borrowers of all costs, fees and expenses relating to the  Transactions, Undrawn Availability shall not be less than $15,000,000.

 

(D)           Representations and Warranties.  The representations and warranties contained herein and in the Loan Documents shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except for any representation or warranty limited by its terms to a specific date and taking into account any amendments to the Schedules or Exhibits as a result of any disclosures made by the Borrowers to Agent after the Closing Date and approved in writing by Agent.

 

(E)           Fees.  With respect to Loans or Lender Letters of Credit to be made or issued on the Closing Date, the Borrowers shall have paid all fees due to Agent or any Lender and payable on the Closing Date.

 

(F)           No Default.  No event shall have occurred and be continuing or would result from funding a Loan or issuing a Lender Letter of Credit requested by Borrowing Agent that would constitute an Event of Default or a Default.

 

(G)           Performance of Agreements.  Each Loan Party shall have performed in all material respects all agreements and satisfied all conditions which any Loan Document provides shall be performed by it on or before that Funding Date.

 

(H)           No Prohibition.  No order, judgment or decree of any court, arbitrator or Governmental Authority shall purport to enjoin or restrain Agent or any Lender from making any Loans or issuing any Lender Letters of Credit.

 

(I)           No Litigation.  There shall not be pending or, to the knowledge of any Loan Party, threatened, any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration by, against or affecting any Loan Party or any property of any Loan Party that has not been disclosed to Agent by a Loan Party in writing, and there shall have occurred no development in any such action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration that, in the opinion of Agent, would reasonably be expected to
have a Material Adverse Effect.

 

  

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(J)           Second Priority Senior Secured Note Investment.  Agent has received or will receive on the Closing Date complete copies of the Note Purchase Documents (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof.  None of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written
agreement or instrument which has heretofore been delivered to Agent.  The transactions contemplated by the Note Purchase Documents shall have been consummated in accordance with the terms thereof including, without limitation, the issuance by Borrower, issued at par, of the Second Priority Senior Secured Notes and, in consideration thereof, the receipt by Borrower of cash proceeds of not less than $40,000,000 (including fees and expenses paid from such sum on or about the Closing Date in the aggregate not to exceed $2,000,000), which shall be repayable not earlier than five (5) years from the Closing Date, except as otherwise agreed to by Agent, and Second Priority Agent shall have entered into the Intercreditor Agreement with Agent.

 

(K)           Refinancing Transactions.  Agent shall have received, on behalf of the Lenders, repayment in full of all outstanding Obligations in respect of Term Loan A and Term Loan C, and shall have been satisfied that all outstanding Indebtedness in respect of Term Loan B shall have been paid in full and that all liens and/or security interests granted by any Borrower in favor of ACFS and/or ACSL shall have been released or terminated.

 

SECTION 4.         REPRESENTATIONS, WARRANTIES OF THE LOAN PARTIES

 

4.1.         Representations and Warranties of Loan Parties.

 

  As a material inducement to Agent and each Lender to enter into the Loan Documents, to make and to continue to make Loans and to issue and continue to issue Lender Letters of Credit or risk participations to the banks that issue Bank Letters of Credit, each Loan Party as to itself (and Parent as to itself and the other Loan Parties) represents, warrants to Agent and each Lender as follows:

 

(A)           Organization and Power.  Each of the Loan Parties is a legal entity duly organized, validly existing and in good standing under the laws of its state of formation.  Each of the Loan Parties has all requisite corporate or other organizational power and authority and all material licenses, permits, approvals and authorizations necessary to own and operate its properties, to carry on its businesses as now conducted and presently proposed to be conducted and to carry out the Transactions, and is qualified to do business in the jurisdictions listed
on the “Organizational Schedule” attached hereto as Schedule 4.1(A), which includes every jurisdiction where the failure to so qualify might reasonably be expected to have a Material Adverse Effect.  Each of the Loan Parties has its principal place of business as set forth on the Organizational Schedule.  The copies of the Charter Documents and By-Laws of the Loan Parties that have been furnished to Agent reflect all amendments made thereto and are correct and complete as of the date of this Agreement.

 

(B)           Principal Business.  The Loan Parties are primarily engaged in the business of assembling and selling specialty footwear and related apparel and accessories (the “Business”).

 

  

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(C)          Financial Statements and Financial Projections.

 

(1)           Financial Statements; Historical Statements.  Parent has delivered to Agent copies of its audited consolidated year-end financial statements for and as of the end of the Fiscal Year ended December 31, 2006 together with an unaudited balance sheet, income statements and cash flow statements for the fiscal period ended March 31, 2007 (together, the “Financial Statements”).  The Financial Statements were compiled from the books and records maintained by Parent’s
management and are correct and complete in all material respects and fairly represent the consolidated financial condition of Parent as of their dates and the results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied (with such interim financial statements being subject to the absence of footnotes required by GAAP and subject to normal year-end adjustments).

 

(2)           Pro Forma Balance Sheet.  The unaudited pro forma balance sheet of the Rocky on a Consolidated Basis as of May 25, 2007, a copy of which has heretofore been delivered to Agent, gives pro forma effect to the consummation of the Transactions, all as if such events had occurred on such date (the “Pro Forma Balance Sheet”).  The Pro Forma Balance Sheet has been prepared in a manner consistent with customary
accounting practices and the financial statements described in Section 4.1(c)(i) (subject to the absence of footnotes required by GAAP and subject to normal year-end adjustments) and, subject to stated assumptions made in good faith and having a reasonable basis set forth therein, presents fairly the financial condition of the Loan Parties on an unaudited pro forma basis as of the date set forth therein after giving effect to the consummation of the Transactions.

 

(3)           Financial Projections.  The Loan Parties have delivered to Agent financial projections of Rocky on a Consolidated Basis for the period January 1, 2007 through December 31, 2009 derived from various assumptions of the Loan Parties’ management (the “Financial Projections”).  The Financial Projections were prepared consistent with GAAP and customary accounting procedures and reflect all information available to the management of the Loan Parties at the time the
Financial Projections were produced.  The Financial Projections in good faith project the Liabilities of the Loan Parties upon consummation of the Transactions as of the Closing Date

 

(4)           Accuracy of Financial Statements.  As of the dates of such Financial Statements, Rocky on a Consolidated Basis did not have any Liabilities, contingent or otherwise, or forward or long-term commitments that are not disclosed in the Financial Statements or in the notes thereto, and except as disclosed therein, as of such dates and as disclosed on the Pro-Forma Balance Sheet as of the date hereof, there are no unrealized or anticipated losses from any commitments that are reasonably likely
to have a Material Adverse Effect.

 

  

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(D)           Capitalization and Related Matters.  As of the Closing Date and immediately thereafter, the authorized capital stock of Parent is as set forth on the “Capitalization Schedule” attached hereto as Schedule 4.1(D).  As of the Closing Date, the authorized capital stock or other equity interests of each of the Subsidiaries of Parent and the number and ownership of all outstanding capital stock or equity interests of each of the Loan Parties (other than
Parent) is set forth on Schedule 4.1(D).  Except as set forth on the Schedule 4.1(D), as of the Closing Date, none of the Loan Parties will have outstanding any stock or securities convertible into or exchangeable for any shares of its capital stock and none will have outstanding any rights or options to subscribe for or to purchase its capital stock (or other equity interests) or any stock or securities convertible into or exchangeable for its capital stock (or other equity interests).  As of the Closing Date, none of the Loan Parties will be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or other equity interests.  As of the Closing Date, all of the outstanding shares and capital stock or other equity interests of the Loan Parties will be validly issued, fully paid and
nonassessable.  None of the Loan Parties have violated any applicable federal or state securities Laws, in any material respect, in connection with the offer, sale or issuance of any of its capital stock or other equity interests, and the offer, sale and issuance of the Notes hereunder, or of the Second Priority Senior Secured Notes, do not require registration under the Securities Act or any applicable state securities laws.

 

(E)           Subsidiaries.  As of the Closing Date, the Loan Parties do not own, or hold any rights to acquire, any shares of stock or any other security or interest in any other Person, and the Loan Parties have no Subsidiaries, except in each case as set forth on the Organizational Schedule.

 

(F)           Authorization; No Breach.  Except as set forth on Schedule 4.1(F), the execution, delivery and performance of this Agreement and the other Loan Documents to which any of the Loan Parties is a party, and the consummation of the Transactions have been duly authorized by each of the Loan Parties.  The execution and delivery by each of the Loan Parties of the Loan Documents and the consummation of the Transactions do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under,
(iii) except as created pursuant to the Loan Documents and the Note Purchase Documents result in the creation of any Lien upon any of the Loan Parties’ capital stock or assets pursuant to, (iv) give any third party the right to accelerate any obligation under, or (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any Governmental Authority pursuant to, the Charter Documents or By-laws of any of the Loan Parties, or any Law to which any of the Loan Parties is subject, or any material contract or material instrument, or any order, judgment or decree, to which any of the Loan Parties is a party or to which they or their assets are subject.

 

(G)           Governmental Approvals.  Except as set forth on Schedule 4.1(G), no registration with or consent or approval of, or other action by, any Governmental Authority is or will be required in connection with the consummation of the Transactions.  No registration with or consent or approval of, or other action by, any Governmental Authority was required in connection with the consummation of the Transactions.

 

(H)           Enforceability.  This Agreement constitutes, and each of the other Loan Documents when duly executed and delivered by each of the Loan Parties who are parties thereto will constitute, legal, valid and binding obligations of each of the Loan Parties enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

(I)           No Material Adverse Change.  Since December 31, 2006, there has been no Material Adverse Change with respect to Rocky and its Subsidiaries, taken as a whole.

 

  

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(J)           Litigation.  Except as described in the “Litigation Schedule” attached hereto as Schedule 4.1(J), as of and after the Closing Date, there are no actions, suits or proceedings at law or in equity or by or before any arbitrator or any Governmental Authority now pending or, to the best knowledge of the Loan Parties’ management after reasonable inquiry, threatened against or filed by or affecting Company, any of the Loan Parties or any of their directors or officers or the businesses, assets or rights of any of the Loan Parties which are
reasonably likely to have a Material Adverse Effect.

 

(K)           Compliance with Laws.  The Loan Parties are not in violation in any material respect of any applicable Law which any such violation (or such violations, if any, in the aggregate) is reasonably likely to have a Material Adverse Effect.  The Loan Parties are not in, and the consummation of the Transactions will not cause any, default concerning any judgment, order, writ, injunction or decree of any Governmental Authority.  As of and after the Closing Date, there is no investigation, enforcement action or regulatory action pending or,
to the knowledge of the Loan Parties, threatened against or affecting any of the Loan Parties by any Governmental Authority, except as set forth on the Litigation Schedule, which is reasonably likely to have a Material Adverse Effect.  Except as set forth in the Litigation Schedule, as of and after the Closing Date, there is no remedial or other corrective action that any of the Loan Parties is required to take to remain in compliance with any judgment, order, writ, injunction or decree of any Governmental Authority or to maintain any material permits, approvals or licenses granted by any Governmental Authority in full force and effect which is reasonably likely to have a Material Adverse Effect.  To the knowledge of Parent, during the past ten (10) years, none of the executive officers, directors or management of Parent or any of its Subsidiaries have been arrested
or convicted of any material crime nor have any of them been bankrupt or an officer or director of a bankrupt corporation or other entity.

 

(L)           Environmental Protection.  Except as specified in “Environmental Schedule” attached hereto as Schedule 4.1(L), and after giving effect to the Transactions, except for materials, conditions, operations and noncompliance which is not reasonably likely to have a Material Adverse Effect:  (i) the business of the Loan Parties and each of their Subsidiaries, the methods and means employed by the Loan Parties (and their Subsidiaries) in the operation
thereof (including all operations and conditions at or in the properties of the Loan Parties or any of their Subsidiaries), the assets owned, leased, managed, used, controlled, held or operated by the Loan Parties and/or their Subsidiaries comply in all material respects with all applicable Environmental Laws; (ii) with respect to the Properties and Facilities, and except as disclosed in the Environmental Schedule, the Loan Parties (and their Subsidiaries) have obtained, possess, and are in compliance in all material respects with all permits, licenses, reviews, certifications, approvals, registrations, consents, and any other authorizations required of a Loan Party (or any Subsidiary thereof) or other party under any Environmental Laws; (iii) the Loan Parties or any of their Subsidiaries have not received (x) any claim or notice of violation, lien, complaint, suit, order or other claim
or notice to the effect that the Loan Parties (or any of their Subsidiaries) are or may be liable to any Person as a result of (A) the environmental condition of any of their Properties and Facilities or any other property, or (B) the release or threatened release of any Pollutant, or (y) any letter or request for information under Section 104 of the CERCLA, or comparable state Laws, and to the best of the any of Loan Parties’ knowledge, none of the operations of the Loan Parties or any of their Subsidiaries is the subject of any investigation by a Governmental Authority evaluating whether any remedial action is needed to respond to a release or threatened release of any Pollutant at the Properties and Facilities or at any other location, including any location to which the Loan Parties or any of their Subsidiaries have transported, or arranged for the transportation of, any
Pollutants with respect to the Properties and Facilities; (iv) except as disclosed in the Environmental Schedule, neither the Loan Parties, nor any of their Subsidiaries nor, to the knowledge of the Loan Parties, any prior owner or operator has incurred in the past, or is now subject to, any Environmental Liabilities; (v) except as disclosed in the Environmental Schedule, to the knowledge of the Loan Parties, there are no Liens, covenants, deed restrictions, notice or registration requirements, or other limitations applicable to the Properties and Facilities, based upon any Environmental Laws or other legal obligations; (vi) to the knowledge of the Loan Parties, there are no USTs located in, at, on, or under the Properties and Facilities or other than the USTs identified in the Environmental Schedule as USTs; and, to the knowledge of the Loan Parties, each of those USTs is in compliance
in all material respects with all Environmental Laws and other legal obligations; and (vii) except as disclosed in the Environmental Schedule, to the knowledge of the Loan Parties, there are no PCBs, lead paint, asbestos (of any type or form), or materials, articles or products containing PCBs, lead paint or asbestos, located in, at, on, under, a part of, or otherwise related to the Properties and Facilities, and, to the knowledge of the Loan Parties, all of the PCBs, lead paint, asbestos, and materials, articles and products containing PCBs, lead paint or asbestos identified in the Environmental Schedule are in compliance in all material respects with all Environmental Laws and other legal obligations.

 

  

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(M)           Legal Investments; Use of Proceeds.  The Loan Parties will use the proceeds from the Loans to provide for the ongoing working capital and general corporate requirements of the Loan Parties.  The Loan Parties are not engaged in the business of extending credit for the purpose of purchasing or carrying any “margin stock” or “margin security” (within the meaning of Regulations T, U or X issued by the Board of Governors of the Federal Reserve System), and no proceeds of the Loans will be used to purchase or carry any margin
stock or margin security or to extend credit to others for the purpose of purchasing or carrying any margin stock or margin security.

 

(N)           Taxes.  The Loan Parties have filed or caused to be filed all federal, state and local tax returns that are required to be filed by it and their Subsidiaries, and have paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, including payroll taxes, other than such Charges (i) which are being contested in good faith by such Person, as the case may be, by appropriate proceedings diligently instituted and conducted and without the risk of the imposition of a Lien with respect to a material
portion of the Collateral and (ii) with respect to which a reserve or other appropriate provision, if any, as is required in conformity with GAAP shall have been made.  Parent has no knowledge of any proposed tax assessment against Parent or any of its Subsidiaries that is reasonably likely to have a Material Adverse Effect.

 

(O)           Labor and Employment.  Except where noncompliance is not reasonably likely to have a Material Adverse Effect, each Loan Party, ERISA Affiliate and each Plan is in compliance in all material respects with those provisions of ERISA, the Code, the Age Discrimination in Employment Act, and the regulations and published interpretations thereunder that are applicable to the Loan Party, or ERISA Affiliate or any such Plan.  As of the date hereof, no Reportable Event has occurred with respect to any Plan maintained by any Loan Party or ERISA Affiliate
as to which said Loan Party or ERISA Affiliate is or was required to file a report with the PBGC.  No Plan has any amount of unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA) or any accumulated funding deficiency (within the meaning of Section 302(a)(2) of ERISA), whether or not waived, and none of the Loan Parties, nor any ERISA Affiliate or any member of the Controlled Group has incurred or expects to incur any withdrawal liability under Subtitle E of Title IV of ERISA to a Multiemployer Plan.  Except where noncompliance is not reasonably likely to have a Material Adverse Effect, the Loan Parties and ERISA Affiliates are in compliance in all material respects with all labor and employment laws, rules, regulations and requirements of all applicable domestic and foreign jurisdictions.  There are no pending or threatened labor
disputes, work stoppages or strikes either (x) as of the Closing Date or (y) thereafter that are reasonably likely to have a Material Adverse Effect.

 

(P)           Investment Company Act; Public Utility Holding Company Act.  None of the Loan Parties are (i) an “investment company” or “controlled” by an investment company within the meaning of the Investment Company Act of 1940, as amended, or (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding
Company Act of 1935, as amended.

 

(Q)           Properties; Security Interests.  The Loan Parties have good (and, solely as to real estate, marketable) title to, or valid leasehold interests in, or valid licenses to use, all of the material assets and properties used or useful by the Loan Parties in the Business (collectively, the “Properties and Facilities”), subject to no Liens except for Permitted Liens.  On and after the Closing Date, Agent has a valid, perfected and, except for Liens set forth in clauses (c), (e), (g) or (h) of the definition of Permitted Liens, first
priority Liens in the Properties and Facilities, all of which constitutes Collateral (except to the extent any of the same constitutes Excluded Property), securing the payment of the Obligations, and such Liens are entitled to all of the rights, priorities and benefits afforded by the UCC or other applicable Law as enacted in any relevant jurisdiction which relates to perfected Liens. All of the Properties and Facilities are in good repair, working order and condition.  As of the Closing Date, all real estate owned or leased by the Loan Parties is listed on the “Properties Schedule,” attached hereto as Schedule 4.1(Q).

 

(R)           Intellectual Property; Licenses.  Each of the Loan Parties possesses or licenses all Proprietary Rights necessary to conduct the Business as heretofore conducted or as proposed to be conducted by it.  All Proprietary Rights registered in the name of the Loan Parties and applications therefor filed by the Loan Parties are listed on the “Intellectual Property Schedule,” attached hereto as Schedule 4.1(R).  No event has occurred that permits,
or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing, which taken in isolation or when considered with all other such revocations or terminations could have a Material Adverse Effect.  None of the Proprietary Rights owned by or used under license by the Loan Parties infringes, misappropriates or conflicts with any Proprietary Rights or other rights of any other Person; no products or services sold by any of the Loan Parties in connection with the Business is infringing on, misappropriating or making any unlawful or unauthorized use of any Proprietary Rights or other rights of another Person; and no other Person is infringing upon, misappropriating or making any unlawful or unauthorized use of any Proprietary Rights of any of the Loan Parties; except, in each case, to the extent any such infringement, misappropriation,
conflict or unlawful or unauthorized use could not reasonably be expected to have a Material Adverse Effect.  None of the Loan Parties has notice or knowledge of any facts or any past, present or threatened occurrence that could preclude or impair the Loan Parties’ ability to retain or obtain any authorization necessary for the operation of the Business.

 

  

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(S)           Solvency.  After giving effect to the Transactions, (i) the fair value of the assets of the Loan Parties, at a fair valuation, will exceed their debts and Liabilities, subordinated, contingent or otherwise, (ii) the present fair saleable value of the property of the Loan Parties will be greater than the amount that will be required to pay the probable liability of their debts and other Liabilities, subordinated, contingent or otherwise, as such debts and other Liabilities become absolute and matured, (iii) the Loan Parties will be able to pay their
debts and Liabilities, subordinated, contingent or otherwise, as such debts and Liabilities become absolute and matured, and (iv) the Loan Parties will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date.  The determination of whether a Person is solvent shall take into account all such Person’s properties and liabilities regardless of whether, or the amount at which, any such property or liability is included on a balance sheet of such Person prepared in accordance with GAAP, including properties such as contingent contribution or subrogation rights, business prospects, distribution channels and goodwill.  The determination of the sum of a Person’s properties at a fair valuation or the present fair saleable value of a
Person’s properties shall be made on a going concern basis, unless at the time of such determination the liquidation of the business in which such properties are used or useful is in process or is reasonably anticipated.  In computing the amount of contingent or unrealized properties or contingent or unliquidated liabilities at any time, such properties and liabilities will be computed at the amounts which, in light of all the facts and circumstances existing at such time, represent the amount that reasonably can be expected to become realized properties or matured liabilities, as the case may be.  In computing the amount that would be required to pay a Person’s probable liability on its existing debts as they become absolute and matured, reasonable valuation techniques, including a present value analysis, shall be applied using such rates over such
periods as are appropriate under the circumstances, and it is understood that, in appropriate circumstances, the present value of contingent liabilities or obligations under Guaranties may be zero.

 

(T)           Complete Disclosure.  All factual information furnished by or on behalf of the Loan Parties to Agent for purposes of or in connection with the GMAC Transactions, or any of the other Transactions, is, to Parent’s knowledge, and all other such factual information hereafter furnished by or on behalf of the Loan Parties, except to the extent any of the same relates expressly to any earlier date, will be, true and accurate in all material respects on the date as of which such information is furnished and not incomplete by omitting to state any fact
necessary to make such information not misleading at such time in light of the circumstances under which such information was provided.

 

(U)           Side Agreements.  Except as set forth in Schedule 4.1(U), as of the Closing Date, none of the Loan Parties nor any Affiliate of the Loan Parties nor any director, officer or employee of the Loan Parties or any of their Affiliates, respectively, has entered into, as of the date hereof, any side agreement, either oral or written, with any individual or business, pursuant to which the director, officer, employee, Loan Party or Affiliate agreed to do anything beyond the
requirements of the formal, written contracts executed by the Loan Parties and disclosed to the Lenders and Agent herein.

 

  

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(V)           Broker’s or Finder’s Commissions.  No broker’s or finder’s or placement fee or commission will be payable to any broker or agent engaged by the Loan Parties or any of their officers, directors or agents with respect to the GMAC Transactions, except for fees payable to Agent.  The Loan Parties agree to indemnify Agent and Lenders and to hold them harmless from and against any claim, demand or liability for broker’s or finder’s or placement fees or similar commissions, whether or not payable by the Loan
Parties, alleged to have been incurred in connection with the GMAC Transactions, other than any broker’s or finder’s fees payable to Persons engaged by Agent or Lenders without the knowledge of the Loan Parties.

 

(W)           Material Contracts.  Schedule 4.1(W) lists, as of the Closing Date, each material contract to which the Loan Parties are a party, by which any of them or their respective properties is bound or to which any of them is subject (collectively, “Material Contracts”), and also indicates the parties, subject matter and term thereof.  As of the Closing Date, (i) each Material Contract is in full force and effect and is enforceable by the Loan Party that is a party thereto in accordance with its terms, and (ii) none of the Loan Parties
(nor, to the knowledge of the Loan Parties, any other party thereto) is in breach of or default under any Material Contract in any material respect or has given notice of termination or cancellation of any Material Contract.

 

(X)           Foreign Assets Control Regulations, Etc.  None of the Loan Parties are an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United States of America (50 U.S.C. App. §§ 1 et seq.), as amended.  None of the Loan Parties are in violation of (a) the Trading with the Enemy Act, as amended, (b) any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto or (c) the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot Act”).  No Loan Party (i) is a blocked person described in section 1 of the Anti-Terrorism Order or (ii) to the best of its knowledge, engages in any dealings or transactions, or is otherwise associated, with any such blocked person.

 

  

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(Y)          Parent SEC Reports.

 

(i)           Parent has filed all required material forms, reports, schedules, statements and other documents (including exhibits and other information incorporated therein) with the SEC since December 31, 2001 (collectively, the “Parent SEC Reports”). As of their respective dates, or, if amended, as of the date of the last such amendment, each Parent SEC Report, (a) complied in all material respects with the applicable requirements of the Securities Act, the Securities Exchange Act, and the rules and regulations thereunder applicable to such Parent SEC Reports and (b) did not, and in the case of such forms, reports, schedules, statements and
other documents filed after the date hereof will not as of the time they are filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  Each of the consolidated financial statements included in or incorporated by reference into the Parent SEC Reports (including the related notes and schedules) were, and in the case of such consolidated financial statements filed after the date hereof will be, prepared materially in accordance with the published rules and regulations of the SEC, and fairly presents (as to such previously filed items) in all material respects the consolidated financial position of Parent and its Subsidiaries as of its date, and each of the consolidated statements of operations,
stockholders’ equity and cash flows included in or incorporated by reference into the Parent SEC Reports (including any related notes and schedules) fairly presents (as to such previously filed items) in all material respects the financial position, results of operations and cash flows, as the case may be, of Parent and its Subsidiaries for the periods set forth therein, in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein (and subject, in the case of unaudited statements, to normal year-end audit adjustments and the absence of footnotes).

 

(ii)           As of the Closing Date, (x) there is no investigation by the SEC pending or threatened with respect to any Parent SEC Report, (y) none of the Parent SEC Reports are the subject of open, unresolved comments from the SEC and (z) to the knowledge of Parent, there is no material unresolved violation of the Securities Exchange Act or the published rules and regulations of the SEC asserted by the SEC with respect to the Parent SEC Reports.

 

(Z)           Current Business Practices.  None of the Loan Parties, nor, to the knowledge of the Loan Parties, any of their respective directors, officers, agents, employees or representatives in their capacities as such has knowingly (or unknowingly, in the case where such conduct is reasonably likely to have had a Material Adverse Effect): (i) used any funds for unlawful contributions, unlawful gifts, unlawful entertainment or other unlawful expenses relating to political activity; (ii) directly or indirectly paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent or other party acting on behalf of or under the auspices of a governmental official or Governmental Authority, in the US or any other country, which is in any manner related to the Business that was illegal under federal, state or local laws of the US or any other country having jurisdiction; (iii) made any payment to any customer or subcontractor of the Business or to any officer, director, partner, employee or agent of any such customer or subcontractor, for the unlawful influence of any such customer or subcontractor or any such officer, director, partner, employee or agent; (iv) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer or subcontractor or any such officer, director, partner, employee or agent, in respect of
the Business; or (v) except as set forth on Schedule 4.1(Z), violated any federal, state or local campaign finance, election or similar laws.

 

4.2.         Absolute Reliance on the Representations and Warranties.  All representations and warranties contained in this Agreement and any financial statements, instruments, certificates, schedules or other documents delivered in connection herewith, shall survive the execution and delivery of this Agreement, regardless of any investigation made by Agent or Lenders or on Agent’s or Lenders’ behalf.

 

  

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SECTION 5.          COVENANTS

 

5.1.          Affirmative Covenants.  Each Loan Party (unless otherwise specified) 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, each of the Loan Parties shall:

 

(A)           Existence.  Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence.

 

(B)           Businesses and Properties; Compliance with Laws.  At all times (i) do or cause to be done all things necessary to preserve, renew and keep in full force and effect the rights, licenses, registrations, permits, certifications, approvals, consents, franchises, Patents, Copyrights, Trademarks and trade names, and any other trade names that are material to the conduct of its businesses; (ii) comply in all material respects with all Laws applicable to the operation of such business, including but not limited to, all Environmental Laws, whether now in effect
or hereafter enacted, (iii) take all action that may be required to obtain, preserve, renew and extend all rights, Patents, Copyrights, Trademarks, tradenames, franchises, registrations, certifications, approvals, consents, licenses, permits and any other authorizations that are material to the operation of such business, (iv) maintain, preserve and protect all property material to the conduct of such business, and (v) except for obsolete, worn-out equipment or equipment no longer useful in the operation of the Business and ordinary wear and tear, keep its property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto deemed necessary by Parent or such Loan Party in order that the Business may be properly conducted at all times.

 

  

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(C)           Insurance.  Maintain insurance required by the Loan Documents and any and all contracts entered into by the Loan Parties, including but not limited to:  (i) coverage on their insurable properties (including all Inventory, Equipment and real property) against the perils of fire, theft, hazard and burglary; (ii) public liability; (iii) workers’ compensation; (iv) business interruption; (v) product liability; and (vi) such other risks as are customary with companies similarly situated and in the same or similar business as that of the Loan
Parties under policies issued by financially sound and reputable insurers in such amounts as are customary with companies similarly situated and in the same or similar business.  Each of the Loan Parties shall pay or shall cause to be paid all insurance premiums payable by it or its Subsidiaries and, upon Agent’s request, shall deliver a copy of the policy or policies of such insurance (or certificates of insurance with copies of such policies) to Agent.  All insurance policies of the Loan Parties shall contain endorsements, in form and substance reasonably satisfactory to Agent, providing that the insurance shall not be cancelable except upon prior written notice to Agent given within a period satisfactory to Agent.  Agent, on behalf of Lenders, shall be shown as a loss payee and an additional named insured party under all such insurance policies (as
well as under all business interruption insurance of Loan Parties), in each case pursuant to appropriate endorsements in form and substance satisfactory to Agent.  No notice of cancellation has been received with respect to such policies and each Loan Party, and each of its Subsidiaries, is in material compliance with all conditions contained in such policies.  Loan Parties shall provide Agent evidence of the insurance coverage and of the assignments and endorsements required by this Agreement immediately upon request by Agent and upon renewal of any existing policy.  If Borrower elects to change insurance carriers, policies or coverage amounts, Borrower shall notify Agent and provide Agent with evidence of the updated insurance coverage and of the assignments and endorsements required by this Agreement.  In the event Borrower fails to provide
Agent with evidence of the insurance coverage required by this Agreement, Agent may, but is not required to, purchase insurance at Loan Parties’ expense to protect Agent’s and the Lender’s interests in the Collateral.  This insurance may, but need not, protect any Loan Party’s interests.  The coverage purchased by Agent may not pay any claim made by any Loan Party or any claim that is made against any Loan Party in connection with the Collateral.  Loan Parties may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that the applicable Loan Party has obtained insurance as required by this Agreement.  If Agent purchases insurance for the Collateral, Loan Parties will be responsible for the costs of that insurance, including interest thereon and other charges imposed on Agent in
connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance, and such costs may be added to the Obligations.  The costs of the insurance may be more than the cost of insurance Loan Parties are able to obtain on their own. Any proceeds received from any policies of insurance relating to Collateral shall be applied to the Obligations in accordance with Section 2.4(E); provided, however, if Borrower reasonably expects the proceeds of any insurance to be reinvested within one hundred eighty (180) days to repair or replace such assets with like assets, to the extent not paid directly to Agent by the applicable insurance company, Borrower shall deliver such insurance proceeds to Agent to be applied to the Revolving Loan and Agent shall establish a reserve against available funds for borrowing purposes under the
Revolving Loan for such amount, until such time as such proceeds have been re-borrowed or applied to other Obligations as set forth herein and Borrower may, so long as no Default or Event of Default shall have occurred and be continuing, reborrow such proceeds only for such repair or replacement.  If Borrower fails to reinvest such insurance proceeds within one hundred eighty (180) days, Borrower hereby authorizes Agent and Lenders to make a Revolving Advance in the amount of the remaining reserve to repay the Loans in the manner set forth in Section 2.4(E).

 

(D)           Obligations and Taxes.  Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon them or upon their income or profits or in respect of their properties before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might give rise to Liens or charges upon such properties or any part thereof; provided, however, that the Loan Parties shall not be required to pay and discharge or to cause to be paid and discharged any
such tax, assessment, charge, levy or claim so long as (i) the validity or amount thereof shall be contested in good faith by appropriate proceedings and (ii) the Loan Parties shall have set aside on their books adequate reserves with respect thereto in accordance with GAAP.

 

  

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(E)          Financial Statements; Reports.  Parent will furnish to Agent:

 

(1)           Annual Financial Statements.  Within ninety (90) days after the end of each Fiscal Year of Rocky on a Consolidated Basis, financial statements of Rocky on a Consolidated Basis including, but not limited to, statements of income and stockholders’ equity and cash flow from the beginning of the current Fiscal Year to the end of such Fiscal Year and the balance sheet as at the end of such Fiscal Year, all prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and reported upon without qualification by an independent certified public accounting firm selected by Parent and satisfactory to Agent (the “Accountants”).  The report of the Accountants shall be accompanied by a statement of the Accountants certifying that (i) they have caused the Loan Agreement to be reviewed, (ii) in making the examination upon which such report was based either no information came to their attention which to their knowledge constituted an Event of Default under this Agreement or any related agreement or, if such information came to their attention, specifying any such Event of Default, its nature, when it occurred and whether it is continuing, and such report shall contain or have appended thereto calculations which set forth Loan Parties’ compliance with each covenant set forth in Section
5.3.  In addition, the reports shall be accompanied by a certificate of Parent’s Chief Financial Officer which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Loan Parties with respect to such event, and such certificate shall have appended thereto calculations which set forth Loan Parties’ compliance with the covenant set forth.  The foregoing certificate of Parent’s Chief Financial Officer shall also set forth a calculation of the Total Leverage Ratio for purposes of determining the Applicable Margin with respect to the then current Calculation Period.

 

(2)           Quarterly Financial Statements.  Within forty-five (45) days after the end of each fiscal quarter, other than the fourth fiscal quarter of each Fiscal Year, an unaudited balance sheet of Rocky on a Consolidated Basis and unaudited statements of income and stockholders’ equity and cash flow of Rocky on a Consolidated Basis reflecting results of operations from the beginning of the Fiscal Year to the end of such quarter and for such quarter, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to the business of Rocky on a Consolidated Basis. Each such balance sheet, statement of income and stockholders’ equity and statement of cash flow shall set forth a comparison of the figures for (w) the current fiscal period and (x) the current year-to-date with the figures for (y) the same fiscal period and year-to-date period of the immediately preceding Fiscal Year and (z) the projections for such fiscal period and year-to-date period delivered pursuant to Section 5.1(E)(e).  The financial statements shall be accompanied by a certificate signed by the Chief Financial Officer of Parent, which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or
Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Loan Parties with respect to such default and, such certificate shall have appended thereto calculations which set forth Loan Parties’ compliance with the covenant set forth in Section 5.3.  The foregoing certificate of Parent’s Chief Financial Officer shall also set forth a calculation of the Total Leverage Ratio for purposes of determining the Applicable Margin with respect to the then current Calculation Period.

 

  

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(3)           Monthly Financial Statements.  Within (a) ninety (90) days after the end of each December, (b) sixty (60) days after the end of each January and (c) thirty (30) days after the end of each other month, an unaudited balance sheet of Rocky on a Consolidated Basis and unaudited statements of income and stockholders’ equity of Rocky on a Consolidated Basis reflecting results of operations from the beginning of the Fiscal Year to the end of such month and for such month, prepared on a
basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to the business of Loan Parties. Each such balance sheet, statement of income and stockholders’ equity shall set forth a comparison of the figures for (w) the current fiscal period and (x) the current year-to-date with the figures for (y) the same fiscal period and year-to-date period of the immediately preceding Fiscal Year and (z) the projections for such fiscal period and year-to-date period delivered pursuant to Section 5.1(E)(e).  The financial statements shall be accompanied by a certificate of Parent’s Chief Financial Officer, which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default
exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Loan Parties with respect to such event and, such certificate shall have appended thereto calculations which set forth Loan Parties’ compliance with the covenants set forth in Section 5.3.

 

(4)           Reserved.

 

(5)           Projections.  As soon as available, but in no event later than December 31 of each Fiscal Year, a projection of the balance sheets, and income, retained earnings and cash flow statements, respectively, for the then current Fiscal Year (which shall be provided in monthly format) and comparable actual and budgeted figures for the current year, each of the foregoing for Rocky on a Consolidated Basis, and within ten (10) days after any material update or amendment of any such plan or
forecast, a copy of such update or amendment, including a description of and reasons for such update or amendment.  Each such projection, update or amendment shall be accompanied by a written certificate signed by Parent’s Chief Financial Officer to the effect that it has been prepared on the basis of the Loan Parties’ historical financial statements and records, together with the assumptions set forth in such projection and that it reflects expectations, after reasonable analysis, of the Loan Parties’ management as to the matters set forth therein.

 

(6)           Variances From Operating Budget.  Upon request of Agent, concurrently with the delivery of the financial statements referred to in Sections 5.1(E)(a), (b), and (c), a written report summarizing all material variances from budgets submitted by Loan Parties pursuant to Section 5.1(E)(e) and a discussion and analysis by Parent’s management with respect to such variances.

 

(7)           Borrowing Base Certificate.  (A) On a monthly basis, within fifteen (15) days after the end of each calendar month, a Borrowing Base Certificate calculated as of the last Business Day of the immediately preceding month; provided, however, that if Undrawn Availability is less than $15,000,000 for any five (5) consecutive Business Days, then, a
Borrowing Base Certificate calculated as of the last Business Day of the immediately preceding week shall be delivered 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); (B) provided further, however that if Undrawn Availability is greater than $17,000,000 (including, for clarification purposes, the requirements of Section 5.3(C)) for any ten (10) consecutive Business Days thereafter, then Borrower shall provide monthly a Borrowing Base Certificate pursuant to and subject to the conditions of clause (A) above; and provided, however, in any case, that the information set forth on each Borrowing
Base Certificate with respect to Eligible Inventory shall be (x) calculated as of the last Business Day of the immediately preceding month for each monthly Borrowing Base Certificate and (y) calculated as of date not earlier than thirty (30) days prior to the preparation thereof for each weekly or more frequently delivered Borrowing Base Certificate.

 

  

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(8)           Collateral Reports.  On or before the thirtieth (30th) day of each month as and for the prior month (a) accounts receivable agings (which shall be in summary form unless a more detailed format is requested by the Agent), (b) accounts payable agings, and (c) Inventory reports.  In addition, each Loan Party shall deliver to Agent at such intervals as Agent may require:  (i) confirmatory assignment schedules, (ii) copies of Customer’s invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents and/or information regarding the Collateral as Agent may require including, without limitation, trial balances and test verifications.  Agent shall have the right to confirm and verify all Accounts by any manner and through any medium it considers advisable and do whatever it may deem reasonably necessary to protect its interests hereunder. The items to be provided under Section 5.1(E)(g) and (h) are to be in form satisfactory to Agent and delivered to Agent from time to time solely for Agent’s convenience in maintaining records of the Collateral, and any Loan Party’s failure to deliver any of such items to Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect to the Collateral.

 

(9)           Additional Information.  Promptly, from time to time, such other information regarding the compliance by the Loan Parties with the terms of this Agreement and the other Loan Documents or the affairs, operations or condition (financial or otherwise) of the Loan Parties, and any tax returns filed by the Loan Parties, all as Agent may reasonably request and that is capable of being obtained, produced or generated by the Loan Parties or of which the Loan Parties have knowledge.

 

(10)         Reconciliation Statements.  If, as a result of any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in Section 5.1(E) hereof (other than an immaterial change in GAAP), the consolidated financial statements of the Loan Parties delivered pursuant to Section 5.1(E) (a), (b) or (e) hereof will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such Sections had
no such change in accounting principles and policies been made, then (A) together with the first delivery of financial statements pursuant to Section 5.1(E) (a), (b) or (e) hereof following such change, consolidated financial statements of the Loan Parties for (y) the current Fiscal Year to the effective date of such change and (z) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in effect during such periods, and (B) together with each delivery of financial statements pursuant to Section 5.1(E) (a), (b) or (e) hereof following such change, a written statement of the chief financial officer of each Loan Party setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in Section 5.3) which would
have resulted if such financial statements had been prepared without giving effect to such change.

 

  

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(11)         Inventory Location Statements.  On or prior to December 31 in each year, in a form similar to the Schedule 6.1(L) delivered on or about the Closing Date, indicating all locations where Inventory valued in excess of $50,000 (based upon cost) is then in the possession of any consignee, bailee, warehouseman, agent or processor.

 

(F)          Litigation and Other Notices.  Give Agent written notice (and copies, as applicable) of the following promptly after any Loan Party has or receives notice or knowledge of the following:

 

(1)           Orders; Injunctions.  The issuance by any court or Governmental Authority of any injunction, order, decision or other restraint prohibiting, or having the effect of prohibiting, the making of any loan or the initiation of any litigation or similar proceeding seeking any such injunction, order or other restraint.

 

(2)           Litigation.  The notice, filing or commencement of any action, suit or proceeding against any of the Loan Parties whether at law or in equity or by or before any court or any Federal, state, municipal or other Governmental Authority and that, if adversely determined against any of the Loan Parties, could result in uninsured liability in excess of $1,000,000 in the aggregate and notice of any material development in such matter.

 

(G)          Environmental Matters.  Promptly notify Agent in writing upon the occurrence of (A) Any Release or threatened Release of any Pollutant required to be reported by a Loan Party or any of its Subsidiaries to any Governmental Authority under any applicable Environmental Laws with respect to the Properties and Facilities or any other property, (B) any Removal, Remedial or Response action taken by any of the Loan Parties or any of their Subsidiaries or any other Person in response to any Pollutant in, at, on or under, a part of or about any of the Properties and
Facilities or any other property, (C) any violation by any of the Loan Parties of any Environmental Law, in each case, is reasonably likely to have a Material Adverse Effect, or (D) any notice, claim or other information received by, or knowledge of which is possessed by, a Loan Party that any of the Loan Parties or any of their Subsidiaries might be subject to an Environmental Liability that could result in uninsured Liability in excess of $1,000,000.

 

(H)          Default; Material Occurrences.  Promptly notify Agent in writing upon the occurrence of (a) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) that is proposed to be taken with respect thereto; (b) any event of default under the Note Purchase Agreement; (c) any event which with the giving of notice or lapse of time, or both, would constitute an event of default under the Note Purchase Agreement; (d) any event, development or
circumstance whereby any financial statements or other reports furnished to Agent fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of any Loan Party as of the date of such statements; (e) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the IRC, could subject any Loan Party to a tax imposed by Section 4971 of the IRC; (f) each and every default by any Loan Party which might result in the acceleration of the maturity of any Indebtedness with an outstanding balance in excess of $500,000, including the names and addresses of the holders of such Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount
of such Indebtedness; (g) termination of any of the Material License Agreements which such termination is reasonably likely to have a Material Adverse Effect and (h) any other development in the business or affairs of any Loan Party which is reasonably likely to have a Material Adverse Effect; in each case describing the nature thereof and the action Loan Parties propose to take with respect thereto.

 

  

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(I)           ERISA.  Comply in all material respects with the applicable provisions of ERISA and the provisions of the Code relating thereto and furnish to Agent, and if requested by them in writing, furnish to Lenders, (i) as soon as possible, and in any event within thirty (30) days after the Loan Parties know or have reason to know thereof, notice of (A) the establishment by the Loan Parties or ERISA Affiliate of any Plan, (B) the commencement by the Loan Parties or ERISA Affiliate of contributions to a Multiemployer Plan, (C) any failure by the Loan Parties or
any of their ERISA Affiliates to make contributions required by Section 302 of ERISA (whether or not such requirement is waived pursuant to Section 303 of ERISA), or (D) the occurrence of any Reportable Event with respect to any Plan or Multiemployer Plan for which the reporting requirement is not waived, together with a statement of an officer setting forth details as to such Reportable Event and the action that the Loan Parties propose to take with respect thereto, together with a copy of the notice of such Reportable Event given to the PBGC if any such notice was provided by the Loan Parties, and (ii) promptly after receipt thereof, a copy of any notice a Loan Party or ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC to terminate any Plan or Multiemployer Plan, or to appoint a trustee to administer any Plan or Multiemployer Plan, and (iii) promptly
after receipt thereof, a copy of any notice of withdrawal liability from any Multiemployer Plan.

 

(J)           Maintaining Records; Access to Premises and Inspections.  Maintain financial records in accordance with generally accepted practices and, upon reasonable notice, at all reasonable times and as often as Agent may reasonably request (and at any time after the occurrence and during the continuation of a Default or Event of Default), permit any authorized representative designated by Agent, subject to the same confidentiality provisions for Agent and Lenders as set forth in this Agreement, to visit and inspect the properties and financial records of the
Loan Parties and to make extracts from such financial records, all at the Loan Parties’ reasonable expense, and permit any authorized representative designated by Agent to discuss the affairs, finances and condition of the Loan Parties with the Loan Parties’ chief financial officers and such other officers as the Loan Parties shall deem appropriate, and the Loan Parties’ independent public accountants.

 

(K)           Other Reports.  Furnish Agent as soon as available, but in any event within ten (10) days after the issuance thereof, (i) with copies of such financial statements, reports and returns as each Loan Party shall send to its stockholders and (ii) copies of all notices sent pursuant to the Note Purchase Agreement.

 

(L)           Patriot Act Compliance.  Loan Parties shall provide such information and take such actions as are reasonably requested by the Agent or any Lender in order to assist the Agent and the Lenders in maintaining compliance with the Patriot Act.

 

  

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(M)           SEC Filings; Press Release.  Promptly after the sending or filing thereof, Parent shall (x) send to Agent (either in writing or by e-mail) copies of all press releases and all statements concerning material changes or developments in the business of the Loan Parties made available by the Loan Parties to the public or any other creditor and (y) use reasonable efforts to send to Agent (either in writing or by e-mail) copies of all reports sent to the holders of the Common Stock of Parent generally and all reports and registration statements filed with the
SEC or any national or foreign securities exchange or the National Association of Securities Dealers, Inc.

 

5.2.         Negative Covenants.  The Loan Parties, jointly and severally, covenant 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:

 

(A)           Indebtedness.  None of the Loan Parties shall create, incur, assume guarantee or be or remain liable for, contingently or otherwise, or suffer to exist any Indebtedness, except:

 

(a)           Indebtedness under this Agreement;

 

(b)           Indebtedness of Borrower incurred in the ordinary course of business with respect to customer deposits, trade payables and other unsecured current Liabilities not the result of borrowing and not evidenced by any note or other evidence of  Indebtedness;

 

(c)           Indebtedness under the Note Purchase Agreement;

 

(d)           Purchase money Indebtedness of Borrower and Indebtedness consisting of Capital Leases, in the aggregate, not to exceed $2,500,000 at any time outstanding;

 

(e)           Intercompany Indebtedness between the Loan Parties, including between Parent and its Subsidiaries (which, for the sake of clarification, do not include trade payables incurred in the ordinary course of business), provided that the aggregate outstanding amount of Intercompany Indebtedness owing at any time by Subsidiaries that are not Loan Parties to Loan Parties shall not exceed $10,000,000;

 

(f)           Indebtedness to shareholders of Parent from share repurchases and redemptions under the Stockholders Agreement not to exceed $500,000 in the aggregate in any Fiscal Year;

 

(g)           Other Indebtedness of Loan Parties in the aggregate at any time outstanding of $1,000,000; provided that such Indebtedness is unsecured and/or subordinated to the Indebtedness under this Agreement on terms reasonably satisfactory to Agent;

 

(h)           Indebtedness of Borrower listed on the Permitted Indebtedness Schedule attached hereto as Schedule 5.2(A);

 

(i)            Indebtedness incurred in connection with the financing of Loan Parties’ insurance premiums;

 

  

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(j)            Indebtedness incurred in connection with Interest Rate Protection Agreements, in all cases not for speculative purposes, not to exceed in the aggregate a maximum potential Liability for the termination of such any and all such agreements, of $7,500,000 at any time outstanding;

 

(k)           Indebtedness incurred in connection with the purchase, financing or refinancing of real property, not to exceed the sum of $5,000,000 in the aggregate at any time outstanding;

 

(l)            obligations under any lease which is accounted for by the lessee as an operating lease and under which the lessee is intended to be the “owner” of the leased property for Federal income tax purposes; and

 

(m)          Indebtedness incurred in connection with a Permitted Sale/Leaseback, not to exceed the sum of $7,000,000.

 

(B)           Negative Pledge; Liens.

 

  The Loan Parties shall not create, incur, assume or suffer to exist any Lien of any kind on any of their properties or assets of any kind, except the following (collectively, “Permitted Liens”):

 

(a)           Liens created in connection with the Loan Documents;

 

(b)           Liens created in connection with the Note Purchase Documents which are subordinate and junior to the Liens of Agent and the Lenders and are subject to the terms of the Intercreditor Agreement;

 

(c)           Liens for or priority claims imposed by law that are incidental to the conduct of business or the ownership of properties and assets (including mechanic’s, warehousemen’s, attorneys’ and statutory landlords’ Liens) and deposits and pledges incurred in the ordinary course of business and not in connection with the borrowing of money; provided, however, that in each case, the obligation secured is not overdue, or, if overdue, is being contested in good faith and adequate reserves have been set up by the Loan Parties as the case may be; and provided, further, that the Lien and security interest provided in the Loan
Documents or any portion thereof created or intended to be created thereby is not, in the opinion of Agent, unreasonably jeopardized thereby;

 

(d)           Liens securing the payments of Charges incurred in the ordinary course of business that either (A) are not delinquent, or (B) are being contested in good faith by appropriate legal or administrative proceedings and as to which adequate reserves have been set aside on their books, and so long as during the period of any such contest, the Loan Parties shall suffer no loss of any privilege of doing business or any other right, power or privilege necessary or material to the operation of the Business; provided, however, that a stay of enforcement of any such Lien is in effect and the first priority status of the Lien of Agent under the Loan
Documents shall not be affected thereby;

 

(e)           Liens securing Capital Leases, purchase money Indebtedness permitted under Section 5.2(A)(d) and Indebtedness incurred in connection with a Permitted Sale/Leaseback, in either case which attach solely to the assets being leased or purchased;

 

  

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(f)            Liens securing Indebtedness permitted under Section 5.2(A)(i) which attach solely to the applicable insurance policies and proceeds thereof;

 

(g)           Liens securing Indebtedness permitted under Section 5.2(A)(k) which attach solely to the relevant real property and improvements;

 

(h)           Liens listed on the “Permitted Liens Schedule” attached hereto as Schedule 5.2(B); and

 

(i)            Extensions, renewals and replacements of Liens referred to in clauses (a), (b), (e), (g) or (j) of this Section 5.2(B); provided, however, that any such extension, renewal or replacement Lien shall be limited to the property or assets covered by the Lien extended, renewed or replaced and that the obligations secured by any such extension, renewal or replacement Lien shall be in an amount not greater than the amount of the obligations secured by the Lien extended, renewed or replaced at the time of such extension, renewal or replacement;

 

(j)            Liens of any licensor or licensee in connection with license agreements entered into in the ordinary course of business, which such Liens do not constitute security interests in any assets of any Loan Party;

 

(k)           any Lien or encumbrance, UCC financing statement, interest or title of a lessor under any operating lease entered into in the ordinary course of business, or any interest or title of any lessee under any leases or subleases of real property, with respect solely to the leased property and not to any other Collateral;

 

(l)            with respect solely to real property, defects and irregularities in title, survey exceptions, encumbrances, licenses, covenants, restrictions, easements or reservations of others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other similar purposes; outstanding mineral rights or reservations (including rights with respect to the removal of material resources) which do not materially diminish the value of the surface estate, assuming usage of such surface estate similar to that being carried on by any Person as of the effective date, and Liens arising with respect to zoning restrictions, licenses, covenants,
building restrictions and other similar charges or encumbrances on the use of real property of such Person which do not materially interfere with the ordinary conduct of such Person’s business;

 

(m)          Liens on any interest in life insurance on any officer, director or employee;

 

(n)           Liens incurred or pledges and deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance, pensions or other types of social security benefits, or to secure the performance of statutory obligations or to secure the performance of bids, tenders, sales and contracts (other than for the repayment of borrowed money) and Liens incurred to secure any surety bonds, appeal bonds, supersedeas bonds or other instruments serving a similar purpose in connection with the appeal of any judgment or defense of any claim relating to a prejudgment Lien;

 

  

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(o)           Liens consisting of financing statements or similar notices filed by a Person of a type listed in Section 9-505 of the UCC solely in such capacity; and

 

(p)           Liens consisting of judgments or attachments that would not  constitute an Event of Default under Section 7.1(J).

 

(C)           Contingent Liabilities.  The Loan Parties shall not become liable for any Guaranties, except for (i) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) guaranties by a Loan Party with respect to Indebtedness of Borrower permitted under Section 5.2(A), (iii) Guaranties of Borrower with respect to a maximum potential liability of $1,000,000 at any time outstanding, (iv) Guaranties, obligations, warranties and indemnities, not with respect to senior or funded Indebtedness of
any Person, which have been or are undertaken or made in the ordinary course of business, in connection with the Transactions or in connection with the issuance of securities of the Parent, and (v) Guaranties of  any Loan Party on behalf of such Loan Party’s Subsidiary which is not a Loan Party, not to exceed in the aggregate at any time outstanding, guaranteed Indebtedness in the sum of $1,000,000.

 

(D)           Intentionally Omitted.

 

(E)           Mergers, etc.  Except for a merger or consolidation of any Subsidiary or Loan Party into another Loan Party (except for mergers or consolidations of Borrowers into Guarantors unless consented to in writing by Agent in its sole reasonable discretion), Loan Parties shall not alter the corporate, capital or legal structure of the Loan Parties, or merge into or consolidate or combine with any other Person, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) or purchase, lease or otherwise acquire (in one transaction or a
series of related transactions) all or any substantial part of the property or assets of any Person in excess of the aggregate sum of $5,000,000 during the term hereof in connection with a Permitted Acquisition.  The Loan Parties shall not sell, transfer or otherwise dispose of any of its assets, including without limitation the Collateral, other than (i) sales, leases, assignments, transfers, conveyances or other dispositions of Inventory in the ordinary course of business; (ii) sales, assignments, transfers, conveyances or other dispositions (other than leases or subleases of leases) of properties outside of the ordinary course of business not to exceed in the aggregate more than $100,000 in any Fiscal Year; (iii) in addition to dispositions permitted under clauses (i) and (ii) above, the disposition of Equipment of any Loan Party if such Equipment is obsolete or no longer
useful in the ordinary course of such Loan Party’s business; (iv) assignments and licenses of intellectual property in the ordinary course of business; (v) the sale or transfer of property of any Loan Party to any other Loan Party (except for sales or transfers by Borrowers to Guarantors unless consented to in writing by Agent in its sole reasonable discretion); (vi) subleases of leases or leases of property which, at the time of such sublease or lease, is then not currently being utilized in the Business; and (vii) any Permitted Sale/Leaseback.

 

  

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(F)          Affiliate Transactions.  Other than by and between, or among, Parent, the Loan Parties and their respective Subsidiaries, in each case in a manner that is not materially economically detrimental to any Borrower, the Loan Parties shall not make any loan or advance to any director, officer or employee of the Loan Parties or any Affiliate, or enter into or be a party to any transaction or arrangement with any Affiliate of the Loan Parties, including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate, except pursuant to the reasonable requirements of the Loan Parties’ business and upon fair and reasonable terms no less favorable to the Loan Parties than would be obtained in a comparable arm’s-length transaction with a Person other than an Affiliate.

 

(G)          Dividends.  The Loan Parties shall not, directly or indirectly, declare or pay any dividends or make any distribution of any kind on their outstanding capital stock or any other payment of any kind to any of their stockholders or its Affiliates (including any redemption, purchase or acquisition of, whether in cash or in property, securities or a combination thereof, any partnership interests or capital accounts or warrants, options or any of their other securities), or set aside any sum for any such purpose other than for such dividends, distributions or
payments paid solely to other Loan Parties and for any other purpose up to $500,000 in the aggregate in any Fiscal Year.

 

(H)          Advances, Investments and Loans.  The Loan Parties shall not purchase, or hold beneficially any stock, other securities or evidences of Indebtedness of, or make or permit to exist any loan, Guaranty or advance to, or make any Investment or acquire any interest whatsoever in, any other Person (including, but not limited to, the formation or acquisition of any Subsidiaries), except, prior to the occurrence and continuance of any Default or Event of Default, and subject to the substantially contemporaneous delivery to Agent of such agreements, documents or
instruments reasonably requested by Agent to obtain a first priority perfected security interest in any such Investment (other than those described in clauses (x), (xii) and (xiv) below, which would not constitute Collateral), any of the following (each, a “Permitted Investment”):

 

(i)            securities issued or directly and fully guaranteed or insured by the US or any agency or instrumentality thereof having maturities of not more than six (6) months from the date of acquisition;

 

(ii)           US dollar-denominated time deposits, certificates of deposit and bankers acceptances of any bank whose short-term debt rating from Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (“S&P”), is at least A-1 or the equivalent or whose short-term debt rating from Moody’s Investors Service, Inc. (“Moody’s”) is at least P-1 or the equivalent with maturities of not more than six months from the date of acquisition;

 

(iii)          commercial paper with a rating of at least A-1 or the equivalent by S&P or at least P-1 or the equivalent by Moody’s maturing within six months after the date of acquisition;

 

(iv)          marketable direct obligations issued by any state of the US or any political subdivision of any such state or any public instrumentality thereof maturing within six months from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s;

 

  

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(v)          Investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above;

 

(vi)         Deposit Accounts maintained in accordance with the Blocked Account Agreements;

 

(vii)         Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;

 

(viii)       Accounts owing to the Loan Parties, prepaid expenses and accrued expenses created or acquired in the ordinary course of Business and payable on customary trade terms of the Loan Parties;

 

(ix)          deposits made in the ordinary course of Business consistent with past practices to secure the performance of leases or in connection with bidding on government contracts;

 

(x)           loans to employees in an aggregate amount not in excess of $100,000 at any one time per such employee (not to exceed in the aggregate at any time outstanding the sum of $1,000,000 with respect to all employees of the Loan Parties), for the purpose of assisting such employees in the purchase of Common Stock;

 

(xi)          Investments or intercompany loans and advances of (A) Parent or a Subsidiary in or to any other Subsidiary (subject to a maximum amount of such loans and advances (which, for the sake of clarification, do not include trade payables incurred in the ordinary course of business) by Parent and any other Borrower to any and all such Subsidiaries of $10,000,000 in the aggregate at any one time outstanding and provided that each such loan and advance is evidenced by a promissory note in form and substance satisfactory to Agent which is pledged by the payee as additional security for the Obligations), (B) any Subsidiary in or to the Parent or (C) any
Guarantor in or to any other Loan Party;

 

(xii)         advances to sales representatives of Parent or any of its Subsidiaries in the ordinary course of Business and consistent with past practices;

 

(xiii)        additional Investments not otherwise permitted in this Section not to exceed $1,000,000 in the aggregate at any one time outstanding;

 

(xiv)        Investments in certificates of deposit and bank deposits with financial institutions located in Puerto Rico and the Dominican Republic, solely to the extent necessary to maintain preferred tax treatment or country of origin status in such locations, not to exceed $5,000,000 in the aggregate at any time outstanding;

 

  

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(xv)         Investments made pursuant to acquisitions permitted by this Agreement;

 

(xvi)        Investments in Interest Rate Protection Agreements, derivative agreements, materials future contracts or other arrangements in connection with Indebtedness, in all cases not for speculative purposes, not to exceed in the aggregate a notional amount of $60,000,000 at any time outstanding; and

 

(xvii)       Deposit Accounts with financial institutions available for withdrawal on demand, subject to the provisions of Sections 6.1(K) and 6.4.

 

(I)           Use of Proceeds.  The Loan Parties shall not use any proceeds from the Loans advanced hereunder, directly or indirectly, for the purposes of purchasing or carrying any “margin securities” within the meaning of Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve Board or for the purpose of arranging for the extension of credit secured, directly or indirectly, in whole or in part by collateral that includes any “margin securities.”

 

(J)           Press Release; Public Offering Materials.  After the Closing Date, the Loan Parties shall not disclose the name of Agent or any Lender in any press release or in any prospectus, proxy statement or other materials filed with any governmental entity relating to a public offering of the capital stock of any Loan Party except as may be required by Law and then only (x) to the extent required by Law and (y) after providing Agent with prior written notice of such disclosure.

 

(K)           Amendment of Charter Documents.  The Loan Parties shall not amend, terminate, modify or waive or agree to the amendment, modification or waiver of any material term or provision of their Charter Documents, or By-laws, other than any amendment, modification or other change to any Charter Document or By-laws that does not adversely affect the rights and privileges of Parent or any Loan Party under the Loan Documents, or the interests of Agent or the Lenders under the Loan Documents or in the Collateral.

 

(L)           Subsidiaries.  The Loan Parties shall not establish nor acquire any new Subsidiary except (i) Foreign Subsidiaries, with the prior written consent of Agent not to be unreasonably withheld or (ii) domestic Subsidiaries, in connection with any acquisition permitted by this Agreement and/or where such Subsidiary becomes a Borrower or obligated pursuant to a Guaranty and grants Agent a first priority perfected security interest in substantially all of its assets, subject only to Permitted Liens.

 

(M)           Business.  The Loan Parties shall not engage, directly or indirectly, in any business other than the Business, and any business reasonably incidental thereto.

 

(N)           Fiscal Year; Accounting.  The Loan Parties shall not change their Fiscal Year from ending on December 31, or method of accounting (other than immaterial changes in methods), except as permitted or required by GAAP, in which case Agent shall be provided with not less than thirty (30) days advance written notice of any such change.

 

  

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(O)           Establishment of New or Changed Business Locations.  The Loan Parties shall not relocate their principal executive offices or other facilities or establish new business locations or store any Inventory or other assets at a location not identified to Agent on or before the date hereof, without providing not less than thirty (30) days advance written notice to Agent.

 

(P)           Business Practices.  The Loan Parties shall not engage in, or permit any of their respective directors, officers, agents, employees or representatives in their capacities to engage in, any of the following: (i) use any funds for unlawful contributions, unlawful gifts, unlawful entertainment or other unlawful expenses relating to political activity; (ii) directly or indirectly pay or deliver any fee, commission or other sum of money or item of property, however characterized, to any finder, agent or other party acting on behalf of or under the auspices
of a governmental official or Governmental Authority, in the US or any other country, which is in any manner related to the Business that was illegal under federal, state or local laws of the US or any other country having jurisdiction; (iii) make any payment to any customer or subcontractor of the Business or to any officer, director, partner, employee or agent of any such customer or subcontractor, for the unlawful influence of any such customer or subcontractor or any such officer, director, partner, employee or agent; (iv) engage in any other unlawful reciprocal practice, or make any other unlawful payment or give any other unlawful consideration to any such customer or subcontractor or any such officer, director, partner, employee or agent, in respect of the Business; or (v) violate any federal, state or local campaign finance, election or similar Laws, where any such conduct is
either (x) done knowingly or (y) reasonably likely to have a Material Adverse Effect.

 

(Q)           Sale or Discount of Accounts.  The Loan Parties shall not, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its Accounts, except without recourse in the ordinary course of business in connection with the compromise or collection thereof and not as part of any financing transactions.

 

(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 Second Priority Senior Secured Note, 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 any Second Priority Senior Secured Note except as contemplated in Section 2.4(E).

 

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:

 

  

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(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:

 

	
Period

	
Fixed Charge

Coverage Ratio

	
Four Quarters ending June 30, 2007

	
1.30 to 1.00

	
Four Quarters ending September 30, 2007

	
1.20 to 1.00

	
Four Quarters ending December 31, 2007

	
1.15 to 1.00

	
Four Quarters ending March 31, 2008

	
1.10 to 1.00

	
Four Quarters ending June 30, 2008

	
1.10 to 1.00

	
Four Quarters ending September 30, 2008

	
1.10 to 1.00

	
Four Quarters ending December 31, 2008

	
1.10 to 1.00

	
Each four Quarter period ending thereafter

	
1.10 to 1.00

(B)           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:

 

	
Period

	 	
Maximum

Capital Expenditures

	 
	 	 	 	 
	
Fiscal Year ending December 31, 2007

	 	$	6,500,000	 
	
Fiscal Year ending December 31, 2008

	 	$	6,500,000	 
	
Fiscal Year ending December 31, 2009

	 	$	6,500,000	 

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

 

SECTION 6.         ADDITIONAL REPRESENTATIONS AND COVENANTS

 

6.1.         Representations.  As a material inducement to Agent and each Lender to enter into the Loan Documents, to make and to continue to make Loans and to issue and to continue to issue Lender Letters of Credit or risk participations to the banks that issue Bank Letters of Credit, each of the Loan Parties represents, warrants and covenants as to itself (and Parent as to all Loan Parties) to Agent and each Lender that the following statements are and will be true, correct and complete and, unless specifically
limited, shall remain so for 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:

 

  

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(A)           Accounts Warranties and Covenants.  Except as otherwise disclosed to Agent in writing, as to each Loan Party’s existing Accounts and each of its hereafter arising Accounts that: at the time of its creation, such Account is a valid, bona fide obligation, representing an undisputed indebtedness incurred by the Account Debtor (and any other Person obligated on such Account) for property actually sold and delivered or for services rendered; there are no defenses,
setoffs, offsets, claims, or counterclaims, genuine or otherwise, against such Account; such Account does not represent a sale or provision of services to a Subsidiary or an Affiliate, or a consignment, sale or return or a bill and hold transaction; the amount represented by Loan Parties to Agent as owing by each Account Debtor (and by each of the other Persons obligated on such Account) is, or will be, the correct amount actually and unconditionally owing, no agreement exists permitting any other deduction or discount except in the ordinary course of business; the respective Loan Party is the lawful owner of such Account and has the right to assign the same to Agent, for the benefit of Agent and Lenders; such Account is free of all Liens, other than Permitted Liens and those in favor of Agent, on behalf of itself and Lenders, such Account constitutes, the legally valid and binding
obligation of the applicable Account Debtor (and any other Person obligated on such Account) and is due and payable in accordance with its terms.

 

Each Loan Party shall, at its own expense: (i) cause all invoices evidencing such Loan Party’s Accounts and all copies thereof to bear a notice that such invoices are payable to the lockboxes established in accordance with Section 6.4 and (ii) use its reasonable efforts to assure prompt payment of all amounts due or to become due under Accounts.  No discounts, credits or allowances will be issued, granted or allowed by any Loan Party to customers and no returns will be accepted without Agent’s prior written consent; provided, however, so long as such discounts, credits, allowances or returns are customarily issued or accepted in the ordinary course of business and are in amounts which are
not material to any Loan Party, or until Agent notifies Borrower to the contrary, each Loan Party may presume consent.  Borrower will promptly notify Agent in the event that any Account Debtor (or any other Person obligated on such Account) alleges any dispute or claim with respect to any Account in excess of an invoice amount of $250,000 or of any other circumstances known to any Loan Party that may impair the validity or collectibility of any such Account.  Agent, or its designee, shall have the right, at any time or times hereafter, to verify the validity, amount or any other matter relating to any Account, by mail, telephone or in person.  After the occurrence of an Event of Default and upon the written request of Agent: (i) no Loan Party shall, without the prior consent of Agent, adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any Account Debtor (or any other Person obligated on such Account), or allow any credit or discount thereon, and (ii) Agent shall have the right at any such time (A) to exercise the rights of any Loan Party, with respect to the obligation of the Account Debtor (or any other Person obligated on such Account) to make payment or otherwise render performance to the applicable Loan Party, and with respect to any property that secures the obligations of the Account Debtor or of any such other Person obligated on such Account; and (B) to adjust, settle or compromise the amount or payment of any such Account or release wholly or partly any Account Debtor or obligor thereunder or allow any credit or discount thereon.

 

(B)           Inventory Warranties and Covenants.  Except as otherwise disclosed to Agent in writing, all of each Loan Party’s Inventory is of good and merchantable quality, free from any defects, such Inventory is not subject to any licensing, patent, trademark, trade name or copyright agreement with any Person that restricts such Loan Party’s ability to manufacture and/or sell the Inventory.  The completion and manufacturing process of such Inventory by a
Person other than a Loan Party would be permitted under any contract to which a Loan Party is a party or to which the Inventory is subject.  None of any Loan party’s Inventory has been or will be produced in violation of the Fair Labor Standards Act and subject to the so-called “hot goods” provisions contained in Title 29 U.S.C. Section 215 or in violation of any other law.  All inventory and products owned by Persons other than Loan Parties and located on any premises owned, leased or controlled by a Loan Party, shall be separately and conspicuously identified as such and shall be segregated from Loan Parties’ own Inventory located at such premises. In the event Inventory of Loan Party valued at more than $500,000 is located on the premises of a consignee, the applicable Loan Party shall perfect a security interest in such Inventory and, at
the request of Agent, shall assign of record such security interest to Agent pursuant to documentation in form and substance satisfactory to Agent.  In the event Inventory of Loan Party valued at more than $250,000 is located on the premises of a bailee, the applicable Loan Party shall use reasonable efforts to obtain and deliver to Agent a bailee waiver in form and substance satisfactory to Agent.

 

  

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(C)           Equipment Warranties and Covenants.  Each Loan Party has maintained and shall cause all of its material Equipment used in the Business to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with any manufacturer’s manual, and shall promptly make or cause to be made all repairs, replacements, and other improvements in connection therewith that Borrower deems necessary or desirable.

 

(D)           Chattel Paper Warranties and Covenants.  As of the Closing Date, Borrower does not hold any Chattel Paper and does not anticipate holding any Chattel Paper in the ordinary course of its business in excess of $100,000.  To the extent Borrower holds or obtains any such Chattel Paper, Borrower will promptly (i) deliver to Agent all such Tangible Chattel Paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent and (ii) provide Agent with Control of all such
Electronic Chattel Paper, by having Agent identified as the assignee of the Records(s) pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of Control set forth in the UCC.  Borrower will also deliver to Agent all security agreements securing any Chattel Paper and execute an authorization to file UCC financing statement amendments assigning to Agent any UCC financing statements filed by Borrower in connection with such security agreements.  Borrower will mark conspicuously all such Chattel Paper with a legend, in form and substance satisfactory to Agent, indicating that such Chattel Paper is subject to the Lien of Agent.

 

(E)           Instruments Warranties and Covenants.  Upon the request of Agent, each Loan Party will deliver to Agent all Instruments in excess of $100,000 which constitute Collateral it holds or obtains duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent.  Each Loan Party will also deliver to Agent all security agreements securing any Instruments and execute an authorization to file UCC financing statement amendments assigning to Agent any UCC financing statements filed by
any Loan Party in connection with such security agreements.

 

(F)           Investment Property Warranties and Covenants.  Upon the request of Agent, each Loan Party will take any and all actions necessary (or required or requested by Agent), from time to time, to (i) cause Agent to obtain exclusive Control of any Investment Property in excess of $50,000 which constitutes Collateral owned by any Loan Party in a manner acceptable to Agent and (ii) obtain from any issuers of such Investment Property and such other Persons, for the benefit of Agent, written confirmation of Agent’s Control over such Investment Property upon
terms and conditions acceptable to Agent.

 

  

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(G)           Letters of Credit Warranties and Covenants.  If requested by Agent, at all times after the occurrence of an Event of Default and during the continuance thereof, each Loan Party will deliver to Agent (i) all Letters of Credit under which it is the beneficiary or is otherwise entitled to receive proceeds duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent and (ii) all security agreements securing any such Letters of Credit and execute UCC financing statement amendments
assigning to Agent any UCC financing statements filed by any Loan Party in connection with such security agreements.  Each Loan Party will take any and all actions reasonably necessary (or required or requested by Agent), from time to time, to cause Agent to obtain exclusive Control of any Letter-of-Credit Rights owned by any Loan Party in a manner acceptable to Agent.

 

(H)           General Intangibles Warranties and Covenants.  Each Loan Party shall use its reasonable efforts to obtain any consents, waivers or agreements necessary to enable Agent to exercise remedies hereunder and under the other Loan Documents with respect to any of such Loan Party’s rights under any General Intangibles, including Loan Parties’ rights as a licensee of computer software.

 

(I)           Intellectual Property Covenants.  Each Loan Party hereby ratifies and reaffirms all of the representations, warranties, covenants and other agreements made by each Loan Party in each Copyright Security Agreement, Patent Security Agreement and Trademark Security Agreement and in all other documents, instruments and other items as may be necessary for Agent to file such agreements with the U.S. Copyright Office and the U.S. Patent and Trademark Office.  The
Copyrights, Patents and Trademarks listed on the respective schedules to each of the Copyright Security Agreement, Patent Security Agreement and Trademark Security Agreement constitute all of the US Patents, Trademarks and government registered Copyrights owned by Loan Parties and their respective Subsidiaries.  If, before the Obligations are indefeasibly paid in full, in cash, any Loan Party acquires or becomes entitled to any new or additional US Patents, Trademarks or federally registered Copyrights, or rights thereto, such Loan Party shall give to Agent prompt written notice thereof, and shall amend the schedules to the respective security agreements or enter into new or additional security agreements to include any such new Patents, Trademarks or government registered Copyrights.  Each Loan Party shall: (a) prosecute diligently any copyright, patent or trademark
application at any time pending, except to the extent the failure to do so is not reasonably likely to have a Material Adverse Effect; (b) make application for registration or issuance of all new copyrights, patents and trademarks as reasonably deemed appropriate by such Loan Party, except to the extent the failure to do so is not reasonably likely to have a Material Adverse Effect; (c) preserve and maintain all rights in the Intellectual Property, except to the extent the failure to do so is not reasonably likely to have a Material Adverse Effect; and (d) use its reasonable efforts to obtain any consents, waivers or agreements necessary to enable Agent to exercise its remedies with respect to the Intellectual Property.  Except to the extent the failure to do so is not reasonably likely to have a Material Adverse Effect, no Loan Party shall abandon any material right to file a
copyright, patent or trademark application nor shall any Loan Party abandon any material pending copyright, patent or trademark application, or Copyright, Patent or Trademark without the prior written consent of Agent.  All government registered Intellectual Property owned by any Loan Party and their respective Subsidiaries is valid, subsisting and enforceable and all filings necessary to maintain the effectiveness of such registrations have been made, except to the extent the failure to do so is not reasonably likely to have a Material Adverse Effect.  The execution, delivery and performance of this Agreement by each Loan Party will not violate or cause a default under any material item of Intellectual Property or any agreement in connection therewith.

 

  

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(J)           Commercial Tort Claims Warranties and Covenants.  Except for matters disclosed on Schedule 2.7(A), as of the Closing Date, no Loan Party owns any Commercial Tort Claims.  Each Loan Party shall advise Agent promptly upon any Loan Party becoming aware that it owns any additional Commercial Tort Claims in excess of the sum of $500,000.  With respect to any such new Commercial Tort Claim, each Loan Party will execute and deliver such documents as Agent deems necessary to create, perfect and protect Agent’s security interest in such
Commercial Tort Claim.

 

(K)           Deposit Accounts; Bank Accounts Warranties and Covenants.  Schedule 6.1(K) sets forth the account numbers and locations of all Deposit Accounts or other bank accounts of each Loan Party.  No Loan Party shall establish any new Deposit Account or other bank accounts (including any term deposit, certificate of deposit or money market account with any Person) or amend or terminate any Blocked Account Agreement or lockbox agreement without Agent’s prior written consent.  Notwithstanding the foregoing, or any provision of Section 6.4
to the contrary, each retail and Rocky Retail shoe center location of Borrower may open and maintain a Deposit Account in which a monthly average balance of not more than $25,000 is maintained.

 

(L)           Bailees.  Except as disclosed on Schedule 6.1(L) and Inventory in transit from time to time, as of the Closing Date none of the Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor, and no Collateral shall at any time be in the possession or control of any warehouse, bailee or any of Loan Parties’ agents or processors without Agent’s prior written consent and unless Agent, if Agent has so requested, has received warehouse receipts or bailee lien waivers satisfactory to Agent prior to the commencement of
such possession or control.  If any Collateral is at any time in the possession or control of any warehouse, bailee or any of Loan Parties’ agents or processors, the applicable Loan Party shall, upon the request of Agent, notify such warehouse, bailee, agent or processor of the Liens in favor of Agent, for the benefit of Agent and Lenders, created hereby, shall instruct such Person to hold all such Collateral for Agent’s account subject to Agent’s instructions, and shall obtain such Person’s acknowledgement that it is holding the Collateral for Agent’s benefit.

 

(M)          Collateral Description; Use of Collateral.  Each Loan Party will furnish to Agent, from time to time upon request, statements and schedules further identifying, updating, and describing the Collateral and such other information, reports and evidence concerning the Collateral, as Agent may reasonably request, all in reasonable detail.  No Loan Party will use or permit any Collateral to be used unlawfully or in violation of any provision of applicable law, or any policy of insurance covering any of the Collateral.

 

  

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(N)           Collateral Filing Requirements; Collateral Records.  None of the Collateral is of a type in which Liens may be registered, recorded or filed under, or notice thereof given under, any federal statute or regulation except for Collateral described on the schedules to the Copyright Security Agreement, the Patent Security Agreement and the Trademark Security Agreement.  Each Loan Party shall promptly notify Agent in writing upon acquiring any interest hereafter in Collateral that is of a type where a Lien may be registered, recorded or filed under,
or notice thereof given under, any federal statute or regulation.  Each Loan Party shall keep full and accurate books and records relating to the Collateral and shall stamp or otherwise mark such books and records in such manner as Agent may reasonably request to indicate Agent’s Liens in the Collateral, for the benefit of Agent and Lenders.

 

(O)           Federal Claims.  None of the Collateral constitutes a claim against the US, or any State or municipal government or any department, instrumentality or agency thereof, the assignment of which claim is restricted by law.  Each Loan Party shall notify Agent of any Collateral in excess of the sum of $100,000 which constitutes a claim against the US, or any State or municipal government or any department, instrumentality or agency thereof, the assignment of which claim is restricted by law.  Upon the request of Agent, the applicable Loan
Party shall take such steps as may be necessary to comply with any applicable federal assignment of claims laws and other comparable laws.

 

(P)           Agent Authorized.  Each Loan Party hereby authorizes and, until such time as the Obligations are indefeasibly paid in full, in cash, shall continue to authorize Agent to file one or more financing or continuation statements, and amendments thereto (or similar documents required by any laws of any applicable jurisdiction), relating to all or any part of the Collateral without the signature of such Loan Party and hereby specifically ratifies all such actions previously taken by Agent.

 

(Q)           Names and Locations.  As of the Closing Date, Schedule 6.1(Q) sets forth (a) all legal names and all other names (including trade names, fictitious names and business names) under which each Loan Party currently conducts business, or has at any time conducted business since the Initial Closing Date, (b) the name of any entity which any Loan Party has acquired in whole or in part or from whom any Loan Party has acquired a significant amount of assets since the Initial Closing Date, (c) the location of each Loan Party’s principal place of business,
(d) the state or other jurisdiction of organization for each Loan Party and sets forth each Loan Party’s organizational identification number or specifically designates that one does not exist, (e) the location of each Loan Party’s books and records, (f) the location of all other offices of each Loan Party, and (g) all Collateral locations (designating Inventory and Equipment locations and indicating between owned, leased, warehouse, storage, and processor locations.  The locations designated on Schedule 6.1(Q) are Loan Parties’ sole locations for their respective businesses and the Collateral.  Each Loan Party will give Agent at least thirty (30) days advance written notice of any: (a) change of name or of any new trade name or fictitious business name of such Loan Party, (b) change of principal place of business of such Loan Party, (c) change in
the location of such Loan Party’s books and records or the Collateral, (d) new location for such Loan Party’s books and records or the Collateral, or (e) changes in any Loan Party’s state or other jurisdiction of organization or its organizational identification number.

 

(R)           Additional Mortgaged Property.  Borrower shall as promptly as possible (and in any event within sixty (60) days after such designation) deliver to Agent a fully executed Mortgage, in form and substance satisfactory to Agent together with title insurance policies and surveys on any Additional Mortgaged Property designated by Agent.

 

  

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(S)           Disclosure of Material Matters.  Immediately upon learning thereof, report to Agent all matters materially affecting the value, enforceability or collectibility of any material portion of the Collateral including, without limitation, any Loan Party’s reclamation or repossession of, or the return to any Loan Party of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.

 

6.2.         Access to Accountants and Management.  Each Loan Party authorizes Agent and Lenders to discuss the financial condition and financial statements of such Loan Party with its Accountants upon reasonable prior notice to Borrower of its intention to do so, and authorizes such Accountants to respond to all of Agent’s inquiries. Agent may from time to time (except, during the continuance of an Event of Default, as may be reasonably requested and during normal business hours) confer with each Loan
Party’s management directly regarding such Loan Party’s business, operations and financial condition.

 

6.3.         Amendment of Schedules.  Borrower may amend any one or more of the Schedules referred in this Section 6 (subject to prior notice to Agent, as applicable) and any representation, warranty, or covenant contained herein which refers to any such Schedule shall from and after the date of any such amendment refer to such Schedule as so amended; provided however, that in no event shall the amendment of any such Schedule constitute a waiver by Agent and Lenders of any Default or Event of Default that exists
notwithstanding the amendment of such Schedule.

 

6.4.         Collection of Accounts and Payments.  Loan Parties shall establish lockboxes and blocked accounts (collectively, “Blocked Accounts”) in the name of such Loan Party with such banks (“Collecting Banks”) as are reasonably acceptable to Agent (subject to irrevocable instructions reasonably acceptable to Agent as hereinafter set forth) to which all Account Debtors or other payment obligors shall directly remit all payments on such Loan Party’s Accounts and in which each
Collecting Bank or Loan Party will immediately deposit all such payments constituting proceeds of Collateral received by such Loan Party in the identical form in which such payment was made, whether by cash or check (excluding proceeds deposited in local accounts in connection with retail and Rocky Retail shoe center locations to the extent permitted under Section 6.1(K)).  Each Collecting Bank shall acknowledge and agree, in a manner reasonably satisfactory to Agent, and with the written consent of the respective Loan Party, to an agreement (each such agreement, a “Blocked Account Agreement”) which provides, to the extent required by Agent in each instance, that (a) all payments made to the Blocked Accounts are the sole and exclusive property of Agent, for its benefit and for the benefit of Lenders, (b) except with respect to making account adjustments related
only to the Blocked Accounts, charging fees and expenses associated with this Blocked Accounts and returned unpaid deposit items associated with the Blocked Accounts, the Collecting Banks have no right to setoff against the Blocked Accounts, (c) the Collecting Banks will not take any Lien in the Blocked Accounts, (d) the Collecting Banks will comply with instructions originated by Agent directing disposition of the funds in the Blocked Accounts without the further consent of any Loan Party and (e) all such payments received will be promptly transferred to Agent’s Account.  Each Loan Party hereby agrees that all payments made to such Blocked Accounts or otherwise received by Agent and whether on the Accounts or as proceeds of other Collateral or otherwise, after delivery of a notice of exclusive control, will be under the sole dominion and control of Agent, for the
benefit of itself and Lenders.  Each Loan Party shall irrevocably instruct each Collecting Bank to, after delivery of a notice of exclusive control, promptly transfer all payments or deposits to the Blocked Accounts into Agent’s Account to be applied to the Obligations in accordance with the terms of this Agreement.  Other than as set forth above, if any Loan Party, or its Affiliates, employees, agents or any other Persons acting for or in concert with any Loan Party, shall receive any monies, checks, notes, drafts or any other payments relating to and/or proceeds of such Loan Party’s Accounts or other Collateral, the respective Loan Party or such Person shall hold such instrument or funds in trust for Agent, and shall, immediately upon receipt thereof, remit the same or cause the same to be remitted, in kind, to the Blocked Accounts or to Agent at its
address set forth in Section 10.3 below.

 

  

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6.5.         Further Assurances.  Each Loan Party shall, from time to time, execute such guaranties, financing or continuation statements, documents, security agreements, reports and other documents or deliver to Agent such instruments, certificates of title, mortgages, deeds of trust, or other documents as Agent at any time may reasonably request to evidence, perfect or otherwise implement the guaranties and security for repayment of the Obligations provided for in the Loan Documents. In the event any Loan Party
acquires an ownership interest in real property with a value greater than $500,000 after the Closing Date which is unencumbered by a mortgage or deed of trust in favor of an entity which provides financing for the acquisition thereof by such Loan Party, if then requested by Agent, such Loan Party shall deliver to Agent a fully executed mortgage or deed of trust over such real property in form and substance reasonably satisfactory to Agent, together with such title insurance policies, surveys, appraisals, evidence of insurance, legal opinions, environmental assessments and other documents and certificates as shall be reasonably required by Agent.

 

SECTION 7.         DEFAULT, RIGHTS AND REMEDIES

 

7.1.         Event of Default.  “Event of Default” shall mean the occurrence or existence of any one or more of the following (for each subsection a different grace or cure period may be specified, if no grace or cure period is specified, such occurrence or existence constitutes an immediate Event of Default):

 

(A)           Payment.  Failure to make payment of any of the Obligations when due; or

 

(B)           Default in Other Agreements.  (1) Failure of any Loan Party to pay when due any principal or interest on any Indebtedness (other than the Obligations) or (2) breach or default of any Loan Party with respect to any Indebtedness (other than the Obligations); if such failure to pay, breach or default entitles the holder to cause such Indebtedness having an individual principal amount in excess of $750,000 or having an aggregate principal amount in excess of $1,500,000 to become or be declared due prior to its stated maturity; or

 

(C)           Breach of Certain Provisions.  Failure of any Loan Party to perform or comply with any term or condition (i) contained in Section 5.1(A), or (ii) contained in Section 5.1 (C), (E) or (J) and the failure to comply or perform is not remedied or waived within five (5) days after notice from Agent or Requisite Lenders to Borrowing Agent of such default or (iii) contained in Section 5.2, 5.3 or Section 6 (exclusive of any representation contained in Section 6 which shall be subject to clause (D) below); or

 

  

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(D)           Breach of Warranty.  Any representation, warranty, certification or other statement made by any Loan Party in any Loan Document or in any statement or certificate at any time given by such Person in writing pursuant or in connection with any Loan Document is false in any material respect on the date made; or

 

(E)           Other Defaults Under Loan Documents.  Any Loan Party defaults in the performance of or compliance with any term contained in this Agreement other than those otherwise set forth in this Section 7.1, or defaults in the performance of or compliance with any term contained in the other Loan Documents and such default is not remedied or waived within fifteen (15) days after notice from Agent, or Requisite Lenders, to Borrowing Agent of such default; or

 

(F)           Change in Control.  A Change of Control shall have occurred;

 

(G)          Involuntary Bankruptcy; Appointment of Receiver, etc.  (1) A court enters a decree or order for relief with respect to any Borrower, or other Loan Party having assets in excess of $1,000,000, in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law; or (2) the continuance of any of the following events for sixty (60) days unless dismissed, bonded or discharged: (a) an involuntary case
is commenced against any Borrower, or against any other Loan Party having assets in excess of $1,000,000, under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or (b) a receiver, liquidator, sequestrator, trustee, custodian or other fiduciary having similar powers over any Loan Party, or over all or a substantial part of their respective property, is appointed; or

 

(H)          Voluntary Bankruptcy; Appointment of Receiver, etc.  (1) Any Loan Party commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or (2) any Borrower, or other Loan Party having assets in excess of
$1,000,000, makes any assignment for the benefit of creditors; or (3) the board of directors of any such Loan Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this Section 7.1(H); or

 

(I)           Liens.  Any Lien, levy or assessment, in the aggregate in excess of the sum of $500,000, is filed or recorded with respect to or otherwise imposed upon all or any part of the Collateral or the assets of any Loan Party by the US or any department or instrumentality thereof or by any state, county, municipality or other governmental agency (other than Permitted Liens) and such lien, levy or assessment is not stayed, vacated, paid or discharged within ten (10) days; or

 

(J)           Judgment and Attachments.  Any money judgment, writ or warrant of attachment, or similar process involving (1) an amount in any individual case in excess of $500,000 or (2) an amount in the aggregate at any time in excess of $1,000,000 (in either case not adequately covered by insurance as to which the insurance company has acknowledged coverage) is entered or filed against any Loan Party or any of their respective assets and remains undischarged, unvacated, unbonded or unstayed for a period of forty (40) days, but in any event not later than five (5)
days prior to the date of any proposed sale thereunder; or

 

  

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(K)           Dissolution.  Any order, judgment or decree is entered against any Borrower, or any Loan Party having assets in excess of $1,000,000, decreeing the dissolution or split up of such Borrower or any such other Loan Party and such order remains undischarged or unstayed for a period in excess of twenty (20) days, but in any event not later than five (5) days prior to the date of any proposed dissolution or split up; or

 

(L)           Solvency.  Any Borrower, or other Loan Party having assets in excess of $1,000,000, ceases to be solvent (as represented by Loan Parties in Section 4.1(S)) or admits in writing its present or prospective inability to pay its debts as they become due; or

 

(M)          Injunction.  Any Loan Party is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business and such order continues for thirty (30) days or more; or

 

(N)          Invalidity of Loan Documents.  Any of the Loan Documents for any reason, other than a partial or full release in accordance with the terms thereof, ceases to be in full force and effect or is declared to be null and void, or any Loan Party denies that it has any further liability under any Loan Documents to which it is party, or gives notice to such effect; or

 

(O)          Failure of Security.  Agent, on behalf of itself and Lenders, does not have or ceases to have a valid and perfected first priority security interest in the Collateral (except as otherwise permitted pursuant to this Agreement), in each case, for any reason other than the failure of Agent or any Lender to take any action within its control; or

 

(P)           Damage, Strike, Casualty.  Any material damage to, or loss, theft or destruction of, any Collateral, if not adequately insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than thirty (30) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of any Loan Party if any such event or circumstance is reasonably likely to have a Material Adverse Effect; or

 

(Q)           Licenses and Permits.  The loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any Loan Party, if such loss, suspension, revocation or failure to renew is reasonably likely to have a Material Adverse Effect; or

 

(R)           Forfeiture.  There is filed against any Loan Party any civil or criminal action, suit or proceeding under any federal or state racketeering statute (including, without limitation, the Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is not dismissed within one hundred twenty (120) days; and (2) could reasonably be expected to result in the confiscation or forfeiture of any material portion of the Collateral.

 

  

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7.2.          Suspension of Commitments.  Upon the occurrence of any Default or Event of Default, notwithstanding any grace period or right to cure, Agent may or upon demand by Requisite Lenders shall, without notice or demand, immediately cease making additional Loans and the Commitments shall be suspended; provided that, in the case of a Default, if the subject condition or event is waived or cured within any applicable grace or cure period, the Commitments shall be reinstated.

 

7.3.          Acceleration.  Upon the occurrence of any Event of Default described in the foregoing Sections 7.1(G) or 7.1(H), all Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Loan Party, and the Commitments shall thereupon terminate.  Upon the occurrence and during the continuance of any other Event of Default, Agent may, and upon demand by Requisite
Lenders shall, by written notice to Borrowing Agent, (a) declare all or any portion of the Obligations to be, and the same shall forthwith become, immediately due and payable and the Commitments shall thereupon terminate and (b) demand that Loan Parties immediately deposit with Agent an amount equal to one hundred five percent (105%) of the Letter of Credit Reserve and deposit the prepayment of fees payable under Section 2.3(B) with respect to such Lender Letters of Credit for the full remaining terms of such Lender Letters of Credit; provided, however, if any of such Lender Letters of Credit are terminated, the unearned portion of such prepaid fee attributable to such Lender Letter of Credit shall be refunded to Borrower.

 

7.4.          Remedies.  If any Event of Default shall have occurred and be continuing, in addition to and not in limitation of any other rights or remedies available to Agent and Lenders at law or in equity, Agent may, and shall upon the request of Requisite Lenders, exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the
affected Collateral) and may also (a) require Loan Parties to, and each Loan Party hereby agrees that it will, at its expense and upon request of Agent forthwith, assemble all or part of the Collateral as directed by Agent and make it available to Agent at a place to be designated by Agent which is reasonably convenient to both parties; (b) withdraw all cash in the Blocked Accounts and apply such monies in payment of the Obligations in the manner provided in Section 7.7; and (c) without notice or demand or legal process, enter upon any premises of Loan Parties and take possession of the Collateral.  Each Loan Party agrees that, to the extent notice of sale of the Collateral or any part thereof shall be required by law, at least ten (10) days notice to Borrowing Agent of the time and place of any public disposition or the time after which any private disposition (which notice
shall include any other information required by law) is to be made shall constitute reasonable notification.  At any disposition of the Collateral (whether public or private), if permitted by law, Agent or any Lender may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) for the purchase, lease, or licensing of the Collateral or any portion thereof for the account of Agent or such Lender.  Agent shall not be obligated to make any disposition of Collateral regardless of notice of disposition having been given.  Each Loan Party shall remain liable for any deficiency.  Agent may adjourn any public or private disposition from time to time by announcement at the time and place fixed therefor, and such disposition may, without further notice, be made at the time and place to which it was so
adjourned.  Agent is not obligated to make any representations or warranties in connection with any disposition of the Collateral.  To the extent permitted by law, each Loan Party hereby specifically waives all rights of redemption, stay or appraisal, which it has or may have under any law now existing or hereafter, enacted.  Agent shall not be required to proceed against any Collateral but may proceed against one or more Loan Parties directly.

 

  

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7.5.          Appointment of Attorney-in-Fact.  Each Loan Party hereby constitutes and appoints Agent as such Loan Party’s attorney-in-fact with full authority in the place and stead of such Loan Party and in the name of such Loan Party, Agent or otherwise, from time to time in Agent’s discretion while an Event of Default is continuing to take any action and to execute any instrument that Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to enforce the obligations of any Account Debtor or other Person obligated on the Collateral and enforce the rights of any Loan Party with respect to such obligations and to any property that secures such obligations; (c) to file any claims or take any action or institute any proceedings that Agent may deem necessary or desirable for the collection of or to preserve the value of any of the Collateral or otherwise to enforce the rights of Agent and Lenders with respect to any of the Collateral; (d) to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Agent in its sole discretion,
and such payments made by Agent to become Obligations, due and payable immediately without demand; (e) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, assignments, verifications and notices in connection with Accounts, Chattel Paper or General Intangibles and other Documents relating to the Collateral; and (f) generally to take any act required of any Loan Party under Section 4 or Section 5 of this Agreement, and to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Agent were the absolute owner thereof for all purposes, and to do, at Agent’s option and Loan Parties’ expense, at any time or from time to time, all acts and things that Agent deems necessary Loan Parties’ protect, preserve or realize upon the
Collateral.  Each Loan Party hereby ratifies and approves all acts of Agent made or taken pursuant to this Section 7.5.  The appointment of Agent as each Loan Party’s attorney and Agent’s rights and powers are coupled with an interest and are irrevocable, 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.

 

7.6.          Limitation on Duty of Agent and Lenders with Respect to Collateral.  Beyond the safe custody thereof, Agent and each Lender shall have no duty with respect to any Collateral in its possession (or in the possession of any agent or bailee) or with respect to any income thereon or the preservation of rights against prior parties or any other rights pertaining thereto.  Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that which Agent accords its own property.  Neither Agent nor any Lender shall be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouse, carrier, forwarding agency, consignee, broker or other agent or bailee selected by Loan Parties or selected by Agent in good faith.

 

  

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7.7.          Application of Proceeds.  Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a) each Loan Party irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Agent from or on behalf of any Loan Party, and Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received at any time or times after the
occurrence and during the continuance of an Event of Default against the Obligations in such manner as Agent may deem advisable notwithstanding any previous application by Agent and (b) in the absence of a specific determination by Agent with respect thereto, the proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied: first, to all fees, costs and expenses incurred by or owing to Agent and then any Lender with respect to this Agreement, the other Loan Documents or the Collateral; second, to accrued and unpaid interest on the Obligations (including any interest which but for the provisions of any bankruptcy or insolvency law would have accrued on such amounts); third, to the principal amounts of the Obligations outstanding and fourth, to any other Obligations or other obligations or indebtedness of any Loan Party owing to Agent or any
Lender under the Loan Documents.  Any balance remaining shall be delivered to Borrowing Agent or to whomever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. Notwithstanding the foregoing, Agent shall not apply any payments to any Obligations consisting of Liabilities of any Loan Party to any Lender under any Interest Rate Protection Agreements, or banking and cash management arrangements and agreements with any Lender, until such time as all other Obligations of Loan Parties, including but not limited to those set forth in clause (b) of the preceding sentence, have been satisfied in full.”

 

7.8.          License of Intellectual Property.  Each Loan Party hereby ratifies and reaffirms its previous assignment, transfer and conveyance to Agent, and hereby further assigns, transfers and conveys to Agent, for the benefit of Agent and Lenders, in any event effective upon the occurrence and during the continuance of any Event of Default hereunder, the non-exclusive right and license to use all Intellectual Property owned or used by any Loan Party together with any goodwill associated therewith, all to
the extent necessary to enable Agent to realize on the Collateral and any successor or assign to enjoy the benefits of the Collateral.  This right and license shall inure to the benefit of all successors, assigns and transferees of Agent and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.  Such right and license is granted free of charge and does not require the consent of any other person.

 

7.9.          Waivers; Non-Exclusive Remedies.  No failure on the part of Agent or any Lender to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement or the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise by Agent or any Lender of any right under this Agreement or any other Loan Document preclude any other or further exercise thereof or the exercise of any other right.  The rights in this
Agreement and the other Loan Documents are cumulative and shall in no way limit  any other remedies provided by law.

 

  

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SECTION 8.         GUARANTY

 

8.1.          Each Guarantor hereby unconditionally ratifies and reaffirms its guaranty pursuant to the Original Financing Agreement and hereby further guarantees, as a primary obligor and not merely as a surety, jointly and severally with each other Guarantor when and as due, whether at maturity, by acceleration, by notice of prepayment or otherwise, the due and punctual performance of all Obligations of each other party hereto.  Each payment made by any Guarantor pursuant to this Guaranty shall be made in lawful money of the US in immediately available funds, (a) without set-off or counterclaim and (b) free and clear of and without deduction or
withholding for or on account of any present and future Charges and any conditions or restrictions resulting in Charges and all penalties, interest and other payments on or in respect thereof (except for Charges based on the overall net income of Agent or a Lender) (“Tax” or “Taxes”) unless Guarantor is compelled by law to make payment subject to such Taxes.

 

8.2.          All Taxes in respect of this Guaranty or any amounts payable or paid under this Guaranty shall be paid by Guarantor when due and in any event prior to the date on which penalties attach thereto.  Each Guarantor will indemnify Agent and each of the Lenders against and in respect of all such Taxes.  Without limiting the generality of the foregoing, if any Taxes or amounts in respect thereof must be deducted or withheld from any amounts payable or paid by any Guarantor hereunder, such Guarantor shall pay such additional amounts as may be necessary to ensure that the Agent and each of the Lenders receives a net amount equal to the
full amount which it would have received had payment (including of any additional amounts payable under this Section 8.2) not been made subject to such Taxes.  Within thirty (30) days of each payment by any Guarantor hereunder of Taxes or in respect of Taxes, such Guarantor shall deliver to Agent satisfactory evidence (including originals, or certified copies, of all relevant receipts) that such Taxes have been duly remitted to the appropriate authority or authorities.

 

8.3.          Each Guarantor hereby absolutely, unconditionally and irrevocably waives (i) promptness, diligence, notice of acceptance, notice of presentment of payment and any other notice hereunder, (ii) demand of payment, protest, notice of dishonor or nonpayment, notice of the present and future amount of the Obligations and any other notice with respect to the Obligations, (iii) any requirement that the Agent or any Lender protect, secure, perfect or insure any security interest or Lien or any property subject thereto or exhaust any right or take any action against any other Loan Party, or any Person or any Collateral, (iv) any other action, event or
precondition to the enforcement hereof or the performance by each such Guarantor of the Obligations, and (v) any defense arising by any lack of capacity or authority or any other defense of any Loan Party or any notice, demand or defense by reason of cessation from any cause of Obligations other than payment and performance in full of the Obligations by the Loan Parties and any defense that any other guarantee or security was or was to be obtained by Agent.

 

8.4.          No invalidity, irregularity, voidableness, voidness or unenforceability of this Agreement or any Loan Document or any other agreement or instrument relating thereto, or of all or any part of the Obligations or of any collateral security therefor shall affect, impair or be a defense hereunder.

 

  

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8.5.         The Guaranty hereunder is one of payment and performance, not collection, and the obligations of each Guarantor hereunder are independent of the Obligations of the other Loan Parties, and a separate action or actions may be brought and prosecuted against any Guarantor to enforce the terms and conditions of this Section 8.5, irrespective of whether any action is brought against any other Loan Party or other Persons or whether any other Loan Party or other Persons are joined in any such action or actions.  Each Guarantor waives any right to require that any resort be had by Agent or any Lender to any security held for payment of the Obligations or
to any balance of any deposit account or credit on the books of any Agent or any Lender in favor of any Loan Party or any other Person.  No election to proceed in one form of action or proceedings, or against any Person, or on any Obligations, shall constitute a waiver of Agent’s right to proceed in any other form of action or proceeding or against any other Person unless Agent has expressed any such waiver in writing.  Without limiting the generality of the foregoing, no action or proceeding by Agent against any Loan Party under any document evidencing or securing indebtedness of any Loan Party to Agent shall diminish the liability of any Guarantor hereunder, except to the extent Agent receives actual payment on account of Obligations by such action or proceeding, notwithstanding the effect of any such election, action or proceeding upon the right of
subrogation of any Guarantor in respect of any Loan Party.

 

8.6.         As an original and independent obligation under this Guaranty, each Guarantor shall (a) indemnify the Agent and each of the Lenders and keep the Agent and each of the Lenders indemnified against all costs, losses, expenses and liabilities of whatever kind resulting from the failure by any party to make due and punctual payment of any of the Obligations or resulting from any of the Obligations being or becoming void, voidable, unenforceable or ineffective against Borrowers (including, but without limitation, all legal and other costs, Charges and expenses incurred by the Agent and each of the Lenders, or any of them in connection with preserving or
enforcing, or attempting to preserve or enforce, its rights under this Guaranty), except to the extent that any of the same results from the gross negligence or willful misconduct by Agent or any Lender; and (b) pay on demand the amount of such costs, losses, expenses and liabilities whether or not Agent or any of the Lenders have attempted to enforce any rights against any Borrower or any other Person or otherwise.

 

8.7.         The liability of each Guarantor hereunder shall be absolute, unlimited and unconditional and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any claim, defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any other Obligation or otherwise.  Without limiting the generality of the foregoing, the obligations of each Guarantor shall not be discharged or impaired, released, limited or otherwise
affected by:

 

(i)           any change in the manner, place or terms of payment or performance, and/or any change or extension of the time of payment or performance of, release, renewal or alteration of, or any new agreements relating to any Obligation, any security therefor, or any liability incurred directly or indirectly in respect thereof, or any rescission of, or amendment, waiver or other modification of, or any consent to departure from, this Agreement or any Loan Document, including any increase in the Obligations resulting from the extension of additional credit to any Borrower or otherwise;

 

(ii)          any sale, exchange, release, surrender, loss, abandonment, realization upon any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, all or any of the Obligations, and/or any offset there against, or failure to perfect, or continue the perfection of, any Lien in any such property, or delay in the perfection of any such Lien, or any amendment or waiver of or consent to departure from any other guaranty for all or any of the Obligations;

 

  

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(iii)          the failure of the Agent or any Lender to assert any claim or demand or to enforce any right or remedy against any Borrower or any other Loan Party or any other Person under the provisions of this Agreement or any Loan Document or any other document or instrument executed an delivered in connection herewith or therewith;

 

(iv)         any settlement or compromise of any Obligation, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and any subordination of the payment of all or any part thereof to the payment of any obligation (whether due or not) of any Loan Party to creditors of any Loan Party other than any other Loan Party;

 

(v)          any manner of application of Collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any Collateral for all or any of the Obligations or any other assets of any Loan Party; and

 

(vi)         any other agreements or circumstance of any nature whatsoever that may or might in any manner or to any extent vary the risk of any Guarantor, or that might otherwise at law or in equity constitute a defense available to, or a discharge of, the Guaranty hereunder and/or the obligations of any Guarantor, or a defense to, or discharge of, any Loan Party or any other Person or party hereto or the Obligations or otherwise with respect to the Advances, Letters of Credit or other financial accommodations to any Borrower pursuant to this Agreement and/or the Loan Documents.

 

8.8.         The Agent shall have the right to take any action set forth in Section 8.7 without notice to or the consent of any Guarantor and each Guarantor expressly waives any right to notice of, consent to, knowledge of and participation in any agreements relating to any of the above or any other present or future event relating to Obligations whether under this Agreement or otherwise or any right to challenge or question any of the above and waives any defenses of such Guarantor which might arise as a result of such actions.

 

8.9.         Agent may at any time and from time to time (whether prior to or after the revocation or termination of this Agreement) without the consent of, or notice to, any Guarantor, and without incurring responsibility to any Guarantor or impairing or releasing the Obligations, apply any sums by whomsoever paid or howsoever realized to any Obligations regardless of what Obligations remain unpaid.

 

  

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8.10.        (a)           The Guaranty provisions herein contained shall continue to be effective or be reinstated, as the case may be, if claim is ever made upon the Agent or any Lender for repayment or recovery of any amount or amounts received by such Person in payment or on account of any of the Obligations and such Person repays all or part of said amount for any reason whatsoever, including, without limitation, by reason of any judgment, decree or order of any court or administrative body having jurisdiction over such Person or the respective property of each, or any settlement or compromise of any claim effected
by such Person with any such claimant (including any Loan Party); and in such event each Guarantor hereby agrees that any such judgment, decree, order, settlement or compromise or other circumstances shall be binding upon such Guarantor, notwithstanding any revocation hereof or the cancellation of any note or other instrument evidencing any Obligation, and each Guarantor shall be and remain liable to the Agent and/or the Lenders for the amount so repaid or recovered to the same extent as if such amount had never originally been received by such Person(s).

 

(b)           Agent shall not be required to marshal any assets in favor of any Guarantor, or against or in payment of Obligations.

 

(c)           No Guarantor shall be entitled to claim against any present or future security held by Agent from any Person for Obligations in priority to or equally with any claim of Agent, or assert any claim for any liability of any Loan Party to any Guarantor in priority to or equally with claims of Agent for Obligations, and no Guarantor shall be entitled to compete with Agent with respect to, or to advance any equal or prior claim to any security held by Agent for Obligations.

 

(d)           If any Loan Party makes any payment to Agent, which payment is wholly or partly subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to any Person under any federal or provincial statute or at common law or under equitable principles, then to the extent of such payment, the Obligation intended to be paid shall be revived and continued in full force and effect as if the payment had not been made, and the resulting revived Obligation shall continue to be guaranteed, uninterrupted, by each Guarantor hereunder.

 

(e)           All present and future monies payable by any Loan Party to any Guarantor, whether arising out of a right of subrogation or otherwise, are assigned to Agent for its benefit and for the ratable benefit of the Lenders as security for such Guarantor’s liability to Agent and the Lenders hereunder and are postponed and subordinated to Agent’s prior right to payment in full of Obligations.  Except to the extent prohibited otherwise by this Agreement, all monies received by any Guarantor from any Loan Party shall be held by such Guarantor as agent and trustee for Agent.  This assignment, postponement and subordination
shall only terminate when the Obligations are paid in full in cash and this Agreement is irrevocably terminated.

 

(f)           Each Loan Party acknowledges this assignment, postponement and subordination and, except as otherwise set forth herein, agrees to make no payments to any Guarantor without the prior written consent of Agent.  Each Loan Party agrees to give full effect to the provisions hereof.

 

  

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8.11.        Upon the occurrence and during the continuance of any Event of Default, the Agent may and upon written request of the Requisite Lenders shall, without notice to or demand upon any Loan Party or any other Person, declare any obligations of such Guarantor hereunder immediately due and payable, and shall be entitled to enforce the obligations of each Guarantor.  Upon such declaration by the Agent, the Agent and the Lenders are hereby authorized at any time and from time to time to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent or the
Lenders to or for the credit or the account of any Guarantor against any and all of the obligations of each Guarantor now or hereafter existing hereunder, whether or not the Agent or the Lenders shall have made any demand hereunder against any other Loan Party and although such obligations may be contingent and unmatured.  The rights of the Agent and the Lenders hereunder are in addition to other rights and remedies (including other rights of set-off) which the Agent and the Lenders may have.  Upon such declaration by the Agent, with respect to any claims (other than those claims referred to in the immediately preceding paragraph) of any Guarantor against any Loan Party (the “Claims”), the Agent shall have the full right on the part of the Agent in its own name or in the name of such Guarantor to collect and enforce such Claims by legal action, proof of
debt in bankruptcy or other liquidation proceedings, vote in any proceeding for the arrangement of debts at any time proposed, or otherwise, the Agent and each of its officers being hereby irrevocably constituted attorneys-in-fact for each Guarantor for the purpose of such enforcement and for the purpose of endorsing in the name of each Guarantor any instrument for the payment of money.  Each Guarantor will receive as trustee for the Agent and will pay to the Agent forthwith upon receipt thereof any amounts which such Guarantor may receive from any Loan Party on account of the Claims.  Each Guarantor agrees that at no time hereafter will any of the Claims be represented by any notes, other negotiable instruments or writings, except and in such event they shall either be made payable to the Agent, or if payable to any Guarantor, shall forthwith be endorsed by such
Guarantor to the Agent.  Each Guarantor agrees that no payment on account of the Claims or any security interest therein shall be created, received, accepted or retained during the continuance of any Event of Default nor shall any financing statement be filed with respect thereto by any Guarantor.

 

8.12.        Any acknowledgment or new promise, whether by payment of principal or interest or otherwise and whether by any Loan Party or others with respect to any of the Obligations shall, if the statute of limitations in favor of any Guarantor against the Agent or the Lenders shall have commenced to run, toll the running of such statute of limitations and, if the period of such statute of limitations shall have expired, prevent the operation of such statute of limitations.

 

8.13.        All amounts due, owing and unpaid from time to time by any Guarantor hereunder shall bear interest at the interest rate per annum then chargeable with respect to Base Rate Loans constituting Revolving Advances (without duplication of interest on the underlying Obligation).

 

8.14.        For purposes of the Interest Act (Canada), where in this Guaranty a rate of interest is to be calculated on the basis of a year of 360 or 365 days, the yearly rate of interest to which the rate is equivalent is the rate multiplied by the number of days in the year for which the calculation is made and divided by 360 or 365, as applicable.

 

  

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8.15.       Without limiting any other rights in this Agreement, if for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Guaranty or any other Loan Document it becomes necessary to convert into the currency of such jurisdiction (herein called the “Judgment Currency”) any amount due hereunder in any currency other than the Judgment Currency, then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given.  For this purpose, “rate of exchange” means the rate at which Agent would, on the relevant date at or about 12:00 noon (New York time), be
prepared to sell a similar amount of such currency in New York, New York against the Judgment Currency.  In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given and the date of payment of the amount due, Guarantor will, on the date of payment, pay such additional amounts (if any) as may be necessary to ensure that the amount paid on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of payment is the amount then due under this Guaranty or any other Loan Document in such other currency.  Any additional amount due from Guarantor under this Section 8.15 will be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of this Agreement or any of the other Loan
Documents.

 

8.16.       Each Guarantor acknowledges receipt of a copy of each of this Agreement and the other Loan Documents.  Each Guarantor has made an independent investigation of the Loan Parties and of the financial condition of the Loan Parties.  Neither Agent nor any Lender has made and neither Agent nor any Lender does make any representations or warranties as to the income, expense, operation, finances or any other matter or thing affecting any Loan Party nor has Agent or any Lender made any representations or warranties as to the amount or nature of the Obligations of any Loan Party to which this Section 8 applies as specifically herein set forth, nor has Agent
or any Lender or any officer, agent or employee of Agent or any Lender or any representative thereof, made any other oral representations, agreements or commitments of any kind or nature, and each Guarantor hereby expressly acknowledges that no such representations or warranties have been made and such Guarantor expressly disclaims reliance on any such representations or warranties.

 

8.17.       The provisions of this Section 8 shall remain in effect until the indefeasible payment in full in cash of all Obligations and irrevocable termination of this Agreement.  Payments received from Guarantors pursuant to this Section 8 shall be applied in accordance with Section 7.7 of this Agreement.

 

SECTION 8A.      BORROWING AGENCY.

 

8A.1.      Borrowing Agency Provisions.

 

(a)           Each Borrower hereby irrevocably designates Borrowing Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of such Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in accordance with the request of Borrowing Agent.

 

(b)           The handling of this credit facility as a co-borrowing facility with a Borrowing Agent in the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their request.  None of Agent, any Issuing Lender or any Lender shall incur liability to Borrowers as a result thereof.  To induce Agent and the Lenders to do so and in consideration thereof, each Borrower hereby indemnifies Agent, each Issuer and each Lender and holds Agent, each Issuer and each Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Agent, any Issuer or any
Lender by any Person arising from or incurred by reason of the handling of the financing arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or instruction from Borrowing Agent or any other action taken by Agent or any Lender with respect to this Section 8A.1 except due to willful misconduct or gross (not mere) negligence by the indemnified party.

 

  

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(c)           All Obligations shall be joint and several, and each Borrower shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearance granted by Agent or any Lender to any Loan Party, failure of Agent or any Lender to give any Borrower notice of borrowing or any other notice, any failure of Agent or any Lender to pursue or preserve its rights against any Loan Party, the release by Agent or any Lender of any Collateral now or thereafter acquired from any Loan Party, and such agreement by each Loan
Party to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Agent or any Lender to the other Loan Parties or any Collateral for such Loan Party’s Obligations or the lack thereof.

 

8A.2.     Waiver of Subrogation.  Each Loan Party expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such Loan Party may now or hereafter have against the other Loan Parties or other Person directly or contingently liable for the Obligations hereunder, or against or with respect to the other Loan Parties’ property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until termination of this Agreement and repayment in full of the
Obligations.

 

SECTION 9.         AGENT

 

9.1.         Agent.

 

(A)          Appointment.  Each Lender hereto and, upon obtaining an interest in any Loan, any participant, transferee or other assignee of any Lender irrevocably appoints, designates and authorizes GMAC CF as Agent to take such actions or refrain from taking such action as its agent on its behalf and to exercise such powers hereunder and under the other Loan Documents as are delegated by the terms hereof and thereof, together with such powers as are reasonably incidental thereto.  Neither the Agent nor any of its directors, officers, employees or agents shall
be liable for any action so taken.  The provisions of this subsection 9.1 are solely for the benefit of Agent and Lenders and no Loan Party shall have any rights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties under this Agreement and the other Loan Documents, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Loan Party.  Agent may perform any of its duties hereunder, or under the Loan Documents, by or through its agents or employees.

 

  

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(B)          Nature of Duties.  Agent shall have no duties, obligations or responsibilities except those expressly set forth in this Agreement or in the Loan Documents.  The duties of Agent shall be mechanical and administrative in nature.  Agent shall not have by reason of this Agreement a fiduciary, trust or agency relationship with or in respect of any Lender or any Loan Party.  Nothing in this Agreement or any of the Loan Documents, express or implied, is intended to or shall be construed to impose upon Agent any obligations in respect of
this Agreement or any of the Loan Documents except as expressly set forth herein or therein.  Each Lender shall make its own appraisal of the credit worthiness of each Loan Party, and shall have independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of Loan Parties, and Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than as expressly required herein), whether coming into its possession before the Closing Date or at any time or times thereafter.  If Agent seeks the consent or approval of any Lenders to the taking or refraining from taking any action hereunder, then Agent shall send notice thereof to each Lender.  Agent shall promptly notify each Lender any time that the Requisite
Lenders have instructed Agent to act or refrain from acting pursuant hereto.

 

(C)          Rights, Exculpation, Etc.  Neither Agent nor any of its officers, directors, employees or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Loan Documents, or in connection herewith or therewith, except that Agent shall be liable to the extent of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction.  Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is
subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them).  Neither Agent nor any of its agents or representatives shall be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or sufficiency of this Agreement or any of the Loan Documents or the transactions contemplated thereby, or for the financial condition of any Loan Party.  Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any of the Loan Documents or the financial condition of any Loan Party, or the existence or possible existence of any Default or Event of Default.  Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Loan Documents Agent is permitted or required to take or to grant, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from Requisite Lenders or all or such other portion of the Lenders as shall be prescribed by this Agreement.  Without
limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders in the absence of an express requirement for a greater percentage of Lender approval hereunder for such action.

 

  

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(D)          Reliance.  Agent shall be under no duty to examine, inquire into, or pass upon the validity, effectiveness or genuineness of this Agreement, any other Loan Document, or any instrument, document or communication furnished pursuant hereto or in connection herewith.   Agent shall be entitled to rely, and shall be fully protected in relying, upon any written or oral notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, fax, telecopy or telegram) believed by it in good
faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Loan Documents and its duties hereunder or thereunder.  Agent shall be entitled to rely upon the advice of legal counsel, independent accountants, and other experts selected by Agent in its sole discretion.

 

(E)          Indemnification.  Lenders will reimburse and indemnify Agent for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, attorneys’ fees and expenses), advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by Agent under this Agreement or any of the Loan Documents, in
proportion to each Lender’s Pro Rata Share, but only to the extent that any of the foregoing is not promptly reimbursed by Loan Parties; provided, however, no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements resulting from Agent’s gross negligence or willful misconduct as determined by a final non-appealable judgment by a court of competent jurisdiction.  If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against, even if so directed by Lenders or Requisite Lenders, until such additional indemnity is furnished.  The obligations of Lenders under this subsection 9.1(E) shall
survive the payment in full of the Obligations and the termination of this Agreement.

 

(F)          GMAC CF Individually.  With respect to its Commitments and the Loans made by it, GMAC CF shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender.  The terms “Lenders” or “Requisite Lenders” or any similar terms shall, unless the context clearly otherwise indicates, include GMAC CF in its individual capacity as a Lender or one of the Requisite Lenders.  GMAC CF, either directly or through
strategic affiliations, may lend money to, acquire equity or other ownership interests in, provide advisory services to and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not acting as Agent pursuant hereto and without any duty to account therefor to Lenders.  GMAC CF, either directly or through strategic affiliations, may accept fees and other consideration from any Loan Party for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

 

(G)          Successor Agent.

 

(1)           Resignation.  Agent may resign from the performance of all its agency functions and duties hereunder at any time by giving at least thirty (30) Business Days’ prior written notice to Borrowing Agent and the Lenders.  Such resignation shall take effect upon the acceptance by a successor Agent of appointment as provided below.

 

  

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(2)           Appointment of Successor.  Upon any such notice of resignation pursuant to subsection 9.1(G)(1) above, Requisite Lenders shall appoint a successor Agent which, unless an Event of Default has occurred and is continuing, shall be reasonably acceptable to Borrowing Agent.  If a successor Agent shall not have been so appointed within said thirty (30) Business Day period, the retiring Agent, upon notice to Borrowing Agent, shall then appoint a successor Agent who shall serve as Agent
until such time, if any, as Requisite Lenders appoint a successor Agent as provided above.

 

(3)           Successor Agent.  Upon the acceptance of any appointment as Agent under the Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents.  After any retiring Agent’s resignation as Agent, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.

 

(H)         Collateral Matters.

 

(1)           Release of Collateral.  Lenders hereby irrevocably authorize Agent, at its option and in its discretion, to release any Lien granted to or held by Agent upon any Collateral (a) upon termination of the Commitments and upon payment and satisfaction of all Obligations (other than contingent indemnification obligations to the extent no claims giving rise thereto have been asserted); or (b) constituting property being sold or disposed of if a Loan Party certifies to Agent that the sale or
disposition is made in compliance with the provisions of this Agreement (and Agent may rely in good faith conclusively on any such certificate, without further inquiry).  In addition, with the consent of Requisite Lenders, Agent may release Liens granted to or held by Agent upon any Collateral having a book value of not greater than ten percent (10%) of the total book value of all Collateral, as determined by Agent, either in a single transaction or in a series of related transactions; provided, however, in no event will Agent, acting under the authority granted to it pursuant to this sentence, release during any calendar year Liens granted to or held by Agent upon any Collateral having a total book value in excess of twenty percent (20%) of the total book value of all Collateral, as determined by Agent.

 

(2)           Confirmation of Authority; Execution of Releases.  Without in any manner limiting Agent’s authority to act without any specific or further authorization or consent by Lenders (as set forth in subsection 9.1(H)(1) above), each Lender agrees to confirm in writing, upon request by Agent or Borrowing Agent, the authority to release any Collateral conferred upon Agent under clauses (a) and (b) of subsection 9.1(H)(1).  To the extent Agent agrees to release any Lien granted to
or held by Agent as authorized under subsection 9.1(H)(1), (a) Agent is hereby irrevocably authorized by Lenders to, execute such documents as may be necessary to evidence the release of the Liens granted to Agent, for the benefit of Agent and Lenders, upon such Collateral; provided, however, that Agent shall not be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to liability or create upon Agent any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (b) Loan Parties shall provide at least ten (10) Business Days prior written notice of any request for any document evidencing such release of the Liens and Loan Parties agree that any such release shall not in any manner discharge, affect or impair the Obligations or any Liens granted to Agent on behalf of Agent and Lenders upon (or
obligations of any Loan Party, in respect of) all interests retained by any Loan Party, including, without limitation, the proceeds of any sale, all of which shall continue to constitute part of the property covered by this Agreement or the Loan Documents.

 

  

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(3)           Absence of Duty.  Agent shall have no obligation whatsoever to any Lender or any other Person to assure that the property covered by this Agreement or the Loan Documents exists or is owned by any Loan Party or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent on behalf of Agent and Lenders herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority,
or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the Loan Documents, it being understood and agreed that in respect of the property covered by this Agreement or the Loan Documents or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in property covered by this Agreement or the Loan Documents as one of the Lenders and that Agent shall have no duty or liability whatsoever to any of the other Lenders; provided, however, that Agent shall exercise the same care which it would in dealing with loans for its own account.

 

(I)          Agency for Perfection.  Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting Agent’s security interest in assets which, in accordance with the Uniform Commercial Code in any applicable jurisdiction, can be perfected by possession or Control.  Should any Lender (other than Agent) obtain possession of any such assets, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor, shall deliver such assets to Agent or in accordance with Agent’s instructions.  The
Agent may file such proofs of claim or documents as may be necessary or advisable in order to have the claims of the Agent and the Lenders (including any claim for the reasonable compensation, expenses, disbursements and advances of the Agent and the Lenders, their respective agents, financial advisors and counsel), allowed in any judicial proceedings relative to any Loan Party, or any of their respective creditors or property, and shall be entitled and empowered to collect, receive and distribute any monies, securities or other property payable or deliverable on any such claims.  Any  custodian in any judicial proceedings relative to any Loan Party is hereby authorized by each Lender to make payments to the Agent and, in the event that the Agent shall consent to the making of such payments directly to the Lenders, to pay to the Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Agent, its agents, financial advisors and counsel, and any other amounts due the Agent.  Nothing contained in this Agreement or the other Loan Documents shall be deemed to authorize the Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Loans, or the rights of any holder thereof, or to authorize the Agent to vote in respect of the claim of any Lender in any such proceeding, except as specifically permitted herein.

 

(J)          Exercise of Remedies.  Each Lender agrees that it will not have any right individually to enforce or seek to enforce this Agreement or any Loan Document or to realize upon any collateral security for the Obligations, unless instructed to do so by Agent, it being understood and agreed that such rights and remedies may be exercised only by Agent.

 

  

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9.2.         Notice of Default.  Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or Borrowing Agent referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”.  Agent will
notify each Lender of its receipt of any such notice.

 

9.3.         Action by Agent.  Agent shall take such action with respect to any Default or Event of Default as may be requested by Requisite Lenders in accordance with Section 7.  Unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any Default or Event of Default as it shall deem advisable or in the best interests of Lenders.

 

9.4.         Amendments, Waivers and Consents.

 

(A)          Percentage of Lenders Required.  Except as otherwise provided herein or in any of the other Loan Documents, no amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, or consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by Requisite Lenders (or, Agent, if expressly set forth herein or in any of the other Loan Documents) and the applicable Loan Party; provided however, no amendment, modification, termination, waiver or
consent shall be effective, unless in writing and signed by all Lenders, to do any of the following: (1) increase any of the Commitments; (2) reduce the principal of or the rate of interest on any Loan or reduce the fees payable with respect to any Loan or Lender Letter of Credit other than in accordance with the terms of this Agreement; (3) extend the Termination Date or the scheduled due date for all or any portion of principal of the Loans or any interest or fees due hereunder; (4) amend the definition of the term “Requisite Lenders” or the percentage of Lenders which shall be required for Lenders to take any action hereunder; (5) amend or waive this Section 9.4 or the definitions of the terms used in this Section 9.4 insofar as the definitions affect the substance of this Section 9.4; (6) increase by more than five percent (5%) each of the percentages contained in the
definition of Borrowing Base; (7) release Collateral in excess of Collateral having a value of $1,000,000 in any Fiscal Year (except if the sale, disposition or release of such Collateral is permitted under Section 5.2(E), Section 9.1(H)(1) or under any other Loan Document); (8) amend Section 5.3(F) or the definition of the term Undrawn Availability; or (9)consent to the assignment, delegation or other transfer by any Loan Party of any of its rights and obligations under any Loan Document; provided, further, that no amendment, modification, termination, waiver or consent affecting the rights or duties of Agent under this Section 9 or under any Loan Document shall in any event be effective, unless in writing and signed by Agent, in addition to the Lenders required to take such action.  Any amendment, modification, termination, waiver or consent effected in accordance with this
Section 9 shall be binding upon each Lender or future Lender and, if signed by a Loan Party, on such Loan Party.

 

(B)           Specific Purpose or Intent.  Each amendment, modification, termination, waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.  No amendment, modification, termination, waiver or consent shall be required for Agent to take additional Collateral.

 

  

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(C)          Failure to Give Consent; Replacement of Non-Consenting Lender.  In the event Agent requests the consent of a Lender and does not receive a written consent or denial thereof within ten (10) Business Days after such Lender’s receipt of such request, then such Lender will be deemed to have denied the giving of such consent.  If, in connection with any proposed amendment, modification, termination or waiver of any of the provisions of this Agreement requiring the consent or approval of all Lenders under this subsection 9.4, the consent of
Requisite Lenders is obtained but the consent of one or more other Lenders whose consent is required is not obtained, then Borrowers shall have the right, so long as all such non consenting Lenders are either replaced or prepaid as described in clauses (1) or (2) below, to either (1) replace the non consenting Lenders with one or more Replacement Lenders pursuant to subsection 2.11(A), as if such Lender were an Affected Lender thereunder, but only so long as each such Replacement Lender consents to the proposed amendment, modification, termination or waiver, or (2) prepay in full the Obligations of the non-consenting Lenders and terminate the non consenting Lenders’ Commitments pursuant to subsection 2.11(B), as if such Lender were an Affected Lender thereunder.

 

Notwithstanding anything in this subsection 9.4, Agent and Loan Parties, without the consent of either Requisite Lenders or all Lenders, may execute amendments to this Agreement and the Loan Documents, which consist solely of the making of typographical corrections.

 

9.5.        Assignments and Participations in Loans.

 

(A)          Assignments.  Each Lender may assign its rights and delegate its obligations under this Agreement to an Eligible Assignee; provided, however, (1) such Lender (other than GMAC CF) shall first obtain the written consent of Agent, and, provided that no Event of Default shall then exist and be continuing, Borrowing Agent, neither of which shall not be unreasonably withheld, (2) the amount of Commitments and Loans of the assigning Lender being assigned shall in no event be less than the lesser of (a) $5,000,000 or (b) the entire amount of the Commitments and Loans
of such assigning Lender and (3)(a) each such assignment shall be of a pro rata portion of all such assigning Lender’s Loans and Commitments hereunder, and (b) the parties to such assignment shall execute and deliver to Agent for acceptance and recording a Assignment and Acceptance Agreement together with (i) a processing and recording fee of $3,500 payable by the assigning Lender to Agent and (ii) the Note originally delivered to the assigning Lender.  The administrative fee referred to in clause (3) of the preceding sentence shall not apply to an assignment of a security interest in all or any portion of a Lender’s rights under this Agreement or the other Loan Documents, as described in clause (1) of subsection 9.5(D) below. Upon receipt of all of the foregoing, Agent shall notify Borrowing Agent of such assignment and the Borrowers shall comply with its
obligations under the last sentence of subsection 2.1(D).  In the case of an assignment authorized under this subsection 9.5, the assignee shall be considered to be a “Lender” hereunder and Loan Parties hereby acknowledge and agree that any assignment will give rise to a direct obligation of Loan Parties to the assignee. The assigning Lender shall be relieved of its obligations to make Loans hereunder with respect to the assigned portion of its Commitment.  Notwithstanding any provision to the contrary, any Lender (an “Assigning Lender”) may assign to one or more special purpose funding vehicles (each, an “SPV”) all or any portion of its funded Loans (without the corresponding Commitment), without the consent of any Person or the payment of a fee, by execution of a written assignment agreement in a form agreed to by such Assigning
Lender and such SPV, and may grant any such SPV the option, in such SPV’s sole discretion, to provide Borrowers all or any part of any Loans that such Assigning Lender would otherwise be obligated to make pursuant to this Agreement.  Such SPV shall have all the rights which a Lender making or holding such Loans would have under this Agreement, but no obligations.  The Assigning Lender shall remain liable for all its original obligations under this Agreement, including its Commitment (although the unused portion thereof shall be reduced by the principal amount of any Loans held by an SPV).  Notwithstanding such assignment, Agent and Borrowers may deliver notices to the Assigning Lender (as agent for the SPV) and not separately to the SPV unless the Agent and Borrowers are requested in writing by the SPV (or its agent) to deliver such notices separately
to it.  Borrowers shall, at the request of any Assigning Lender, execute and deliver to such Person as such Assigning Lender may designate, a Note in the amount of such Assigning Lender’s original Note, to evidence the Loans of such Assigning Lender and related SPV.

 

  

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(B)           Participations.  Each Lender may sell participations in all or any part of any Loans or Commitments made by it to another Person; provided, however, such Lender shall first obtain the prior written consent of Agent, which consent shall not be unreasonably withheld.  All amounts payable by Loan Parties hereunder shall be determined as if that Lender had not sold such participation and the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly effecting
(1) any reduction in the principal amount or an interest rate on any Loan in which such holder participates; (2) any extension of the Termination Date or the date fixed for any payment of interest or principal (other than any mandatory prepayment) payable with respect to any Loan in which such holder participates; and (3) any release of substantially all of the Collateral.  Loan Parties hereby acknowledge and agree that the participant under each participation shall for purposes of subsections 2.8, 2.9, 2.10, 9.6 and 10.2 be considered to be a “Lender”.

 

(C)           No Relief of Obligations; Cooperation; Ability to Make LIBOR Loans.  Except as otherwise provided in subsection 9.5(A) no Lender shall, as between Borrower and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loans or other Obligations owed to such Lender.  Each Lender may furnish any information concerning Loan Parties in the possession of that Lender from time to time to Eligible Assignees and participants
(including prospective assignees and participants).  Loan Parties agree that they will use their reasonable efforts to assist and cooperate with Agent and any Lender in any manner reasonably requested by Agent or such Lender to effect the sale of a participation or an assignment described above, including without limitation assistance in the preparation of appropriate disclosure documents or placement memoranda.  Notwithstanding anything contained in this Agreement to the contrary, so long as the Requisite Lenders shall remain capable of making LIBOR Loans, no Person shall become a Lender hereunder unless such Person shall also be capable of making LIBOR Loans.

 

  

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(D)           Security Interests; Assignment to Affiliates.  Notwithstanding any other provision set forth in this Agreement, any Lender may at any time following written notice to Agent (1) pledge the Obligations held by it or create a security interest in all or any portion of its rights under this Agreement or the other Loan Documents in favor of any Person; provided, however  (a) no such pledge or grant of security interest to any Person shall release such Lender from its obligations hereunder or under any other Loan Document and (b) the acquisition of
title to such Lender’s Obligations pursuant to any foreclosure or other exercise of remedies by such Person shall be subject to the provisions of this Agreement and the other Loan Documents in all respects including, without limitation, any consent required by subsection 9.5; and (2) subject to complying with the provisions of subsection 9.5(A), assign all or any portion of its funded loans to an Eligible Assignee which is a Subsidiary of such Lender or its parent company, to one or more other Lenders, or to a Related Fund.

 

(E)           Recording of Assignments.  Agent shall maintain at its office in New York, New York a copy of each Assignment and Acceptance Agreement delivered to it and a register for the recordation of the names and addresses of Lenders, and the commitments of, and principal amount of the Loans owing to each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be presumptive evidence of the amounts due and owing to Lender in the absence of manifest error.  Loan Parties, Agent and
each Lender may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for inspection by Borrowing Agent and any Lender, at any reasonable time upon reasonable prior notice.

 

At the request of Agent from time to time both before and after the Closing Date, the Loan Parties will assist Agent in the syndication of the credit facility provided pursuant to this Agreement and the other Loan Documents.  Such assistance shall include, but not be limited to (i) prompt assistance in the preparation of an information memorandum and the verification of the completeness and accuracy of the information and the reasonableness of the projections contained therein, (ii) preparation of offering materials and financial projections by Loan Parties and their advisors, (iii) providing Agent with all information reasonably deemed necessary by Agent to successfully complete the syndication, (iv)
confirmation as to the accuracy and completeness of such offering materials and information and confirmation that management’s projections are based on assumptions believed by the Loan Parties to be reasonable at the time made, and (v) participation of the Loan Parties’ senior management in meetings and conference calls with potential lenders at such times and places as Agent may reasonably request.

 

9.6.         Set Off and Sharing of Payments.  In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized by each Loan Party at any time or from time to time, with reasonably prompt subsequent notice to Borrowing Agent (any prior or contemporaneous notice being hereby expressly waived) to set off and to appropriate and to apply any and all (a)
balances held by such Lender at any of its offices for the account of Loan Parties (regardless of whether such balances are then due to Loan Parties), and (b) other property at any time held or owing by such Lender to or for the credit or for the account of any Loan Party, against and on account of any of the Obligations; except that no Lender shall exercise any such right without the prior written consent of Agent.  Any Lender exercising its right to set off shall purchase for cash (and the other Lenders shall sell) interests in each of such other Lender’s Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the amount so set off with each other Lender  in accordance with their respective Pro Rata Shares.  Each Loan Party agrees, to the fullest extent permitted by law, that any Lender may exercise its right to set off
with respect to amounts in excess of its Pro Rata Share of the Obligations and upon doing so shall deliver such amount so set off to Agent for the benefit of Agent and of all Lenders in accordance with their Pro Rata Shares.

 

  

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9.7.         Disbursement of Funds.  Agent may, on behalf of Lenders, disburse funds to Borrowers for Loans requested.  Each Lender shall reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender will remit to Agent its Pro Rata Share of any Loan or Advance before Agent disburses same to Borrowers.  If Agent elects to require that each Lender make funds available to Agent prior to a disbursement by Agent to Borrower, Agent shall advise each
Lender by telephone, telex, fax or telecopy of the amount of such Lender’s Pro Rata Share of the Loan requested by Borrowing Agent no later than 1:00 p.m. New York time on the Funding Date applicable thereto, and each such Lender shall pay Agent such Lender’s Pro Rata Share of such requested Loan, in same day funds, by wire transfer to Agent’s account on such Funding Date.

 

9.8.         Settlements, Payments and Information.

 

(A)          Revolving Advances and Payments; Fee Payments.

 

(1)           Fluctuation of Revolving Loan Balance.  The Revolving Loan balance may fluctuate from day to day through Agent’s disbursement of funds to, and receipt of funds from, Loan Parties.  In order to minimize the frequency of transfers of funds between Agent and each Lender notwithstanding terms to the contrary set forth in Section 2 and subsection 9.7, Revolving Advances and repayments, except as set forth in subsection 2.1(A), will be settled according to the procedures
described in this subsection 9.8. Notwithstanding these procedures, each Lender’s obligation to fund its portion of any advances made by Agent to Borrowers will commence on the date such advances are made by Agent.  Such payments will be made by such Lender without set-off, counterclaim or reduction of any kind.

 

(2)           Settlement Dates.  Once each week for the Revolving Loan or more frequently (including daily), if Agent so elects (each such day being a “Settlement Date”), Agent will advise each Lender by telephone, fax or telecopy of the amount of each such Lender’s Pro Rata Share of the Revolving Loan.  In the event payments are necessary to adjust the amount of such Lender’s required Pro Rata Share of the Revolving Loan balance to such Lender’s actual Pro Rata
Share of the Revolving Loan balance as of any Settlement Date, the party from which such payment is due will pay the other, in same day funds, by wire transfer to the other’s account not later than 3:00 p.m. New York time on the Business Day following the Settlement Date.

 

(3)           Settlement Definitions.  For purposes of this subsection 9.8(A), the following terms and conditions will have the meanings indicated:

 

(a)           “Daily Loan Balance” means an amount calculated as of the end of each calendar day by subtracting (i) the cumulative principal amount paid by Agent to a Lender on a Loan from the Closing Date through and including such calendar day, from (ii) the cumulative principal amount on a Loan advanced by such Lender to Agent on that Loan from the Closing Date through and including such calendar day.

 

  

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(b)           “Daily Interest Rate” means an amount calculated by dividing the interest rate payable to a Lender on a Loan (as set forth in subsection 2.2) as of each calendar day by three hundred sixty (360).

 

(c)           “Daily Interest Amount” means an amount calculated by multiplying the Daily Loan Balance of a Loan by the associated Daily Interest Rate on that Loan.

 

(d)           “Interest Ratio” means a number calculated by dividing the total amount of the interest on a Loan received by Agent with respect to the immediately preceding by the total amount of interest on that Loan due from Borrower during the immediately preceding month.

 

(4)          Settlement Payments.  On the first Business Day of each month (“Interest Settlement Date”), Agent will advise each Lender by telephone, fax or telecopy of the amount of such Lender’s share of interest and fees on each of the Loans as of the end of the last day of the immediately preceding month.  Provided that such Lender has made all payments required to be made by it under this Agreement, Agent will pay to such Lender, by wire transfer to such Lender’s
account (as specified by such Lender on the signature page of this Agreement or the applicable Assignment and Acceptance Agreement, as amended by such Lender from time to time after the date hereof or in the applicable Assignment and Acceptance Agreement) not later than 3:00 p.m. New York time on the next Business Day following the Interest Settlement Date, such Lender’s share of interest and fees on each of the Loans.  Such Lender’s share of interest on each Loan will be calculated for that Loan by adding together the Daily Interest Amounts for each calendar day of the prior month for that Loan and multiplying the total thereof by the Interest Ratio for that Loan.  Such Lender’s share of the unused line fee described in Section 2.3(A) shall be an amount equal to (a)(i) such Lender’s average Revolving Loan Commitment during such month, less
(ii) the sum of (x) such Lender’s average Daily Loan Balance of the Revolving Loans, plus (y) such Lender’s Pro Rata Share of the average daily aggregate amount of Letter of Credit Reserve, in each case for the preceding month, multiplied by (b) the percentage required by Section 2.3(A).  Such Lender’s share of all other fees paid to Agent for the benefit of Lenders hereunder shall be paid and calculated based on such Lender’s Commitment with respect to the Loans on which such fees are associated.  To the extent Agent does not receive the total amount of any fee owing by Borrowers under this Agreement, each amount payable by Agent to a Lender under this subsection 9.8(A)(4) with respect to such fee shall be reduced on a pro rata basis.  Any funds disbursed or received by Agent pursuant to this Agreement, including, without
limitation, under Sections 9.7, 9.8(A)(1), and 9.9, prior to the Settlement Date for such disbursement or payment shall be deemed advances or remittances by GMAC CF, in its capacity as a Lender, for purposes of calculating interest and fees pursuant to this subsection 9.8(A)(4).

 

(B)          Return of Payments.

 

(1)           Recovery after Non-Receipt of Expected Payment.  If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from any Loan Party and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender without set-off, counterclaim or deduction of any kind together with interest thereon, for each day from and including the date such amount is made available
by Agent to such Lender to but excluding the date of repayment to Agent, at the greater of the Federal Funds Effective Rate and a rate determined by Agent in accordance with banking industry rules on interbank compensation.

 

  

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(2)           Recovery of Returned Payment.  If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Loan Party or paid to any other Person pursuant to any requirement of law, court order or otherwise, then, notwithstanding any other term or condition of this Agreement, Agent will not be required to distribute any portion thereof to any Lender.  In addition, each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Loan Party or such other Person, without set-off, counterclaim or deduction of any kind.

 

9.9.         Discretionary Advances.  Notwithstanding anything contained herein to the contrary, Agent may, in its sole discretion, for a period of not more than thirty (30) consecutive days make Revolving Advances in an aggregate amount of not more than $2,500,000 in excess of the limitations set forth in the Borrowing Base but not in excess of the  Revolving Loan Commitment for the purpose of preserving or protecting the Collateral or for incurring any costs associated with collection or enforcing
rights or remedies against the Collateral, or incurred in any action to enforce this Agreement or any other Loan Document.

 

9.10.       Other Agents.  The entities identified in the Recitals section of this Agreement as the ‘Syndication Agent’ and ‘Documentation Agent’ shall not have any right, power, obligation, liability, responsibility or duty under this Agreement (or any of the Loan Documents) other than those applicable to all Lenders as such.  Without limiting the foregoing, the entities so identified as the ‘Syndication Agent’ and the ‘Documentation Agent’ shall not have or be
deemed to have any fiduciary relationship with any Lender or Borrower.  Each Lender acknowledges that it has not relied, and will not rely, on the entity so identified as the ‘Syndication Agent’ or the ‘Documentation Agent’ in deciding to enter into this Agreement and each of the Loan Documents to which it is a party or in taking or not taking action hereunder or thereunder.”

 

SECTION 10.        MISCELLANEOUS

 

10.1.        Expenses and Attorneys’ Fees.  Whether or not any of the Transactions shall be consummated, each Loan Party agrees to promptly pay all reasonable fees, costs and expenses of Agent incurred in connection with any matters contemplated by or arising out of this Agreement or the other Loan Documents including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand and secured by the Collateral: (a) reasonable fees, costs and expenses incurred by Agent
(including attorneys’ fees and expenses, the allocated costs of Agent’s internal legal staff and fees of environmental consultants, accountants and other professionals retained by Agent) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (b) reasonable fees, costs and expenses incurred by Agent (including attorneys’ fees and expenses, the allocated reasonable costs of Agent’s internal legal staff and fees of environmental consultants, accountants and other professionals retained by Agent) incurred in connection with the review, negotiation, preparation, documentation, execution, syndication and administration of the Loan Documents, the Loans, and any amendments, waivers, consents, forbearances and other modifications relating thereto or any
subordination or intercreditor agreements, including reasonable documentation charges assessed by Agent for amendments, waivers, consents and any other documentation prepared by Agent’s internal legal staff; (c) reasonable fees, costs and expenses (including attorneys’ fees and allocated costs of internal legal staff) incurred by Agent in creating, perfecting and maintaining perfection of Liens in favor of Agent, on behalf of Agent and Lenders; (d) reasonable fees, costs and expenses incurred by Agent in connection with forwarding to Borrowers the proceeds of Loans including Agent’s or any Lenders’ standard wire transfer fee; (e) reasonable fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by Agent or any Lender in establishing, maintaining and handling lock box accounts, Blocked Accounts or other accounts for collection
of the Collateral; (f) reasonable fees, costs, expenses (including attorneys’ fees and allocated costs of internal legal staff) of Agent or any Lender and costs of settlement incurred in collecting upon or enforcing rights against the Collateral or incurred in any action to enforce this Agreement or the other Loan Documents or to collect any payments due from any Loan Party under this Agreement or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement, whether in the nature of a “workout” or in connection with any insolvency or bankruptcy proceedings or otherwise.

 

  

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10.2.        Indemnity.  In addition (and without duplication of) to the payment of expenses pursuant to subsection 10.1, whether or not any of the Transactions shall be consummated, each Loan Party agrees to indemnify, pay and hold Agent and each Lender, and the officers, directors, employees, agents, consultants, auditors, persons engaged by Agent or any Lender, to evaluate or monitor the Collateral, affiliates and attorneys of Agent, Lender and such holders (collectively called the “Indemnities”)
harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnities in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnity shall be designated a party thereto) that may be imposed on, incurred by, or asserted against that Indemnity, in any manner relating to or arising out of this Agreement or the other Loan Documents, the consummation of the GMAC Transactions, the statements contained in the commitment letters, if any, delivered by Agent or any Lender, Agent’s and each Lender’s agreement to make the Loans hereunder, the use or intended use of the proceeds of any of the Loans or the exercise of
any right or remedy hereunder or under the other Loan Documents (the “Indemnified Liabilities”); provided that no Loan Party shall have any obligation to an Indemnity hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of that Indemnity as determined by a final non-appealable judgment by a court of competent jurisdiction.

 

10.3.        Notices.  Unless otherwise specifically provided herein, all notices shall be in writing addressed to the respective party as set forth below and may be personally served, faxed, telecopied or sent by overnight courier service or US mail and shall be deemed to have been given: (a) if delivered in person, when delivered; (b) if delivered by fax or telecopy, on the date of transmission if transmitted on a Business Day before 4:00 p.m. New York time or, if not, on the next succeeding Business Day; (c) if
delivered by overnight courier, two (2) days after delivery to such courier properly addressed; or (d) if by U.S. Mail, four (4) Business Days after depositing in the US mail, with postage prepaid and properly addressed.

 

  

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If to any Loan Party:

	
Rocky Brands, Inc.

39 East Canal Street

Nelsonville, Ohio  45764

	 	
Attn: 

	
James E. McDonald

Chief Financial Officer

Fax/Telecopy No.:  (740) 753-4024

	
  

	
With a copy to:

	
Porter, Wright, Morris & Arthur LLP

41 South High Street

Columbus, Ohio  43215

	 	
Attn: 

	
Timothy E. Grady, Esq.

Fax/Telecopy No.:  (614) 227-2100

	
  

	
If to Agent or to GMACCF:

	
GMAC Commercial Finance LLC

1290 Avenue of the Americas, 3rd Floor

New York, New York 10104

	 	
Attn: 

	
Rocky Portfolio Manager

Fax/Telecopy No.:  (212) 884-7692

	
  

	
With copies to:

	
GMAC Commercial Finance LLC

1290 Avenue of the Americas

New York, New York 10104

	 	
Attn: 

	
Legal Services/SFD

Fax/Telecopy No.:  (212) 884-7693

Hahn & Hessen LLP

488 Madison Avenue

New York, New York 10022

	 	
Attn: 

	
Daniel J. Krauss, Esq.

Fax/Telecopy No.:  (212) 478-7400

If to any Lender:  Its address indicated on the signature page hereto, in an Assignment and Acceptance Agreement or in a notice to Agent and Borrowing Agent or to such other address as the party addressed shall have previously designated by written notice to the serving party, given in accordance with this subsection 10.3.

 

10.4.       Survival of Representations and Warranties and Certain Agreements.  All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.  Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of each Loan Party, Agent, and Lenders set forth in subsections 9.1(E), 10.1, 10.2, 10.6, 10.11, 10.14, and 10.15 shall survive the payment of the Loans and the termination of this
Agreement.

 

10.5.       Indulgence Not Waiver.  No failure or delay on the part of Agent, any Lender or any holder of any Note in the exercise of any power, right or privilege hereunder or under any Note shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

 

  

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10.6.       Marshaling; Payments Set Aside.  Neither Agent nor any Lender shall be under any obligation to marshal any assets in favor of any Loan Party or any other party or against or in payment of any or all of the Obligations.  To the extent that any Loan Party makes a payment or payments to Agent and/or any Lender or Agent and/or any Lender enforces its security interests or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

10.7.       Entire Agreement.  This Agreement and the other Loan Documents embody the entire agreement among the parties hereto and supersede all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof, and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto.

 

10.8.       Severability.  The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Agreement or the other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Agreement, or the other Loan Documents.

 

10.9.       Lenders’ Obligations Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is several and not joint and neither Agent nor any Lender shall be responsible for the obligation or Commitment of any other Lender hereunder.  In the event that any Lender at any time should fail to make a Loan as herein provided, the Lenders, or any of them, at their sole option, may make the Loan that was to have been made by the Lender so failing to make such
Loan.  Nothing contained in any Loan Document and no action taken by Agent or any Lender pursuant hereto or thereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt.

 

10.10.     Headings.  Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

 

10.11.     APPLICABLE LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

 

  

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10.12.     Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided, however, no Loan Party may assign its rights or obligations hereunder without the written consent of Lenders.

 

10.13.     No Fiduciary Relationship; No Duty; Limitation of Liabilities.

 

(A)           No Fiduciary Relationship.  No provision in this Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create any fiduciary duty by Agent or any Lender to any Loan Party.

 

(B)           No Duty.  All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Agent or any Lender shall have the right to act exclusively in the interest of Agent or such Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any Loan Party or any of any Loan Party’s shareholders or any other Person.

 

(C)           Limitation of Liabilities.  Neither Agent nor any Lender, nor any affiliate, officer, director, shareholder, employee, attorney, or agent of Agent or any Lender shall have any liability with respect to, and each Loan Party hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by any Loan Party in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, any of the GMAC Transactions or any of the
other Transactions.  Each Loan Party hereby waives, releases, and agrees not to sue Agent or any Lender or any of Agent’s or any Lender’s affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, any of the GMAC Transactions or any of the other Transactions.

 

10.14.     CONSENT TO JURISDICTION.  EACH LOAN PARTY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  EACH LOAN PARTY EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS.  EACH LOAN PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWING AGENT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWING AGENT, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.  EACH LOAN PARTY IN ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY AGENT OR ANY LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM) OR OTHER THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE.

 

  

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10.15.      WAIVER OF JURY TRIAL.  EACH LOAN PARTY, AGENT AND EACH LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  EACH LOAN PARTY, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS.  EACH LOAN PARTY, AGENT AND EACH LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

10.16.      Construction.  Each Loan Party, Agent and each Lender each acknowledge that it has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement and the other Loan Documents with its legal counsel.  This Agreement and the other Loan Documents shall be construed as if jointly drafted by Loan Parties, Agent and each Lender.

 

10.17.      Counterparts; Effectiveness.  This Agreement and any amendments, waivers, consents, or supplements may be executed via telecopier or facsimile transmission in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties
hereto.

 

10.18.      Confidentiality.  Agent and each Lender agree to exercise their best efforts to keep confidential any non-public information delivered pursuant to the Loan Documents and identified as such by Borrowing Agent and not to disclose such information to Persons other than to: its respective affiliates, officers, directors and employees; or its potential assignees or participants; or Persons employed by or engaged by Agent, a Lender or a Lender’s assignees or participants including, without limitation, attorneys,
auditors, professional consultants, rating agencies and portfolio management services.  The confidentiality provisions contained in this subsection shall not apply to disclosures (a) required to be made by Agent or any Lender to any regulatory or governmental agency or pursuant to legal process or (b) consisting of general portfolio information that does not identify any Loan Party.  The obligations of Agent and Lenders under this subsection 10.18 shall supersede and replace the obligations of Agent and Lenders under any confidentiality agreement in respect of this financing executed and delivered by Agent or any Lender prior to the date hereof.  In no event shall Agent or any Lender be obligated or required to return any materials furnished by Loan Parties ;provided, however, each potential assignee or participant shall be required to agree that if it does
not become an assignee (or participant) it shall return all materials furnished to it by Loan Parties in connection herewith.

 

  

105

  

 

Notwithstanding the foregoing, and notwithstanding any other express or implied agreement or understanding to the contrary, each of the parties hereto and their respective employees, representatives, and other agents are authorized to disclose the tax treatment and tax structure of the Transactions to any and all persons, without limitation of any kind.  Each of the parties hereto may disclose all materials of any kind (including opinions or other tax analyses) insofar as they relate to the tax treatment and tax structure of the Transactions.  This authorization does not extend to disclosure of any other information including (without limitation) (a) the identities of participants or potential
participants in the GMAC Transactions (b) the existence or status of any negotiations, (c) any pricing or other financial information or (d) any other term or detail not related to the tax treatment and tax structure of the GMAC Transactions.  The confidentiality provisions contained in this Agreement shall not prohibit disclosures to any trustee, administrator, collateral manager, servicer, backup servicer, lender, rating agency or secured party of any SPV or its affiliates in connection with the evaluation, administration, servicing of, or the reporting on, the assets or securitization activities of such SPV or its affiliates.

 

10.19.      Publication.  Each Loan Party consents to the publication by Agent of a tombstone or similar advertising material relating to the GMAC Transactions; provided, however, Agent shall provide a draft of any such tombstone or similar advertising material to Borrowing Agent for review prior to the publication thereof.  Agent and Lenders reserve the right to provide industry trade organizations information necessary and customary for inclusion in league table measurements.

 

[SIGNATURE PAGES FOLLOW]

 

  

106

  

 

Witness the due execution of this Loan and Security Agreement by the respective duly authorized officers of the undersigned as of the date first written above.

 

	  	  	
ROCKY BRANDS, INC.

	  	  	
FEIN:  31-1364046

	  	  	
LIFESTYLE FOOTWEAR, INC.

	  	  	
FEIN:  66-0448782

	  	  	
ROCKY BRANDS WHOLESALE LLC

	  	  	
FEIN:  22-3709787

	  	  	
ROCKY BRANDS RETAIL LLC

	  	  	
FEIN:  22-3709780

	  	  	  
	  	
   By:

	
/s/ James E. McDonald

	  	  	
  Name:  James E. McDonald

	  	
Title:

	
Executive Vice President, Chief Financial

Officer and Treasurer 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

	  	  	  
	  	  	
BANK OF AMERICA, N.A.

	  	  	  
	  	
   By:

	
/s/ William J. Wilson

	  	  	
Name:        William J. Wilson

	  	  	
Title:        Vice President

	  	  	  
	  	
Revolving Loan Commitment:  $21,186,440.00

 

  

 

  

 

	  	  	
CHARTER ONE BANK, N.A.

	  	  	  
	  	
   By:

	
/s/ James G. Zamborsky

	  	
   Name:

	
James G. Zamborsky

	  	  	
Title: Vice President

	  	  	  
	  	
Revolving Loan Commitment:  $17,796,610.00

	  	  	  
	  	
   PNC BANK, NATIONAL ASSOCIATION

	  	  	  
	  	
   By:

	
/s/ Richard F. Musez

	  	  	
Name:  Richard F. Musez

	  	  	
  Title: Sr. Vice President

	  	  	  
	  	
Revolving Loan Commitment:  $17,796,610.00

	  	  	  
	  	  	
COMERICA BANK

	  	  	  
	  	
   By:

	
/s/ Harold Dalton

	  	  	
Name:  Harold Dalton

	  	  	
Title:   V.P.

	  	  	  
	  	
Revolving Loan Commitment:  $16,101,700.00

 

  

 

  

 

EXHIBIT A

 

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

ASSIGNMENT AND ACCEPTANCE AGREEMENT, dated as of _____________ , 20 among ("Transferor Lender"), _________________________ ("Purchasing Lender"), and GMAC COMMERCIAL FINANCE LLC ("GMAC CF") as agent for the Lenders (as defined below) under the Loan Agreement (as defined below).

 

WITNESSETH

 

WHEREAS, this Assignment and Acceptance Agreement is being executed and delivered in accordance with Section 9.5 of the Amended and Restated Loan and Security Agreement dated as of May 25, 2007 (as from time to time amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the "Loan Agreement") among ROCKY BRANDS, 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, ROCKY BRANDS WHOLESALE LLC, a limited liability company organized and existing under the laws of the State of Delaware, and
ROCKY BRANDS RETAIL LLC, a limited liability company organized and existing under the laws of the State of Delaware (the foregoing entities, jointly and severally, as the context requires, "Borrower" or "Borrowers"), the financial institution(s) listed on the signature pages thereof and their respective successors and Eligible Assignees (each individually a "Lender" and collectively, "Lenders"), GMAC COMMERCIAL FINANCE LLC, a Delaware limited liability company (in its individual capacity, "GMAC CF"), as administrative agent and sole lead arranger for the Lenders (in such capacities, the "Agent"), BANK OF AMERICA, N.A., as syndication agent, and CHARTER ONE BANK, N.A., as documentation agent;

 

WHEREAS, Purchasing Lender wishes to become a Lender party to the Loan Agreement; and

 

WHEREAS, Transferor Lender is selling and assigning to Purchasing Lender, rights, obligations and commitments under the Loan Agreement;

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

1.            All capitalized terms used herein which are not defined shall have the meanings given to them in the Loan Agreement.

 

2.            Upon receipt by the Agent of four counterparts of this Assignment and Acceptance Agreement, to each of which is attached a fully completed Schedule I, and each of which has been executed by Transferor Lender and Agent, Agent will transmit to Transferor Lender and Purchasing Lender a Transfer Effective Notice, substantially in the form of Schedule II to this Assignment and Acceptance Agreement (a "Transfer Effective Notice"). Such Transfer Effective
Notice shall set forth, inter alia, the date on which the transfer effected by this Assignment and Acceptance Agreement shall become effective (the "Transfer Effective Date"), which date shall not be earlier than the first Business Day following the date such Transfer Effective Notice is received. From and after the Transfer Effective Date, Purchasing Lender shall be a Lender party to the Loan Agreement for all purposes thereof.

 

  

 

  

 

3.           At or before 1:00 P.M. (Eastern Standard time) on the Transfer Effective Date Purchasing Lender shall pay to Transferor Lender, in immediately available funds, an amount equal to the purchase price, as agreed between Transferor Lender and Purchasing Lender (the "Purchase Price"), of the portion of the Loans being purchased by Purchasing Lender (Purchasing Lender's "Purchased Percentage") of the outstanding Loans and other amounts owing to Transferor Lender under the Loan Agreement and its Revolving Note. Effective upon
receipt by Transferor Lender of the Purchase Price from Purchasing Lender, Transferor Lender hereby irrevocably sells assigns and transfers to Purchasing Lender, without recourse, representation or warranty, and Purchasing Lender hereby irrevocably purchases, takes and assumes from Transferor Lender, Purchasing Lender's Purchased Percentage of the Loans and other amounts owing to Transferor Lender under the Loan Agreement and its Revolving Note, together with all instruments, documents and collateral security pertaining thereto.

 

4.           Transferor Lender has made arrangements with Purchasing Lender with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by Transferor Lender to Purchasing Lender of any fees heretofore received by Transferor Lender pursuant to the Loan Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to be paid, and the date or dates for payment, by Purchasing Lender to Transferor Lender of fees or interest received by Purchasing Lender pursuant to the Loan Agreement from and after the Transfer Effective Date.

 

5.           (a) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of Transferor Lender pursuant to the Loan Agreement and its Revolving Note shall, instead, be payable to or for the account of Transferor Lender and Purchasing Lender, as the case may be, in accordance with their respective interests as reflected in this Assignment and Acceptance Agreement.

 

(b) All interest, fees and other amounts that would otherwise accrue for the account of Transferor Lender from and after the Transfer Effective Date pursuant to the Loan Agreement and its Revolving Note shall, instead, accrue for the account of, and be payable to, Transferor Lender and Purchasing Lender, as the case may be, in accordance with their respective interests as reflected in this Assignment and Acceptance Agreement. In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by Purchasing Lender, Transferor Lender and Purchasing Lender will make appropriate arrangements for payment by Transferor Lender to
Purchasing Lender of such amount upon receipt thereof from Borrowers.

 

6.           Prior to, or concurrently with, the execution and delivery hereof, Transferor Lender will provide to Purchasing Lender conformed copies of the Loan Agreement, and all related documents delivered to Transferor Lender which have been requested by Purchasing Lender.

 

  

2

  

 

7.           Each of the parties to this Assignment and Acceptance Agreement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment and Acceptance Agreement.

 

8.            By executing and delivering this Assignment and Acceptance Agreement, Transferor Lender and Purchasing Lender confirm to and agree with each other and Agent and Lenders as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, Transferor Lender makes no representation or warrant and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan
Agreement, its Revolving Note, or any other instrument or document furnished pursuant thereto; (ii) Transferor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its Liabilities under the Loan Agreement, its Revolving Note, or any other instrument or document furnished pursuant hereto; (iii) Purchasing Lender confirms that it has received a copy of the Loan Agreement, together with copies of such financial statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance Agreement; (iv) Purchasing Lender will, independently and without reliance upon Agent, Transferor Lender or any other Lenders and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement; (v) Purchasing Lender appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under the Loan Agreement as are delegated to the Agent by the terms thereof; (vi) Purchasing Lender agrees that it will perform all of its respective obligations as set forth in the Loan Agreement to be performed by each as a Lender; and (vii) Purchasing Lender represents and warrants to Transferor Lender, Lenders, Agent and each Loan Party that it is either (x) entitled to the benefits of an income tax treaty with the United States of America that provides for an exemption from the United States withholding tax on interest and
other payments made by Borrowers under the Loan Agreement and the Other Agreements or (y) is engaged in trade or business within the United States of America.

 

9.            Schedule I hereto sets forth the revised Total Loan Commitment of Transferor Lender and the Total Loan Commitment of Purchasing Lender as well as administrative information with respect to Purchasing Lender.

 

10.          This Assignment and Acceptance Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 

[SIGNATURE PAGE FOLLOWS]

 

  

3

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance Agreement to be executed by their respective duly authorized officers on the date set forth above.

 

	  	  	  
	  	  	  	  
	  	
as Transferor Lender

	  
	  	  	  	  
	  	
By:

	  	  
	  	
Name:

	  
	  	
Title:

	  
	  	  	  	  
	  	  	  
	  	
as Purchasing Lender

	  
	  	  	  
	  	
By:

	  	  
	  	
Name:

	  
	  	
Title:

	  
	  	  	  	  
	  	
GMAC COMMERCIAL FINANCE LLC

as Agent

	  	  	  
	  	
By:

	  	  
	  	
Name:

	  
	  	
Title:

	  

 

  

 

  

 

SCHEDULE I TO ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS

 

	
Transferor Lender

	
Revolving Loan Commitment:

Revised Pro Rata Share:

	
$ _________

	 	 	 
	
Purchasing Lender

	
Revolving Loan Commitment:

Pro Rata Share:

	
$ _________

 

Addresses for Notices to Purchasing Lender

 

 

Attention: __

Telephone:

Telecopier:

 

  

 

  

 

SCHEDULE II TO ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

Transfer Effective Notice

 

To: _______________________________, as Transferor Lender and

______________, Purchasing Lender:

 

The undersigned, as Agent under the Amended and Restated Loan and Security Agreement dated as of May 25, 2007 (as from time to time amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the "Loan Agreement") among ROCKY BRANDS, 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, ROCKY BRANDS WHOLESALE LLC, a limited liability company organized and existing under the laws of the State of Delaware, and ROCKY BRANDS RETAIL LLC, a limited liability company organized and existing under the
laws of the State of Delaware (the foregoing entities, jointly and severally, as the context requires, "Borrower" or "Bon-owers"), the financial institution(s) listed on the signature pages thereof and their respective successors and Eligible Assignees (each individually a "Lender" and collectively, "Lenders"), GMAC COMMERCIAL FINANCE LLC, a Delaware limited liability company (in its individual capacity, "GMAC CF"), as administrative agent and sole lead arranger for the Lenders (in such capacities, the "Agent"), BANK OF AMERICA, N.A., as syndication agent, and CHARTER ONE BANK, N.A., as documentation agent, acknowledges receipt of four (4) executed counterparts of a completed Assignment and Acceptance Agreement in the form attached hereto. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement.

 

Pursuant to such Assignment and Acceptance Agreement, you are advised that the Transfer Effective Date will be ____________, 20__.

	  	
GMAC COMMERCIAL FINANCE LLC, as Agent

	  	  
	  	
By:

	  
	  	
Name:

	  	
Title:

 

  

 

  

 

EXHIBIT B

 

Form of Borrowing Base Certificate

 

CONSOLIDATED BORROWING BASE CERTIFICATE

ROCKY BRANDS, INC.

 

	
TO:    GMAC Commercial Finance, LLC (“Agent”)

	
Date:   ____ __, 200_

	
3000 Town Center, Suite 280

	
As of:  A/R:_/__/200_; Inv.:_/__/200_

	
Southfield, MI 48075

	
  

Please refer to the Amended and Restated Credit Agreement dated as of May __, 2007 (as amended or otherwise modified from time to time, the “Credit Agreement”) among Rocky Shoes & Boots, Inc. (“Borrower”), various financial institutions and Agent.  This certificate, together with the supporting calculations, is delivered to you pursuant to the terms of the Credit Agreement. Terms used but not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.

 

Borrowing Agent hereby certifies and warrants to the Agent and Lenders that the following is a true and correct computation as of the close of business on the date set forth above (the “Computation Date”) of the Borrowing Base, and Inventory, Account, and Supplemental balance changes since the previous Borrowing Base Certificate provided to you (the “Prior Certificate”).

 

Accounts Receivable

 

	  	  	
Rocky

	  	
Lifestyle

	  	
Rocky

Wholesale

	  	
Rocky Retail

	  	
Consolidated

	
Balance Per Aging

	  	  	  	  	  	  	  	  	  	  
	
Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Foreign Receivables

	  	  	  	  	  	  	  	  	  	  
	
Employee Receivables

	  	  	  	  	  	  	  	  	  	  
	
Past Due

	  	  	  	  	  	  	  	  	  	  
	
Cross Aging (50%)

	  	  	  	  	  	  	  	  	  	  
	
Credit balances over 90 Days from Invoice Date

	  	  	  	  	  	  	  	  	  	  
	
Accrued Freight

	  	  	  	  	  	  	  	  	  	  
	
Accrued Rebate - Dealer Incentives

	  	  	  	  	  	  	  	  	  	  
	
Coop Advertising Accrual

	  	  	  	  	  	  	  	  	  	  
	
Extended Payment Terms

	  	  	  	  	  	  	  	  	  	  
	
Bankruptcy

	  	  	  	  	  	  	  	  	  	  
	
Concentration - Accts. > 20% of Total

	  	  	  	  	  	  	  	  	  	  
	
Government Receivables

	  	  	  	  	  	  	  	  	  	  
	
New Jersey Receivables

	  	  	  	  	  	  	  	  	  	  
	
Debit Memos

	  	  	  	  	  	  	  	  	  	  
	
Unapplied Cash Receipts

	  	  	  	  	  	  	  	  	  	  
	
Intercompany Accounts

	  	  	  	  	  	  	  	  	  	  
	
Net Eligible A/R Before Dilution

	  	  	  	  	  	  	  	  	  	  
	
Dilution Reserve

	  	  	  	  	  	  	  	  	  	  
	
Total Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Eligible

	  	  	  	  	  	  	  	  	  	  
	
Advance Rate

	  	  	  	  	  	  	  	  	  	  
	
Borrowing Base

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  

 

  

 

  

 

Finished Goods

 

	  	  	
Rocky

	  	
Lifestyle

	  	
Rocky

Wholesale

	  	
Rocky Retail

	  	
Consolidated

	
Gross Amount

	  	  	  	  	  	  	  	  	  	  
	
Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Slow Moving Inventory

	  	  	  	  	  	  	  	  	  	  
	
Samples

	  	  	  	  	  	  	  	  	  	  
	
Coop Point of Purchase

	  	  	  	  	  	  	  	  	  	  
	
Capitalized Variance - Monthly

	  	  	  	  	  	  	  	  	  	  
	
Intercompany Profits

	  	  	  	  	  	  	  	  	  	  
	
Markdown Accrual

	  	  	  	  	  	  	  	  	  	  
	
Consignment Inventory

	  	  	  	  	  	  	  	  	  	  
	
Shrinkage Reserve

	  	  	  	  	  	  	  	  	  	  
	
Commissary Inv. less than $50,000

	  	  	  	  	  	  	  	  	  	  
	
Dominican Republic Inventory

	  	  	  	  	  	  	  	  	  	  
	
Canadian Inventory

	  	  	  	  	  	  	  	  	  	  
	
Puerto Rico Inventory – Advances >$2MM

	  	  	  	  	  	  	  	  	  	  
	
Total Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Eligible

	  	  	  	  	  	  	  	  	  	  
	
Advance Rate (1)

	  	  	  	  	  	  	  	  	  	  
	
Borrowing Base

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  

Retail

 

	  	  	
Rocky

	  	
Lifestyle

	  	
Rocky

Wholesale

	  	
Rocky Retail

	  	
Consolidated

	
Gross Amount

	  	  	  	  	  	  	  	  	  	  
	
Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Closeouts

	  	  	  	  	  	  	  	  	  	  
	
Total Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Eligible

	  	  	  	  	  	  	  	  	  	  
	
Advance Rate (1)

	  	  	  	  	  	  	  	  	  	  
	
Borrowing Base

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  

 

  

 

  

 

Raw Materials

 

	  	  	
Rocky

	  	
Lifestyle

	  	
Rocky

Wholesale

	  	
Rocky Retail

	  	
Consolidated

	
Gross Amount

	  	  	  	  	  	  	  	  	  	  
	
Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Supplies

	  	  	  	  	  	  	  	  	  	  
	
Total Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Eligible

	  	  	  	  	  	  	  	  	  	  
	
Advance Rate (1)

	  	  	  	  	  	  	  	  	  	  
	
Borrowing Base

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  

Intransit

 

	  	  	
Rocky

	  	
Lifestyle

	  	
Rocky

Wholesale

	  	
Rocky Retail

	  	
Consolidated

	
Gross Amount

	  	  	  	  	  	  	  	  	  	  
	
Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Total Ineligibles

	  	  	  	  	  	  	  	  	  	  
	
Eligible

	  	  	  	  	  	  	  	  	  	  
	
Advance Rate (1)

	  	  	  	  	  	  	  	  	  	  
	
Borrowing Base

	  	  	  	  	  	  	  	  	  	  
	
Intransit Inventory Advances Above $8 Million

	  	  	  	  	  	  	  	  	  	  
	
Intransit Inventory Borrowing Base Capped at $8 Million

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  

	
Total Gross Inventory

	  
	  	  
	
Net Borrowing Base Availability from Inventory

	  
	  	  
	
Inventory Availability above $50 million

	  
	  	  
	
Inventory Availability – Capped at $50 million

	  
	  	  
	
Total Borrowing Base Availability

	  
	  	  
	
Total Availability Above $100 Million

	  
	  	  
	
Total Availability – Capped at $100 Million

	  

 

  

 

  

 

	
Borrowing base availability

	  
	
Less:  Outstanding letter of credit

	  
	
Less:  Royalty Reserve/Other Reserve

	  
	
Total Available

	  
	
Revolving loan balance at computation date

	  
	
Excess availability

	  
	
Less:  Minimum availability

	  
	
Net Availability for borrowing

	  
	  	  
	
Loan Activity

	  
	  	  
	
Revolving loan balance carried forward from prior report

	  
	
Total advances since previous report

	  
	
Total payments since previous report

	  
	
Total adjustments since previous report (including interest and fees)

	  
	
Revolving loan balance at computation date

	  

Borrowing Agent hereby further certifies and warrants to the Agent and Lenders that no Event of Default or event which with the passage of time would be an Event of Default has occurred.

 

IN WITNESS WHEREOF, the Borrowing Agent has caused this Certificate to be executed and delivered by its officer thereunto duly authorized on _________  __, 200_.

 

	  	
ROCKY BRANDS, INC.

	  
	  	  	  
	  	
By:

	  	  
	  	
Title:

	  

 

(1) High Selling Period - May through October, Low Selling Period - November through April.

 

  

 

  

 

EXHIBIT C

 

FORM OF COMPLIANCE AND PRICING CERTIFICATE

	  	
________20___

 

GMAC Commercial Finance LLC

1290 Avenue of the Americas New

York, New York 10104 Attention:

 

Ladies and Gentlemen:

 

Reference is made to that certain Amended and Restated Loan and Security Agreement dated as of May 25, 2007 (as from time to time amended, restated, supplemented or otherwise modified in accordance with the terms thereof, the "Loan Agreement") among ROCKY BRANDS, 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, ROCKY BRANDS WHOLESALE LLC, a limited liability company organized and existing under the laws of the State of Delaware, and ROCKY BRANDS RETAIL LLC, a limited liability company organized and existing under the laws of the State of Delaware (the foregoing entities, jointly
and severally, as the context requires, "Borrower" or "Borrowers"), the financial institution(s) listed on the signature pages thereof and their respective successors and Eligible Assignees (each individually a "Lender" and collectively, "Lenders"), GMAC COMMERCIAL FINANCE LLC, a Delaware limited liability company (in its individual capacity, "GMAC CF"), as administrative agent and sole lead arranger for the Lenders (in such capacities, the "Agent"), BANK OF AMERICA, N.A., as syndication agent, and CHARTER ONE BANK, N.A., as documentation agent. Capitalized terms used herein, and not otherwise defined herein, have the respective meanings given them in the Loan Agreement.

 

The undersigned hereby certifies to the Lender as follows:

 

1.            The undersigned is a duly appointed officer of the Borrowers and is authorized to deliver this Compliance and Pricing Certificate to the Agent.

 

2.            The undersigned has examined the books and records of the Loan Parties and has conducted such other examinations and investigations as are reasonably necessary to provide this Compliance and Pricing Certificate.

 

3.            To the best of the undersigned's knowledge, information and belief, no Default or Event of Default has occurred since the date of the last Compliance and Pricing Certificate, or, if any such Default or Event of Default has occurred, the Loan Parties' actions taken with respect thereto are set forth on Schedule 2 attached hereto.

 

  

 

  

 

4. Computations demonstrating compliance with the financial covenants for the Loan Parties' fiscal period ended on the date of the financial statements delivered herewith are set forth on Schedule 1 attached hereto.

 

IN WITNESS WHEREOF, the undersigned has executed this Compliance and Pricing Certificate as of the date first written above.

	  	
By:

	  	  
	  	  	
Name:

	  
	  	  	
Title:

	  

 

  

 

  

 

Schedule 1

 

CALCULATION OF FINANCIAL COVENANTS

 

1.           Fixed Charge Coverage Ratio:

 

2.           Capital Expenditures:

 

3.           Total Leverage Ratio:

 

  

 

  

 

Schedule 2

 

DEFAULTS AND/OR EVENTS OF DEFAULT SINCE

DATE OF LAST COMPLIANCE AND PRICING CERTIFICATE

 

Indicate "None" or list such Defaults and/or Events of Default and actions taken by Borrowers with respect thereto:

 

  

 

  

 

EXHIBIT F

 

Notice of Borrowing

_____________, 20__

GMAC Commercial Finance LLC,

as Agent for the Lenders party to the Amended

and Restated Loan and Security Agreement

referred to below

1290 Avenue of the Americas

New York, New York 10104

 

Ladies and Gentlemen:

 

The undersigned, ROCKY BRANDS, 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, ROCKY BRANDS WHOLESALE LLC, a limited liability company organized and existing under the laws of the State of Delaware, and ROCKY BRANDS RETAIL LLC, a limited liability company organized and existing under the laws of the State of Delaware (each a "Borrower" and jointly and severally, "Borrowers"), refer to the Amended and Restated Loan and Security Agreement dated as of May 25, 2007 (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"; the terms defined therein being used herein as therein defined) by and among Borrowers, the Lenders party thereto, GMAC COMMERCIAL FINANCE LLC, a Delaware limited liability company (in its individual capacity, "GMAC CF"), as administrative agent and sole lead arranger for the Lenders (in such capacities, the "Agent") and BANK OF AMERICA, N.A., as syndication agent and CHARTER ONE BANK, N.A., as documentation agent, and hereby gives you notice, pursuant to Section 2.1 of the Loan Agreement, that the Borrowers hereby request a Revolving Advance under the Loan Agreement, and in that connection sets forth below the information relating to such Revolving Advance (the "Proposed Advance") as required by Section 2.1(C) of the Loan Agreement:

 

	
  

	
(i)

	
The ______________ Proposed Advance is a Revolving Advance in the aggregate amount of $

 

	
  

	
(ii)

	
The Proposed Advance is a [LIBOR Loan] [Base Rate Loan].

 

	 	
(iii)

	
If the Proposed Advance is a LIBOR Loan, the requested Interest Period for such Loan is __________ months.

 

	
  

	
(iv)

	
The Funding Date of the Proposed Advance is _____________ , 20__.

 

  

 

  

 

The Borrower hereby certifies that the representations and warranties contained in Sections 5 and 6 of the Loan Agreement and in each other Loan Document, certificate or other writing delivered to the Agent pursuant thereto are correct on and as of the date first above written (other than those which expressly speak only as of a different date) and no Default or Event of Default has occurred or is continuing as of the date hereof.

 

The undersigned hereby requests that Agent disburse the proceeds of the Loans as set forth on Schedule A attached hereto.

	  	
Very truly yours,

	  	  
	  	
ROCKY BRANDS, INC.

	  	
LIFESTYLE FOOTWEAR, INC.

ROCKY BRANDS WHOLESALE LLC

ROCKY BRANDS RETAIL LLC

	  	  
	  	
B y:

	  	  
	  	
Name:

	  	  
	  	
Title:

	  	  

 

  

 

  

 

Schedule A

	
1. 

	
For the account of ________________________:

	
Bank:

	  
	
ABA Routing No.:

	  
	
Account No.:

	  
	
Account Name:

	  
	
Amount:

	  
	
Reference No.:

	  

 

  

 

  

 

FINAL

SCHEDULES TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

Dated as of May 25, 2007

Introduction:

For purposes of this introduction, the term “Schedules” shall include the following:

	 	
Schedule 1.1 

	
Excluded Property

	 	
Schedule 2.7(A) 

	
Commercial Tort Claims

	 	
Schedule 3 

	
Closing Deliveries

	 	
Schedule 4.1(A) 

	
Organizational Schedule

	 	
Schedule 4.1(D) 

	
Capitalization Schedule

	 	
Schedule 4.1(F) 

	
Authorization; No Breach

	 	
Schedule 4.1(G) 

	
Governmental Approvals

	 	
Schedule 4.1(J) 

	
Litigation Schedule

	 	
Schedule 4.1(L) 

	
Environmental Schedule

	 	
Schedule 4.1(Q) 

	
Properties Schedule

	 	
Schedule 4.1(R) 

	
Intellectual Property Schedule

	 	
Schedule 4.1(U) 

	
Side Agreements

	 	
Schedule 4.1(W) 

	
Material Contracts

	 	
Schedule 4.1(Z) 

	
Current Business Practices

	 	
Schedule 5.2(A) 

	
Permitted Indebtedness Schedule

	 	
Schedule 5.2(B) 

	
Permitted Liens Schedule

	 	
Schedule 6.1(K) 

	
Deposit Accounts

	 	
Schedule 6.1(L) 

	
Bailees/Consignees/Warehouse

	 	
Schedule 6.1(Q) 

	
Names and Locations

Unless otherwise defined in these Schedules, all capitalized terms used herein shall have the meanings ascribed to them in the Amended and Restated Loan and Security Agreement by, between the Lenders, GMAC COMMERCIAL FINANCE LLC, as administrative agent and sole lead arranger for the Lenders, BANK OF AMERICA, N.A., as syndication agent and CHARTER ONE BANK, N.A., as documentation agent, and Rocky Brands, Inc., Lifestyle Footwear, Inc., Rocky Brands Wholesale LLC and Rocky Brands Retail LLC, as borrowers, dated May 25, 2007 (the “Agreement”).

The headings contained in these Schedules are for reference purposes only and shall not affect in any way the meaning or interpretation of the Agreement or these Schedules.

 

  

 

  

 

SCHEDULE 1.1

Excluded Property

 

	
1. 

	
Operating leases for leased personal property consisting of specific equipment as follows:

	 	
(a) 

	
Chase Equipment Leasing – automatic wrapper, warehouse storage units (Rocky)

	 	
(b) 

	
Worthen Industries  - glue machines (Rocky)

	 	
(c) 

	
GE Capital – machine adhesives (Rocky)

	 	
(d) 

	
W.L. Gore – dryers, sealer & cutter, centrifugal testers (Rocky/Lifestyle)

	 	
(e) 

	
USM- stitcher (Lifestyle)

	 	
(f) 

	
Manifest Funding (International Absolute) – leased equipment (Lifestyle)

	 	
(g) 

	
NMGH Financial Services, Inc. – leased equipment (Rocky)

	 	
(h) 

	
BSB Bank & Trust Company – leased equipment (Rocky)

	 	
(i) 

	
Pitney Bowes Credit –leased equipment (Rocky)

	 	
(j) 

	
Cab East, LLC– motor vehicles (Rocky)

	 	
(k) 

	
DeLage Landen Financial Services, Inc. – leased equipment (Rocky)

	 	
(l) 

	
BSFS Equipment Leasing –phone system (Rocky/Rocky Retail)

	 	
(m) 

	
IOS Capital LLC – leased equipment (Rocky/Rocky Retail)

	 	
(n) 

	
ComSource – computer equipment (Rocky/Rocky Retail)

	 	
(o) 

	
CitiCapital Fleet – motor vehicles (Rocky Retail)

	 	
(p) 

	
Key Equipment Finance – motor vehicles (Rocky Retail)

	 	
(q) 

	
Navistar Leasing Company/Hardco Leasing Company, Inc. – motor vehicles (Rocky Retail)

	 	
(r) 

	
Dell Financial Services, LP – computer equipment (Rocky Retail/Rocky Wholesale)

	 	
(s) 

	
GE Capital – inserter (Rocky Wholesale/Rocky Retail)

	 	
(t) 

	
Bell South – telephone and MIS equipment (Rocky Retail/Rocky Wholesale)

	 	
(u) 

	
Xerox Financial – copiers and fax machines (Rocky/Rocky Retail/Rocky Wholesale)

	
2. 

	
License agreements for “off-the-shelf” Microsoft Corporation and other software

	
3. 

	
The following license agreements (to the extent a licensor consent to assignment has not been obtained):

	 	
(a) 

	
Trademark License Agreement between W. L. Gore & Associates, Inc., W. L. Gore & Associates GmbH, and Rocky Shoes & Boots, Inc. dated July 11, 2001

	 	
(b) 

	
Renewal License Agreement between Haas Outdoors, Inc. and Rocky Shoes and Boots dated November 23, 2001

	 	
(c) 

	
License Agreement between Jordan Outdoor Enterprises, Ltd. and Rocky Shoes & Boots, Inc. dated February 14, 2002

	
1.

	
(d)          License Agreement between Williamson-Dickie Manufacturing Company and Georgia Boot LLC dated January 2004, as amended

 

  

 

  

 

	
2.  

	
(e)           License Agreement between John Deere Shared Services, Inc., a subsidiary of Deere & Company and Georgia Boot LLC dated July 30, 2003 (Agreement terminates if Georgia Boot is sold to one of Deere & Company’s competitors)

 

	
3.

	
(f)            Trademark License Agreement between Chromalloy Men’s Apparel Group, Inc (now known as After Six Inc.) and EJ Footwear Corp. dated October 7, 1997, as amended

 

	
4.

	
(g)           Trademark License between W.L. Gore & Associates, Inc. and Georgia Boot dated May 20, 2002

 

	 	
(h) 

	
Distribution Agreement (Occupational and Safety Footwear) between Gear Six Technologies LLC and Rocky Brands, Inc. dated June 13, 2006, as amended by a First Amendment to Distribution Agreement dated April 18, 2007 (MICHELIN)

	 	
(i) 

	
License Agreement between Sole Matters, LLC and Rocky Shoes & Boots, Inc. dated June 15, 2006 (ZUMFOOT)

	
4. 

	
Inseam trimmer, side and heal seat laster, staple side laster and toe laster and proceeds pledged to Androscoggin Savings Bank and Pamco Machine Company, Inc.

 

  

 

  

 

SCHEDULE 2.7(A)

Commercial Tort Claims

 

Rocky Brands, Inc. et al. v. Red Wing Shoe Company, Inc. et al., Case No. C2 06 275, pending in the U.S. District Court for the Southern District of Ohio.  Rocky Brands, Inc. and Lehigh Safety Shoe Co. LLC (collectively, “Rocky”) are plaintiffs in this matter.  Rocky alleges claims for false advertising and false designation of origin in commercial advertising or promotion; tortious interference with business relationships; and deceptive trade practices.  Rocky claims that Red Wing Shoe Company, Inc. and its wholly-owned subsidiary Red Wing Brands of America, Inc. (collectively, “Red Wing”) willfully,
intentionally and deceptively market and promote certain imported footwear products as having been “Made in the USA.”  Rocky seeks unspecified damages to compensate for sales lost as a result of Red Wing’s wrongful behavior and unjust enrichment.

 

  

 

  

 

SCHEDULE 3

Closing Deliveries

See Exhibit 3 attached.

 

  

 

  

 

Exhibit 3 to Schedule 3

 

GMAC COMMERCIAL FINANCE LLC (as "Agent" and "Lender")

 

with

 

ROCKY BRANDS, INC. ("Rocky")

LIFESTYLE FOOTWEAR, INC. ("Lifestyle")

ROCKY BRANDS WHOLESALE LLC ("Wholesale")

ROCKY BRANDS RETAIL LLC ("Retail")

 

(each a "Borrower" and collectively, "Borrowers")

 

$100,000,000 Revolving Credit Facility

 

Amended and Restated Financing Transaction Checklist

 

May 25, 2007

 

	
I. 

	
Financing Documentation

	
A.

	
Loan Documentation

	
  

	
1.

	
Amended and Restated Loan and Security Agreement, together with Exhibits and Schedules

Exhibits

	
  

	
A.

	
Assignment and Acceptance Agreement

	
  

	
B.

	
Borrowing Base Certificate

	
  

	
C.

	
Compliance and Pricing Certificate

	
  

	
D.

	
Calculation of Initial Advance Rates for Eligible Inventory

	
  

	
F.

	
Notice of Borrowing

Schedules

	
  

	
Schedule 1.1

	
Excluded Property

	
  

	
Schedule 2.7(A)

	
Commercial Tort Claims

	
  

	
Schedule 3

	
List of Closing Documents

	
  

	
Schedule 4.1(A)

	
Organizational Schedule

	
  

	
Schedule 4.1(D)

	
Capitalization Schedule

	
  

	
Schedule 4.1(F)

	
Authorization; No Breach

	
  

	
Schedule 4.1(G)

	
Governmental Approvals

	
  

	
Schedule 4.1(J)

	
Litigation Schedule

 

  

 

  

 

	
  

	
Schedule 4.1(L)

	
Environmental Schedule

	
  

	
Schedule 4.1(R)

	
Intellectual Property Schedule

	
  

	
Schedule 4.1(W)

	
Material Contracts

	
  

	
Schedule 4.1(Q)

	
Properties Schedule

	
  

	
Schedule 4.1(U)

	
Side Agreements

	
  

	
Schedule 4.1(Z)

	
Current Business Practices

	
  

	
Schedule 5.2(A)

	
Permitted Indebtedness Schedule

	
  

	
Schedule 5.2(B)

	
Permitted Liens Schedule

	
  

	
Schedule 6.1(K)

	
Deposit Accounts

	
  

	
Schedule 6.1(L)

	
Bailees

	
  

	
Schedule 6.1(Q)

	
Names and Locations

	
  

	
2.

	
$100,000,000 in Amended and Restated Revolving Credit Notes (from previous closings)

	
  

	
a.

	
Comerica Bank — $16,101,7000

	
  

	
b.

	
PNC Bank, National Association - $17,796,610

	
  

	
c.

	
The Royal Bank of Scotland PLC - $17,796,610

	
  

	
d.

	
Bank of America, N.A. - $21,186,4400

	
  

	
e.

	
GMAC Commercial Finance LLC - $27,118,640

	
  

	
3.

	
Officer's Certificate re: Conditions Precedent

	
  

	
4.

	
Financial Condition Certificate with Pro Forma Balance Sheet and Cash Flow Projections

	
  

	
5.

	
Accountant's Access Letter (from previous closings)

	
  

	
6.

	
Payoff Letter — ACAS re Term Loan B

	
  

	
7.

	
Payoff Letter — GMAC re Term Loan A and Term Loan C

	
  

	
B.

	
Ancillary Collateral Documentation

	
  

	
8.

	
Pledge Documentation — Rocky,

	
  

	
a.

	
Amended and Restated Pledge Agreement

	
  

	
b.

	
Stock Powers

	
  

	
c.

	
Stock Certificates

	
  

	
C.

	
Intellectual Property Documentation

	
  

	
9.

	
Intellectual Property Searches (On file with Hahn & Hessen)

	
  

	
10.

	
Copyright, Trademark, Patent and License Security Agreements (On file with Hahn & Hessen from previous closings)

 

  

 

  

 

	
  

	
11.

	
Additional Copyright, Trademark, Patent and License Security Agreements (post-closing)

	
  

	
D.

	
Insurance Documentation

	
  

	
12.

	
Certificates of Insurance (Copies of Insurance Policies in possession of Agent)

	
  

	
13.

	
Loss Payable Endorsements (together with evidence of insurance agent's authority to execute same)

	
  

	
E.

	
Opinion of Counsel

	
  

	
14.

	
Opinion of Porter, Wright, Morris & Arthur ("BC")

	
  

	
F.

	
Second Priority Senior Notes Documentation

	
  

	
15.

	
Note Purchase Agreement

	
  

	
16.

	
Second Priority Senior Notes - $40,000,000

	
  

	
a.

	
Whitebox Hedged High Yield Partners, LP - $17,500,00

	
  

	
b.

	
GPC LIX, L.L.C. - $2,500,000

	
  

	
c.

	
Laminar Direct Capital L.P. — 20,000,000

	
  

	
17.

	
Intercreditor Agreement between Second Priority Agent and GMAC CF

	
II.

	
UCC, Tax Lien and Judgments

	
  

	
18.

	
UCC, Tax Lien and Judgment Searches (See Schedule A)

	
  

	
19.

	
UCC-1 Financing Statements — Second Priority Agent

	
  

	
20.

	
UCC-3 Termination Statements — ACAS

	
III.

	
Corporation Authorization

	
  

	
21.

	
Good Standing Certificates and Authorizations to do Business

a. Rocky (OH, WV)

b. Lifestyle (DE)

c. Wholesale (LA, OH, WV)

d. Retail (CA, CO, DE, FL, GA, HI, IL, IN, KS, KY, LA, MI MN, MO, NH, NY, NC, OH, PA, SC, TN, TX, VA, WV, WI)

	
  

	
22.

	
Secretaries' Certificates of Borrowers together with incumbency certificate, authorizing resolutions, certificate of incorporation/formation and operating agreement/by-laws)

a. Rocky

b. Lifestyle

c. Wholesale

d. Retail

 

  

 

  

 

Schedule A

 

UCC, Tax Lien and Judgment Searches

 

I.            Rocky Brands, Inc.

	 	
·

	
Delaware S/S

	 	
·

	
Ohio S/S

	 	
·

	
Athens County, Ohio

	 	
·

	
Hocking County, Ohio

 

II.           Lifestyle Footwear, Inc.

	 	
·

	
Delaware S/S

 

III.         Rocky Brands Wholesale LLC

	 	
·

	
Delaware S/S

	 	
·

	
Ohio S/S

	 	
·

	
DC Register of Deeds

 

IV.         Rocky Brands Retail LLC

	 	
·

	
Delaware S/S

	 	
·

	
Tennessee S/S

	 	
·

	
Williamson County, TN

	
  

	
·

	
Georgia Clerk Cooperative NY S/S

	
  

	
·

	
Broome County, NY

 

  

 

  

 

Schedule B

 

UCC 1 Financing Statements

 

Rocky Brands, Inc.

 

	
Jurisdiction

	
Filing Date

	
Filing Number

	
OH-SOS

	
5/25/2007  

	
OH00115607115

	  	  	  
	
Rocky Brands Retail LLC

	  	  	  
	
Jurisdiction

	
Filing Date

	
Filing Number

	
DE-SOS

	
5/25/2007  

	
20071978104  

	  	  	  
	
Rocky Brands Wholesale LLC

	  	  	  
	
Jurisdiction

	
Filing Date

	
Filing Number

	
DE-SOS

	
5/25/2007  

	
20071978096  

	  	  	  
	
Lifestyle Footwear, Inc.

	  	  	  
	
Jurisdiction

	
Filing Date

	
Filing Number

	
DE-SOS

	
5/25/2007  

	
20071977528  

 

  

 

  

 

Schedule C

 

UCC 3 Termination Statements

 

Rocky Brands Retail LLC

 

	
Jurisdiction

	
Filing Date

	
Filing Number

	
DE-SOS

	
6/19/2007

	
20072323292

	
DE-SOS

	
6/19/2007

	
20072323458

	
DE-SOS

	
6/19/2007

	
20072323318

Rocky Brands Wholesale LLC

	
Jurisdiction

	
Filing Date

	
Filing Number

	
DE-SOS

	
6/19/2007

	
200723223177

	
DE-SOS

	
6/19/2007

	
20072323235

	
DE-SOS

	
6/19/2007

	
20072323250

	
DE-SOS

	
6/19/2007

	
20072323136

Lifestyle Footwear, Inc.

	
Jurisdiction

	
Filing Date

	
Filing Number

	
DE-SOS

	
6/19/2007

	
20072322724

 

  

 

  

 

SCHEDULE 4.1(A)

Organizational Schedule

	
Name

	  	
Principal Place of

Business

	  	
Qualified to do

Business

	  	
Subsidiaries

	
Rocky Brands, Inc., an Ohio corporation

	  	
39 East Canal Street

Nelsonville, OH 45764

	  	
OH, VA and WV

	  	
Lifestyle Footwear, Inc.

Rocky Brands Wholesale LLC

Five Star Enterprises Ltd.

Rocky Canada, Inc.

Rocky Brands Retail LLC

EJ Asia Limited (99.99% ownership)

	 	 	 	 	 	 	 
	
Lifestyle Footwear, Inc., a Delaware corporation

	  	
Road 125 KM 3.8 BO Pueblo Industrial Park

Moca, PR  00676-0728

	  	
DE and Puerto Rico

	  	
None

	 	 	 	 	 	 	 
	
Rocky Brands Wholesale LLC, a Delaware limited liability company

	  	
39 East Canal Street

Nelsonville, OH 45764

	  	
DE, GA, TN, NY, OH, WV,  and LA

	  	
None

	 	 	 	 	 	 	 
	
Rocky Brands Retail LLC, a Delaware limited liability company

	
  

	
39 East Canal Street

Nelsonville, OH 45764

	
  

	
DE, KY, OH, NY, CA, MO, MI, NH, KS, SC, GA, PA, NC, LA, CO, IN, TX, TN, HI, WI, IL, FL, MN, VA, and WV

	
  

	
None

 

  

 

  

 

SCHEDULE 4.1(D)

Capitalization Schedule

ROCKY BRANDS, INC. (formerly Rocky Shoes & Boots, Inc.)

Authorized:

1.           250,000,000 shares of common stock, without par value

2.           250,000 shares of voting preferred stock, without par value

3.           250,000 shares of non-voting preferred stock, without par value, consisting of:

a.           125,000 shares of Series A Non-Voting Convertible Preferred Stock

b.           125,000 shares of Series B Junior Participating Cumulative Preferred Stock

Issued and Outstanding:  only common

Rocky has stock options issued and outstanding under:

1.           1992 Stock Option Plan

2.           1995 Amended and Restated Stock Option Plan

3.           2004 Stock Incentive Plan

As of September 30, 2006, 543,276 shares are issued and outstanding pursuant to option plans.

LIFESTYLE FOOTWEAR, INC.

Authorized:  3,000 shares of common stock, without par value

Issued and Outstanding:  2,000 shares to Rocky Brands, Inc. (formerly Rocky Shoes & Boots, Inc.), Replacement Certificate No. 3.

ROCKY CANADA, INC.

Authorized:  an unlimited number of common shares

Issued and Outstanding:  100 shares to Rocky Brands, Inc. (formerly Rocky Shoes & Boots, Inc.), Certificate No. 2 for 65 shares and Certificate No. 3 for 35 shares

FIVE STAR ENTERPRISES LTD.

Authorized:  900,000 shares of common stock, valued at One United States Dollar each

Issued and Outstanding:  5,000 shares to Rocky Brands, Inc. (formerly Rocky Shoes & Boots, Inc.), Replacement Certificate No. 6

 

  

 

  

 

EJ ASIA LIMITED (Pending Dissolution)

Authorized:  10,000 ordinary shares

Issued and Outstanding:  9,999 shares constituting 99.99% of the equity interests to  Rocky Brands, Inc.  successor by merger to EJ Footwear LLC, Certificate No. 3 and 1 share constituting .01% of the equity interest to Douglas Bedell Brown, Certificate No. 4

ROCKY BRANDS WHOLESALE LLC (formerly Georgia Boot LLC prior to merger of Georgia Boot Properties LLC, Durango Boot Company LLC, and Northlake Boot Company LLC with and into Georgia Boot LLC, with name change to Rocky Brands Wholesale LLC)

Authorized:  100 Class A Common Units

Issued and Outstanding:  100 Class A Common Units to Rocky Brands, Inc. (formerly Rocky Shoes & Boots, Inc.), Certificate No. 2

ROCKY BRANDS RETAIL LLC (formerly Lehigh Safety Shoe Co. LLC prior to mergers of Lehigh Safety Shoe Properties LLC with and into Lehigh Safety Shoe Co. LLC and HM Lehigh Safety Shoe Co. LLC with and into Lehigh Safety Shoe Co. LLC, with name change to Rocky Brands Retail LLC)

Authorized:  100 Class A Common Units

Issued and Outstanding:  100 Class A Common Units to Rocky Brands, Inc. (formerly Rocky Shoes & Boots, Inc.), Certificate No. 1

 

  

 

  

 

SCHEDULE 4.1(F)

Authorization; No Breach

None

 

  

 

  

 

SCHEDULE 4.1(G)

Governmental Approvals

None

 

  

 

  

 

SCHEDULE 4.1(J)

Litigation Schedule

None

 

  

 

  

 

SCHEDULE 4.1(L)

Environmental Schedule

None

 

  

 

  

 

SCHEDULE 4.1(Q)

Properties Schedule

	
A. 

	
Rocky Brands, Inc. (formerly Rocky Shoes & Boots, Inc.)

	 	
1. 

	
Owned Real Property

39 East Canal Street

Nelsonville, OH  45764

(mortgaged to General Electric Capital Business Asset Funding Corporation)

29 Fayette St.

Nelsonville, OH 45764

	 	
2. 

	
Leased Real Property – None

	
B. 

	
Lifestyle Footwear, Inc.

	 	
1. 

	
Owned Real Property – None

	 	
2. 

	
Leased Real Property

Road 125 KM 3.8 BO Pueblo Industrial Park

Moca, PR  00676-0728

	
C. 

	
Rocky Brands Wholesale LLC (formerly Georgia Boot LLC)

	 	
1. 

	
Owned Real Property

37601 Rocky Boots Way

Logan, OH  43138

	 	
2. 

	
Leased Real Property

235 Noah Drive

Franklin, TN 37064

Office

Denver Merchandise Mart

451 East 58th Street

Showrooms 3529 & 4435

Denver, CO  80216

 

  

 

  

 

	
D. 

	
Rocky Brands Retail LLC (formerly Lehigh Safety Shoe Co. LLC)

	 	
1. 

	
Owned Real Property

45 East Canal Street

Nelsonville, OH 45764

901 Franklin Street E

Endicott, NY 13761

	 	
2. 

	
Leased Real Property

120 Plaza Dr.

Vestal, NY

Office

12545 Laramie Avenue, Unit 11-B

Alsip, IL  60803

9038 N. IH-35, Suite A

Austin, TX  78753

5001 West 161st Street

Cleveland, OH  44142

Unit E, 400 Northeast Dr.

Columbia, SC  29203

7250 Bandini Blvd., Unit 102

Commerce, CA  90040

4413 Empire Way

Westland Industrial Park

Lansing, MI  48917

3890 Kipling, Unit K

Wheat Ridge, CO  80033

2945 S. Miami Blvd., Suite 120

Durham, NC  27703

Powerline Business Center

5601 N.W. 9th Avenue

Suite 103

Fort Lauderdale, FL  33309

 

  

 

  

284 South Colony Rd.

Route #5

Wallingford, CT  06492

1130 N. Nimitz  Highway, Suite A-122

Honolulu, HI  96817

5545 West Raymond Street, Suite C

Indianapolis, IN  46241

3103 Fern Valley Rd., Suite 103

Louisville, KY 40213

2885 Business Park Drive

Airport Business Park

Building E

Memphis, TN 38118

2415 Monroe Road

DePere, WI  54115

4250 44th Avenue, Suite 2

Moline, IL  61265

Three  Progress Avenue

Nashua, NH 03062

1412 Antioch Pike, Suite 101

Antioch, TN  37211

5610 Jefferson Highway, C-1

New Orleans, LA 70123

5952 Peachtree Industrial Blvd.

Suite 17

Norcross, GA  30071

7685 Currency Drive

Sand Lake Service Center 2

Orlando, FL  32809

4735 Campbell's Run Road, Space A

Pittsburgh, PA  15205

 

  

 

  

 

1331 West 3300 South

Salt Lake City, UT 84119

1510 Montague Expressway

San Jose, CA  95131

Carr 887 km. 0.6 Victoria Industrial Park

Carolina Commercial Park, Puerto Rico 00987

10 Saratoga Avenue

South Glen Falls, NY  12803

13609 Lakefront Drive

Earth City, MO  63045

445 Etna Street, Suite 56

St. Paul, MN  55106

6103 E. Malloy Rd.

E. Syracuse, NY  13057

Corporex Plaza

3904 Corporex Park Drive

Suite 100A

Tampa, FL  33619

1927 S. West Street, Suite B

Wichita, KS  67213

34-23 38th Street

Long Island City, NY  11101

47 Bridge Street

Corning, NY  14830

Commercial Center

2229 E. Division

Arlington, TX  76011

1707 Center Street

Deer Park, TX  77536

3240 Peach Orchard Rd., Suite 6

Augusta, GA  30906

703 E. Ordnance Road, Suite 610

Baltimore, MD  21226

  

 

  

Carr #2, KM 57.5

Barceloneta, PR  00617

Carr 887 Km 0.6, Bo Martin Gonzalez

Carolina, PR  00987

142 State Rd., #189 KM 2.2

Caguas, PR  00726

1625 Walden Ave.

Cheektowaga, NY  14225

131 Harbison Blvd.

Columbia, SC  29212

2914 E. Yandell, Suite 1

El Paso, TX  79903

4380 S. Noland Road

Independence, MO  64055

2224 Paradise Road’

Las Vegas, NV  89102

Rd. # 2 km 44.7

Bo Cantera #43 STE

Manati, PR  00674

2737 W. McDowell Road

Phoenix, AZ  85009

2341 Avenida Las Americas, Ste 103

Ponce, PR  00717

3247 NW 29th Ave.

Portland, OR  97210

  

 

  

SCHEDULE 4.1(R)

Intellectual Property Schedule

ROCKY BRANDS, INC.

FEDERAL TRADEMARK APPLICATIONS AND REGISTRATIONS

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
ADVANTA-FLEX

	  	
Ser. No. 76/435112

	  	
Filed 7/29/02

	  	
Assigned to GMAC

	  	  	
Reg. No. 2783005

	  	
Reg 11/11/03

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ALPHAFORCE

	  	
Ser. No. 78/098664

	  	
Filed 12/17/01

	  	  
	  	  	
Reg. No. 2766744

	  	
Reg. 9/23/03

	  	  
	  	  	  	  	  	  	  
	
AOG

	  	
Serial No. 75/010045

	  	
Filed 10/24/95

	  	
Assigned to GMAC

	  	  	
Reg. No. 2166173

	  	
Reg. 6/16/98

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ASTRO

	  	
Ser. No. 72/301213

	  	
Filed 6/24/68

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 862801

	  	
Reg 12/31/68

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
AQUA GUARD

	  	
Ser. No. 75/786424

	  	
Filed 8/27/99

	  	
Assigned to GMAC

	  	  	
Reg. No. 2538542

	  	
Reg. 2/12/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
BARCLAY (stylized)

	  	
Ser. No. 71/550334

	  	
Filed 2/21/48

	  	
Assigned to GMAC

	  	  	
Reg. No. 516495

	  	
Reg 10/18/49

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
BEACON STRATEGIC RESOURCING

	  	
Ser. No. 76/362852

	  	
Filed 1/24/02

	  	
Assigned to GMAC

	  	  	
Reg. No. 2759986

	  	
Reg 9/2/03

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
BEAR CLAW

	  	
Ser. No. 74/662553

	  	
Filed 4/18/95

	  	
Assigned to GMAC

	  	  	
Reg. No. 1974865

	  	
Reg. 5/21/96

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
BOOTS UNLIMITED

	  	
Ser. No. 76/203030

	  	
Filed 1/31/01

	  	
Assigned to GMAC

	  	  	
Reg. No. 2515098

	  	
Reg 12/4/01

	  	
Commercial Finance LLC 2/2/05

 

  

 

  

 

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
CAMO-TEK

	  	
Ser. No. 75/603250

	  	
Filed 12/10/98

	  	
Assigned to GMAC

	  	  	
Reg. No. 2534492

	  	
Reg. 1/29/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
CHIEFTAN

	  	
Ser. No. 72/248946

	  	
Filed 6/27/66

	  	
Assigned to GMAC

	  	  	
Reg. No. 831865

	  	
Reg 7/11/67

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
CORNSTALKERS

	  	
Ser. No. 74/541038

	  	
Filed 6/22/94

	  	
Assigned to GMAC

	  	  	
Reg. No. 1897612

	  	
Reg. 6/6/95

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
DESIGN (Boot)

	  	
Ser. No. 78/520734

	  	
Filed 11/22/04

	  	  
	  	  	
Reg. No. 3057432

	  	
Reg. 2/7/06

	  	  
	  	  	  	  	  	  	  
	
DURANGO MUSTANG

	  	
Ser. No. 77/054878

	  	
Filed 12/1/06

	  	  
	  	  	  	  	  	  	  
	
EJ

	  	
Ser. No. 73/742972

	  	
Filed 7/29/88

	  	
Assigned from Endicott

	
and Design

	  	
Reg. No. 1530972

	  	
Reg 3/21/89

	  	
Johnson Corporation 7/11/00

	  	  	  	  	  	  	  
	
FARM MASTERS

	  	
Ser. No. 73/365988

	  	
Filed 5/24/82

	  	
Assigned to GMAC

	  	  	
Reg. No. 1250453

	  	
Reg 9/6/83

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
FIRSTMED

	  	
Ser. No. 76/109464

	  	
Filed 8/15/00

	  	
Assigned to GMAC

	  	  	
Reg. No. 2595571

	  	
Reg. 7/16/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
FLX-POINT

	  	
Ser. No. 76/470052

	  	
Filed 11/25/02

	  	
Assigned to GMAC

	  	  	
Reg. No. 2789949

	  	
Reg 12/2/03

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
FORMZ

	  	
Ser. No. 75/674579

	  	
Filed 4/5/99

	  	
Assigned to GMAC

	  	  	
Reg. No. 2466342

	  	
Reg. 7/3/01

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
G (Stylized)

	  	
Ser. No. 76/182533

	  	
Filed 12/18/00

	  	
Assigned to GMAC

	  	  	
Reg. No. 2967416

	  	
Reg. 7/12/05

	  	
Commercial Finance LLC 2/2/05

  

 

  

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
GATES (Stylized)

	  	
Ser. No. 73/464729

	  	
Filed 2/8/84

	  	
Assigned to GMAC

	  	  	
Reg. No. 1319524

	  	
Reg. 2/12/85

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
GATES (stylized)

	  	
Ser. No. 76/186743

	  	
Filed 12/27/00

	  	
Assigned to GMAC

	  	  	
Reg. No. 2743239

	  	
Reg. 7/29/03

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
GATES GLOVES

	  	
Ser. No. 73/194276

	  	
Filed 11/22/78

	  	
Assigned to GMAC

	  	  	
Reg. No. 1174311

	  	
Reg 10/20/81

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
GATES LITE (stylized)

	  	
Ser. No. 73/606294

	  	
Filed 6/25/86

	  	
Assigned to GMAC

	  	  	
Reg. No. 1439249

	  	
Reg. 5/12/87

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
GATES ULTRA LITE (stylized)

	  	
Ser. No. 73/778191

	  	
Filed 2/2/89

	  	
Assigned to GMAC

	  	  	
Reg. No. 1558154

	  	
Reg. 9/26/89

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
INTER-FLEX

	  	
Ser. No. 78/655300

	  	
Filed 6/21/05

	  	  
	  	  	  	  	  	  	  
	
INTER FLX

	  	
Ser. No. 78/720437

	  	
Filed 9/26/05

	  	  
	  	  	  	  	  	  	  
	
LONGBEARD

	  	
Ser. No. 75/566549

	  	
Filed 10/5/98

	  	
Assigned to GMAC

	  	  	
Reg. No. 2515692

	  	
Reg. 12/4/01

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
LONGBEARD

	  	
Ser. No. 77/149,083

	  	
Filed 4/5/07

	  	  
	  	  	  	  	  	  	  
	
PARACORD (stylized)

	  	
Ser. No. 71/277699

	  	
Filed 1/8/29

	  	
Assigned to GMAC

	  	  	
Reg. No. 256338

	  	
Reg 5/14/29

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
PONDEROSA

	  	
Ser. No. 72/189568

	  	
Filed 3/25/64

	  	
Assigned to GMAC

	  	  	
Reg. No. 781810

	  	
Reg 12/15/64

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
PRO-HIKER

	  	
Ser. No. 78/471685

	  	
Filed 8/23/04

	  	
Assigned to GMAC

	  	  	  	  	  	  	
Financial, LLC 2/2/05

  

 

  

 

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
PROHUNTER

	  	
Ser. No. 75/533954

	  	
Filed 8/10/98

	  	
Assigned to GMAC

	  	  	
Reg. No. 2820566

	  	
Reg. 3/9/04

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
PROHUNTER

	  	
Ser. No. 77/022459

	  	
Filed 10/17/06

	  	  
	  	  	  	  	  	  	  
	
ROCKY

	  	
Ser. No. 73/797529

	  	
Filed 5/1/89

	  	
Assigned to GMAC

	  	  	
Reg. No. 1577871

	  	
Reg. 1/16/90

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ROCKY

	  	
Ser. No. 75/670045

	  	
Filed 3/29/99

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 2538870

	  	
Reg. 2/19/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ROCKY

	  	
Ser. No. 75/671246

	  	
Filed 3/29/99

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 2538872

	  	
Reg. 2/19/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ROCKY

	  	
Ser. No. 76/519218

	  	
Filed 5/19/03

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 2898894

	  	
Reg. 11/2/04

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ROCKY 911 SERIES

	  	
Ser. No. 74/073129

	  	
Filed 4/14/05

	  	  
	  	  	
Reg. No. 3132278

	  	
Reg. 8/22/06

	  	  
	  	  	  	  	  	  	  
	
ROCKY BOOTS

	  	
Ser. No. 73/313429

	  	
Filed 6/5/81

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 1313519

	  	
Reg. 1/8/85

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ROCKY and Design

	  	
Ser. No. 75/977717

	  	
Filed 5/15/95

	  	
Assigned to GMAC Business

	  	  	
Reg. No. 2200673

	  	
Reg. 10/27/98

	  	
Credit, LLC 9/26/00

	  	  	  	  	  	  	  
	
ROCKY ELMINATOR

	  	
Ser. No. 76/111663

	  	
Filed 8/17/00

	  	
Assigned to GMAC

	  	  	
Reg. No. 2587482

	  	
Reg. 7/2/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
S2V

	  	
Ser. No. 77/165283

	  	
Filed 4/25/07

	  	  
	  	  	  	  	  	  	  
	
SAWBLADE

	  	
Ser. No. 78/086747

	  	
Filed 10/3/01

	  	
Assigned to GMAC

	  	  	
Reg. No. 2730726

	  	
Reg. 6/24/03

	  	
Commercial Finance LLC 2/2/05

  

 

  

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
SHARPS GUARD

	  	
Ser. No. 77/174116

	  	
Filed 5/7/07

	  	  
	  	  	  	  	  	  	  
	
SIGNATURE TOUR QUALITY FOOTWEAR

	  	
Ser. No. 73/678670

	  	
Filed 8/17/87

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 1504024

	  	
Reg 9/13/88

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SILENTHUNTER

	  	
Ser. No. 78/135127

	  	
Filed 6/12/02

	  	
Assigned to GMAC

	  	  	
Reg. No. 2982826

	  	
Reg. 8/9/05

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SILENTHUNTER

	  	
Ser. No. 75/566533

	  	
Filed 10/5/98

	  	
Assigned to GMAC

	  	  	
Reg. No. 2553070

	  	
Reg. 3/26/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SILENTHUNTER SUEDE

	  	
Ser. No. 77/101504

	  	
Filed 2/7/07

	  	  
	  	  	  	  	  	  	  
	
SMART GLOVE BY GATES

	  	
Ser. No. 76/345733

	  	
Filed 12/4/01

	  	
Assigned to GMAC

	  	  	  	  	  	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SNOW STALKER

	  	
Ser. No. 74/663746

	  	
Filed 4/20/95

	  	
Assigned to GMAC

	  	  	
Reg. No. 1955171

	  	
Reg. 2/6/96

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SPORTSET

	  	
Ser. No. 72/289087

	  	
Filed 1/18/68

	  	
Assigned to GMAC

	  	  	
Reg. No. 871822

	  	
Reg 6/24/69

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
STALKERS

	  	
Ser. No. 74/541039

	  	
Filed 6/22/94

	  	
Assigned to GMAC

	  	  	
Reg. No. 1975747

	  	
Reg. 5/28/96

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
TAC•TEAM

	  	
Ser. No. 75/565836

	  	
Filed 10/6/98

	  	
Assigned to GMAC

	  	  	
Reg. No. 2307328

	  	
Reg. 1/11/00

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
TECHNO-RIDE

	  	
Ser. No. 77/002482

	  	
Filed 9/19/06

	  	  
	  	  	  	  	  	  	  
	
TORQUE SUSPENSION SYSTEM

	  	
Ser. No. 76/478609

	  	
Filed 12/27/02

	  	
Assigned to GMAC

	  	  	
Reg. No. 2801594

	  	
Reg 12/30/03

	  	
Commercial Finance LLC 2/2/05

  

 

  

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
TRAILBLADE

	  	
Ser. No. 78/720442

	  	
Filed 9/26/05

	  	  
	  	  	  	  	  	  	  
	
TRAIL KING

	  	
Ser. No. 72/306050

	  	
Filed 8/27/68

	  	
Assigned to GMAC

	  	  	
Reg. No. 873081

	  	
Reg 7/15/69

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
TRIAD (stylized)

	  	
Ser. No. 73/720906

	  	
Filed 4/7/88

	  	
Assigned to GMAC

	  	  	
Reg. No. 1537440

	  	
Reg. 5/2/89

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
ULTRA 900

	  	
Ser. No. 75/880873

	  	
Filed 12/17/99

	  	  
	  	  	
Reg. No. 2398135

	  	
Reg. 10/24/00

	  	  
	  	  	  	  	  	  	  
	
WILD WOLF

	  	
Ser. No. 78/079724

	  	
Filed 8/17/01

	  	
Assigned to GMAC

	  	  	
Reg. No. 2642990

	  	
Reg. 10/29/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
WILD WOLF

	  	
Ser. No. 78/079843

	  	
Filed 8/17/01

	  	
Assigned to GMAC

	  	  	
Reg. No. 2760278

	  	
Reg. 9/2/03

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
WOODS N'WORK

	  	
Ser. No. 77/048951

	  	
Filed 11/21/06

	  	  
	  	  	  	  	  	  	  
	
WORKSMART

	  	
Ser. No. 77/030309

	  	
Filed 10/26/06

	  	  
	  	  	  	  	  	  	  
	
XSP

	
  

	
Ser. No. 78/647155

	
  

	
Filed 6/9/05

	
  

	  

ROCKY BRANDS, INC. (formerly ROCKY SHOES & BOOTS, INC.)

FEDERAL PATENTS AND PATENT APPLICATIONS

	  	  	  	  	  	  	
Exp

	  	
App.

	  	
Filing

	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
WATERPROOF FOOTWEAR LINER AND METHOD OF MAKING THE SAME

	  	  	  	  	  	  	  	
10/237001

	  	
9/6/02

	 
	
Inventors:  Allen G. Sheets, Richard Finney

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

  

 

  

	  	  	  	  	  	  	
Exp

	  	
App.

	  	
Filing 

	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
FOOTWEAR SOLE WITH INTEGRAL DISPLAY ELEMENT

	  	
6539646

	  	
4/1/03

	  	
1/11/21

	  	
09/758583

	  	
1/11/01

	 
	
Inventors:  Mike Brooks, Allen G. Sheets

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
WATERPROOF FOOTWEAR LINER AND METHOD OF MAKING SAME

	  	
6446360

	  	
9/10/02

	  	
4/9/21

	  	
09/829422

	  	
4/9/01

	 
	
Inventors:  Allen G. Sheets, Richard Finney

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
PACK BOOT WITH RETRACTABLE CRAMPONS

	  	
6360455

	  	
3/26/02

	  	
5/12/20

	  	
09/569643

	  	
5/12/00

	 
	
Inventor:  Sang Rok Seo

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
WATERPROOF BREATHABLE GLOVES

	  	
5682613

	  	
11/4/97

	  	
7/25/17

	  	
08/279958

	  	
7/25/94

	 
	
Inventors:  Chuck Dinatale

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (impact pod)

	  	
D507398S

	  	
7/19/05

	  	
7/19/19

	  	
29/205245

	  	
5/11/04

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (retr)

	  	
D509346S

	  	
9/13/05

	  	
9/13/19

	  	
29/185759

	  	
7/1/03

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (rk-v)

	  	
D507694S

	  	
7/26/05

	  	
7/26/19

	  	
29/185757

	  	
7/1/03

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (ventor)

	  	
D498350

	  	
11/16/04

	  	
11/16/18

	  	
29/185801

	  	
7/1/03

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (rkt)

	  	
D498042

	  	
11/9/04

	  	
11/9/18

	  	
29/185758

	  	
7/1/03

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (rk-z)

	  	
D495476

	  	
9/7/04

	  	
9/7/18

	  	
29/193649

	  	
11/12/03

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (rk/ac)

	  	
D489884

	  	
5/18/04

	  	
5/18/18

	  	
29/181678

	  	
5/14/03

	 
	
Inventor:  Mark Recchi

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

  

 

  

	  	  	  	  	  	  	
Exp

	  	
App.

	  	
Filing 

	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (polar trac)

	  	
D489881

	  	
5/18/04

	  	
5/18/18

	  	
29/185794

	  	
7/1/03

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SOLE SOLE (sawblade)

	  	
D478714

	  	
8/26/03

	  	
8/26/17

	  	
29/157533

	  	
3/21/02

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE

	  	
D474586

	  	
5/20/03

	  	
5/20/17

	  	
29/163315

	  	
7/2/02

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (rkl outsole)

	  	
D471696

	  	
3/18/03

	  	
3/18/17

	  	
29/156225

	  	
2/26/02

	 
	
Inventor:  Mark Recchi

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (bobcat outsole)

	  	
D468517

	  	
1/14/03

	  	
1/14/17

	  	
29/156224

	  	
2/26/02

	 
	
Inventors:  Mark Recchi, Allen Sheets

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (knobby outsole)

	  	
D468081

	  	
1/7/03

	  	
1/7/17

	  	
29/156254

	  	
2/26/02

	 
	
Inventors:  Mark Recchi, Allen Sheets

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (7590)

	  	
D467715

	  	
12/31/02

	  	
12/31/16

	  	
29/149427

	  	
10/10/01

	 
	
Inventors:  Richard Finney

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE

	  	
D448147

	  	
9/25/01

	  	
9/25/15

	  	
29/136811

	  	
2/7/01

	 
	
Inventors:  Jamie Zimmer, Allen Sheets

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
BOOT UPPER WITH DETACHABLE HOLSTER

	  	
D447619

	  	
9/11/01

	  	
9/11/15

	  	
29/130656

	  	
10/4/00

	 
	
Inventors:  James R. Carey, Charles S. Brooks

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D424797

	  	
5/16/00

	  	
5/16/14

	  	
29/092425

	  	
8/19/98

	 
	
Inventors:  Denis Norton, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D422783

	  	
4/18/00

	  	
4/18/14

	  	
29/098204

	  	
12/23/98

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

  

 

  

	  	  	  	  	  	  	
Exp

	  	
App.

	  	
Filing 

	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE

	  	
D412777

	  	
8/17/99

	  	
8/17/13

	  	
29/092423

	  	
8/19/98

	 
	
Inventors:  Denis Norton, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D410141

	  	
5/25/99

	  	
5/25/13

	  	
29/080764

	  	
12/15/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (7258)

	  	
D407198

	  	
3/30/99

	  	
3/30/13

	  	
29/080749

	  	
12/15/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (7562)

	  	
D407197

	  	
3/30/99

	  	
3/30/13

	  	
29/077174

	  	
9/29/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (911-139)

	  	
D407196

	  	
3/30/99

	  	
3/30/13

	  	
29/077173

	  	
9/29/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (prohunter)

	  	
D402798

	  	
12/22/98

	  	
12/22/12

	  	
29/084098

	  	
2/24/98

	 
	
Inventors:  Denis Norton, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (844)

	  	
D402099

	  	
12/8/98

	  	
12/8/12

	  	
29/077188

	  	
9/29/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (bear claw)

	  	
D401746

	  	
12/1/98

	  	
12/1/12

	  	
29/058393

	  	
8/14/96

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (8444)

	  	
D401401

	  	
11/24/98

	  	
11/24/12

	  	
29/077641

	  	
9/29/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

  

 

  

	  	  	  	  	  	  	
Exp

	  	
App.

	  	
Filing 

	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (9163)

	  	
D401400

	  	
11/24/98

	  	
11/24/12

	  	
29/077187

	  	
9/29/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (1761)

	  	
D400699

	  	
11/10/98

	  	
11/10/12

	  	
29/073407

	  	
7/8/97

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (alpha)

	  	
D395742

	  	
7/7/98

	  	
7/7/12

	  	
29/054776

	  	
5/21/96

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE SOLE (tuff terrainer)

	  	
D394542

	  	
5/26/98

	  	
5/26/12

	  	
29/054777

	  	
5/21/96

	 
	
Inventors:  Diana A. Wurfbain, Theodore A. Kastner

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D386294

	  	
11/18/97

	  	
11/18/11

	  	
29/055442

	  	
6/4/96

	 
	
(winter trails nylon)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D386293

	  	
11/18/97

	  	
11/18/11

	  	
29/055441

	  	
6/4/96

	 
	
(winter trails propex)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D386292

	  	
11/18/97

	  	
11/18/11

	  	
29/055440

	  	
6/4/96

	 
	
(winter trails leather)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D385992

	  	
11/11/97

	  	
11/11/11

	  	
29/055444

	  	
6/4/96

	 
	
(winter trails eco pile)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

  

 

  

	  	  	  	  	  	  	
Exp

	  	
App.

	  	
Filing 

	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (outback sizzler)

	  	
D385991

	  	
11/11/97

	  	
11/11/11

	  	
29/055443

	  	
6/4/96

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (tuff terrainer)

	  	
D384195

	  	
9/30/97

	  	
9/30/11

	  	
29/054747

	  	
5/21/96

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D380891

	  	
7/15/97

	  	
7/15/11

	  	
29/054739

	  	
5/21/96

	 
	
(tuff terrainer oxford)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (alpha boot)

	  	
D380599

	  	
7/8/97

	  	
7/8/11

	  	
29/054748

	  	
5/21/96

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D380598

	  	
7/8/97

	  	
7/8/11

	  	
29/054742

	  	
5/21/96

	 
	
(stalker expedition)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (prof demi boot)

	  	
D380597

	  	
7/8/97

	  	
7/8/11

	  	
29/054740

	  	
5/21/96

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (outback oxford)

	  	
D380596

	  	
7/8/97

	  	
7/8/11

	  	
29/054741

	  	
5/21/96

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D376684

	  	
12/24/96

	  	
12/24/10

	  	
29/035556

	  	
3/2/95

	 
	
(snow stalker extreme)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

  

 

  

	  	  	  	  	  	  	
Exp

	  	
App.

	  	
Filing 

	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER

	  	
D369019

	  	
4/23/96

	  	
4/23/10

	  	
29/035560

	  	
3/2/95

	 
	
(snow stalker hunter)

	  	  	  	  	  	  	  	  	  	  	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (winter trails)

	  	
D369018

	  	
4/23/96

	  	
4/23/10

	  	
29/035559

	  	
3/2/95

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (snow stalker)

	  	
D368797

	  	
4/16/96

	  	
4/16/10

	  	
29/035563

	  	
3/2/95

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (super stalker)

	  	
D368361

	  	
4/2/96

	  	
4/2/10

	  	
29/029890

	  	
10/18/94

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (the brute)

	  	
D367354

	  	
2/27/96

	  	
2/27/10

	  	
29/031067

	  	
11/16/94

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE UPPER (outback khaki)

	  	
D367165

	  	
2/20/96

	  	
2/20/10

	  	
29/031068

	  	
11/16/94

	 
	
Inventors:  Mike Brooks, Edgar H. Simpson, Theodore A. Kastner, Diana A. Wurfbain

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

ROCKY BRANDS, INC. (formerly ROCKY SHOES & BOOTS, INC.)

FEDERAL COPYRIGHT APPLICATIONS AND REGISTRATIONS

	
Title of Work

	  	
Reg. No.

	  	
Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
Rocky Ram

	  	
VA-810-954

	  	
8/26/96

	  	
Assigned to GMAC Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
Rocky Shoes & Boots Partnering for Wildlife Conservation

	
  

	
VA 1-239-611

	
  

	
7/28/03

	
  

	
Assigned to GMAC Commercial Finance LLC 2/2/05

  

 

  

ROCKY BRANDS, INC. (formerly EJ FOOTWEAR LLC)

FEDERAL PATENTS AND PATENT APPLICATIONS

	  	  	  	  	  	  	
Exp

	  	
App.

	  	  	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Filing Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
OUTSOLE

	  	
D447856

	  	
9/18/01

	  	
9/18/15

	  	
29/135982

	  	
1/22/01

	 
	
Inventor:  Jeffrey Raymond Rake

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

ROCKY BRANDS WHOLESALE LLC (formerly GEORGIA BOOT LLC)

FEDERAL TRADEMARK APPLICATIONS AND REGISTRATIONS

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
ARCTIC TOE

	  	
Ser. No. 76/212102

	  	
Filed 2/20/01

	  	
Assigned to GMAC 5

	  	  	
Reg. No. 2664307

	  	
Reg 12/17/02

	  	
Commercial Finance LLC 2/2/0

	  	  	  	  	  	  	  
	
BARNSTORMERS

	  	
Ser. No. 75/605525

	  	
Filed 12/7/98

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 2421991

	  	
Reg 1/16/01

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
CLIMATRAC

	  	
Ser. No. 76/579105

	  	
Filed 3/4/04

	  	
Assigned to GMAC

	  	  	
Reg. No. 2978004

	  	
Reg. 7/26/05

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
COMFORT CORE

	  	
Ser. No. 74/175689

	  	
Filed 6/13/91

	  	
Assigned to GMAC

	  	  	
Reg. No. 1689129

	  	
Reg 5/26/92

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
CONSTRUX

	  	
Ser. No. 76/606797

	  	
Filed 8/10/04

	  	
Assigned to GMAC

	  	  	  	  	  	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
D.TECH

	  	
Ser. No. 75/544917

	  	
Filed 8/31/98

	  	
Assigned to GMAC

	
(stylized)

	  	
Reg. No. 2288942

	  	
Reg 10/26/99

	  	
Commercial Finance LLC 2/2/05

  

 

  

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
DURANGO

	  	
Ser. No. 72/198549

	  	
Filed 7/27/64

	  	
Assigned to GMAC

	  	  	
Reg. No. 790751

	  	
Reg 6/8/65

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
DURANGO

	  	
Ser. No. 75/084007

	  	
Filed 4/4/96

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 2304436

	  	
Reg 12/28/99

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
DURANGO

	  	
Ser. No. 75/712688

	  	
Filed 5/24/99

	  	
Assigned from Georgia Boot Inc. 8/30/00

	  	  	
Reg. No. 2562205

	  	
Reg 4/16/02

	  	  
	  	  	  	  	  	  	  
	
DURANGO

	  	
Ser. No. 75/912800

	  	
Filed 2/8/00

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 2660084

	  	
Reg 12/10/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
DURANGO

	  	
Ser. No. 76/635030

	  	
Filed 4/4/05

	  	  
	
and Design

	  	  	  	  	  	  
	  	  	  	  	  	  	  
	
FARM & RANCH

	  	
Ser. No. 74/294738

	  	
Filed 7/16/92

	  	
Assigned to GMAC

	  	  	
Reg. No. 1758465

	  	
Reg 3/16/93

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
FIELD LITE

	  	
Ser. No. 76/635028

	  	
Filed 4/4/05

	  	  
	  	  	
Reg. No. 3133612

	  	
Reg. 8/22/06

	  	  
	  	  	  	  	  	  	  
	
G and Design

	  	
Ser. No. 77/149076

	  	
Filed 4/5/07

	  	  
	  	  	  	  	  	  	  
	
GEORGIA BOOT

	  	
Ser. No. 73/420215

	  	
Filed 4/5/83

	  	
Assigned to GMAC

	  	  	
Reg. No. 1333323

	  	
Reg 4/30/85

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
GEORGIA GIANT

	  	
Ser. No. 76/581605

	  	
Filed 3/17/04

	  	
Assigned to GMAC

	  	  	
Reg. No. 3037187

	  	
Reg 1/3/06

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
GEORGIA WORKWEAR

	  	
Ser. No. 76/635029

	  	
Filed 4/4/05

	  	  
	  	  	  	  	  	  	  
	
MUD DOG

	  	
Ser. No. 75/605540

	  	
Filed 12/7/98

	  	
Assigned to GMAC

	
and Design

	  	
Reg. No. 2421992

	  	
Reg 1/16/01

	  	
Commercial Finance LLC 2/2/05

  

 

  

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
NORTHLAKE

	  	
Ser. No. 73/215438

	  	
Filed 5/14/79

	  	
Assigned to GMAC

	  	  	
Reg. No. 1154957

	  	
Reg 5/19/81

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
PROTECH

	  	
Ser. No. 76/579106

	  	
Filed 3/4/04

	  	
Assigned to GMAC

	
(stylized)

	  	
Reg. No. 3052222

	  	
Reg. 1/31/06

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SHADES OF THE OLD WEST

	  	
Ser. No. 74/294739

	  	
Filed 7/16/92

	  	
Assigned to GMAC

	  	  	
Reg. No. 1758466

	  	
Reg 3/16/93

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SNAKE RIVER

	  	
Ser. No. 74/541041

	  	
Filed 6/22/94

	  	
Assigned to GMAC

	  	  	
Reg. No. 1919870

	  	
Reg 9/19/95

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
THE G LINE

	  	
Ser. No. 77/148522

	  	
Filed 4/4/07

	  	  
	  	  	  	  	  	  	  
	
X-10

	  	
Ser. No. 73/883183

	  	
Filed 5/15/06

	  	  
	  	
  

	
Reg. No. 3215754

	
  

	
Reg 3/6/07

	
  

	  

ROCKY BRANDS WHOLESALE LLC (formerly GEORGIA BOOT LLC)

FOREIGN TRADEMARK REGISTRATIONS

	
5.

	
COMFORT CORE - (Canada)

 

	
6.

	
COMFORT CORE - (Taiwan)

 

	
7.

	
DURANGO - (Japan)

 

	
8.

	
DURANGO BOOT (Canada)

 

	
9.

	
DURANGO - (France)

 

	
10.

	
DURANGO - (Switzerland)

 

	
11.

	
DURANGO - (Canada)

 

	
12.

	
DURANGO - (CTM)

 

	
13.

	
FARM & RANCH - (Australia)

 

	
14.

	
GEORGIA BOOT - (Canada)

 

  

 

  

	
15.

	
GEORGIA BOOT - (Italy)

 

	
16.

	
GEORGIA BOOT and

 

Design (Large male character with

GEORGIA BOOT on the body) (Japan)

 

	
17.

	
GEORGIA BOOT - (CTM)

 

	
18.

	
MUD DOG - (Canada)

 

(Stylized)

 

	
19.

	
NORTHLAKE - (Canada)

 

	
20.

	
NORTHLAKE - (Great Britain)

 

	
21.

	
NORTHLAKE - (Japan)

 

	
22.

	
NORTHLAKE - (Spain)

 

	
23.

	
NORTHLAKE - (Taiwan)

 

ROCKY BRANDS WHOLESALE LLC (formerly GEORGIA BOOT LLC)

FEDERAL PATENTS AND PATENT APPLICATIONS

	  	  	  	  	  	  	
Exp

	  	
App.

	  	  	 
	
Title

	  	
Patent No.

	  	
Issue Date

	  	
Date

	  	
No.

	  	
Filing Date

	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SAFETY SHOE

	  	
6581304

	  	
6/24/03

	  	
12/29/19

	  	
09/474179

	  	
12/29/99

	 
	
Inventor:  David Mitchell

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
SHOE WITH INSOLE AS PART SOLE FILLER AND METHOD OF MAKING SAME

	  	
6560901

	  	
5/13/03

	  	
5/13/20

	  	
08/332275

	  	
10/31/94

	 
	
Inventors:  Sven E. Oberg, David P. Mitchell

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
FOOTWEAR WITH MOLDED WEB PLATFORM FOR ATTACHING OUTSOLE

	  	
6338205

	  	
1/15/02

	  	
12/29/19

	  	
09/474224

	  	
12/29/99

	 
	
Inventor:  David Mitchell

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

  

 

  

	
SHOE WITH INSOLE AS PART SOLE FILLER AND METHOD OF MAKING SAME

	  	
6321464

	  	
11/27/01

	  	
11/27/18

	  	
08/463843

	  	
6/5/95

	 
	
Inventors:  Sven E. Oberg, David P. Mitchell

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
CUSHIONED FOOTWEAR AND APPARATUS FOR MAKING THE SAME

	  	
6145220

	  	
11/14/00

	  	
11/22/15

	  	
08/562009

	  	
11/22/95

	 
	
Inventors:  William C. Johnson, Jr., William G. Thomas

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
METHOD FOR PRECISELY PERFORATING AN OPENING IN FOOTWEAR

	  	
5924345

	  	
7/20/99

	  	
8/14/16

	  	
08/696618

	  	
8/14/96

	 
	
Inventors:  Howard A. Hoffman; Ronald E. Pottorff; Lavert F. Sneed; William G. Thomas

	  	  	  	  	  	  	  	  	  	  	 
	  	  	  	  	  	  	  	  	  	  	  	 
	
OUTSOLE

	  	
D493952

	  	
8/10/04

	  	
8/10/18

	  	
29/164377

	  	
7/22/02

	 
	
Inventor:  David Mitchell

	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  	 

	
24.

	
U.S. Patent Application No. 09/977463 (Boot with oversized toe box for thermal insulation)

 

	
25.

	
U.S. Patent Application No. 10/799395 (Footwear with improved insole)

 

	
26.

	
U.S. Design Patent Application No. 29/194,981 (Outsole)

 

ROCKY BRANDS WHOLESALE LLC (formerly GEORGIA BOOT LLC)

FOREIGN PATENTS

	
27.

	
Canada Patent No. 2,188,847 (Cushioned footwear and apparatus for making the same )

 

	
28.

	
Mexico Patent No. 204081 (Cushioned footwear and apparatus for making the same )

 

	
29.

	
People’s Republic of China Patent No. ZL 96123386.9 (Cushioned footwear and apparatus for making the same )

 

	
30.

	
Canada Patent No. 2,059,761 (Shoe with insole as part sole filler and method for making same)**

 

	
31.

	
Mexico Patent No. 186564 (Shoe with insole as part sole filler and method for making same)**

 

  

 

  

 

	
32.

	
People’s Republic of China Patent No.92100616 (Shoe with insole as part sole filler and method for making same)**

 

	
33.

	
Taiwan Patent No. No. 056563 (Shoe with insole as part sole filler and method for making same)**

 

**owned jointly with RoSearch, Inc.

 

  

 

  

 

ROCKY BRANDS RETAIL LLC (formerly LEHIGH SAFETY SHOE CO. LLC)

FEDERAL TRADEMARK APPLICATIONS AND REGISTRATIONS

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
FIT FOR SAFETY

	  	
Ser. No. 75/823689

	  	
Filed 10/15/99

	  	
Assigned to GMAC

	  	  	
Reg. No. 2628723

	  	
Reg 10/1/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
FIT FOR WORK

	  	
Ser. No. 75/823688

	  	
Filed 10/15/99

	  	
Assigned to GMAC

	  	  	
Reg. No. 2565788

	  	
Reg 4/30/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
L and Design

	  	
Ser. No. 76/610147

	  	
Filed 9/1/04

	  	
Assigned to GMAC

	  	  	
Reg. No. 3039424

	  	
Reg. 1/10/06

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
LEHIGH

	  	
Ser. No. 73/153033

	  	
Filed 12/22/77

	  	
Assigned to GMAC

	  	  	
Reg. No. 1103936

	  	
Reg 10/10/78

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
LEHIGH

	  	
Ser. No. 72/023484

	  	
Filed 1/30/57

	  	
Assigned to GMAC

	
“FOOTSHIELDS” (stylized)

	  	
Reg. No. 658172

	  	
Reg 2/4/58

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
LOCKRIM

	  	
Ser. No. 72/178690

	  	
Filed 10/10/63

	  	
Assigned to GMAC

	  	  	
Reg. No. 783691

	  	
Reg 1/19/65

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
L.S.R.

	  	
Ser. No. 75/339713

	  	
Filed 7/24/97

	  	
Assigned to GMAC

	
(stylized)

	  	
Reg. No. 2201252

	  	
Reg 11/3/98

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
MIRA-LUG

	  	
Ser. No. 73/220929

	  	
Filed 6/25/79

	  	
Assigned to GMAC

	  	  	
Reg. No. 1159250

	  	
Reg 6/30/81

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
NUGUARD75

	  	
Ser. No. 73/741631

	  	
Filed 7/22/88

	  	
Assigned to GMAC

	
(stylized)

	  	
Reg. No. 1530662

	  	
Reg 3/21/89

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
PROMISE PLUS

	  	
Ser. No. 75/668090

	  	
Filed 3/25/99

	  	
Assigned from Lehigh Safety

	  	  	
Reg. No. 2395071

	  	
Reg 10/17/00

	  	
Shoe Co. 6/17/02

  

 

  

	
Mark

	  	
Serial. No./Reg. No.

	  	
Filing Date/Reg. Date

	  	
Comments

	  	  	  	  	  	  	  
	
SLIP GRIPS

	  	
Ser. No. 76/489562

	  	
Filed 2/14/03

	  	
Assigned to GMAC

	  	  	
Reg. No. 2891737

	  	
Reg 10/5/04

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
SWAMPERS

	  	
Ser. No. 76/063389

	  	
Filed 6/1/00

	  	
Assigned to GMAC

	  	  	
Reg. No. 2579908

	  	
Reg 6/11/02

	  	
Commercial Finance LLC 2/2/05

	  	  	  	  	  	  	  
	
US 1

	  	
Ser. No. 76/259815

	  	
Filed 5/18/01

	  	
Assigned to GMAC

	
and Design

	
  

	
Reg. No. 2565267

	
  

	
Reg 4/30/02

	
  

	
Commercial Finance LLC 2/2/05

ROCKY BRANDS RETAIL LLC (formerly LEHIGH SAFETY SHOE CO.  LLC)

FEDERAL PATENTS AND PATENT APPLICATIONS

U.S. Patent Application No. 09/875, 542 (Metatarsal Guard)

ROCKY BRANDS RETAIL LLC (formerly LEHIGH SAFETY SHOE CO. LLC)

FOREIGN TRADEMARK REGISTRATIONS

	
34.

	
FIT FOR WORK - (Canada)

 

	
35.

	
FIT FOR SAFETY - (Canada)

 

	
36.

	
LEHIGH - (Japan)

 

	
37.

	
PROMISE PLUS - (Canada)

 

  

 

  

SCHEDULE 4.1(U)

Side Agreements

None

  

 

  

SCHEDULE 4.1(W)

Material Contracts

Trademark License between W.L. Gore & Associates, Inc., W.L. Gore & Associates GmbH, Japan Gore-Tex, Inc. and Georgia Boot LLC dated May 20, 2002

Trademark License Agreement between W. L. Gore & Associates, Inc., W. L. Gore & Associates GmbH, and Rocky Shoes & Boots, Inc. dated July 11, 2001

	
38.

	
Warehouse and Fulfillment Services Agreement among Kane Distribution, EJ Footwear, Lehigh Safety Shoe Co. LLC and Georgia Boot dated April 18, 2002, as amended

 

	
39.

	
Distributor Consignment Agreement between Lehigh Safety Supply Co. and Lehigh Safety Shoe Co. LLC dated July 1, 1978

 

	
40.

	
The Agreement and the Note Purchase Agreement, and the respective security agreements in connection therewith

 

	
41.

	
Lease Contract dated December 16, 1999, between Lifestyle Footwear, Inc. and The Puerto Rico Industrial Development Company

 

	
42.

	
Rocky Shoes & Boots, Inc. Retirement Plan for Non-Union Employees

 

Employment Agreement, dated July 1, 1995, between Parent and Mike Brooks for executive officers (incorporated by reference to Exhibit 10.1 to the Parent’s Annual Report on Form 10-K for the fiscal year ended June 30, 1995 (the “1995 Form 10-K”))

Promissory Note, dated December 30, 1999, in favor of General Electric Capital Business Asset Funding Corporation in the amount of $1,050,000 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (the “June 30, 2000 Form 10-Q”))

10.           Promissory Note, dated January 31, 2000, in favor of General Electric Capital Business Asset Funding Corporation in the amount of $3,750,000 (incorporated by reference to Exhibit 10.3 to the June 30, 2000 Form 10-Q)

  

 

  

SCHEDULE 4.1(Z)

Current Business Practices

None

  

 

  

SCHEDULE 5.2(A)

Permitted Indebtedness Schedule

Rocky Brands, Inc. obligations to General Electric Capital Business Asset Funding Corporation:

a.           $1,050,000 promissory note dated December 30, 1999

b.           $3,750,000 promissory note dated January 28, 2000

Letters of Credit

a.           Irrevocable Standby Letter of Credit.  Issuer:  Bank of America; Beneficiary: Pacific Employers Insurance Company; Workers Comp; Approximately $800,000; expired on  January 27, 2007,  subject to extension.

b.           Irrevocable Standby Letter of Credit issued September 15, 2001.  Issuer:  GMAC Business Credit; Beneficiary: Chase Equipment Leasing; $1,000,000;

3.           Capital Lease Obligations

None

4.           Dell Financial Services, L.P. revolving credit account for equipment purchases

5.           Androscoggin Savings Bank and Pamco Machine Company, Inc. for purchases of rebuilt equipment

  

 

  

SCHEDULE 5.2(B)

Permitted Liens Schedule

	
A.

	
All Loan Parties

Liens on real estate in which a Loan Party is lessee

	
B.

	
Rocky Brands, Inc. (formerly Rocky Shoes & Boots, Inc.)

	
Secured Party

	  	
Collateral

	
GE Capital Business Asset Funding Corporation

	  	
Real Estate, fixtures and other property in connection with real properties in Athens County and Hocking County, Ohio, including without limitation that collateral further described in Financing Statement numbers AP0207801, AP0207802, AP0231440 filed with the Ohio Secretary of State, Financing Statement number 200000000069/200000000508 filed with the Hocking County, Ohio Recorder, Financing Statement numbers 20000000000-1/20000000000-2 and 20000000000-3 /20000000000-8 filed with the Athens County, Recorder, and in certain Open-End Mortgages, Security Agreements, Assignments of Rents and Leases and Fixture Filings in Hocking and Athens Counties.

	 	 	 
	
Chase Equipment Leasing

	  	
Specific leased equipment, including without limitation warehouse storage units and other collateral further described in Financing Statement numbers AP0163529 and AP0196827 filed with the Ohio Secretary of State and Financing Statement number 199900000969/199900006769 filed with the Hocking County, Ohio Recorder.

	 	 	 
	
GMAC Business Credit LLC

	  	
All business assets

	 	 	 
	
American

	  	
Leased counter forming machine

	 	 	 
	
Worthern Industries

	  	
Leased glue machines

	 	 	 
	
W.L. Gore

	  	
Leased centrifugal testers ES & FS

	 	 	 
	
Ascom Hasler

	  	
Mail Machine Lease

	 	 	 
	
Xerox Capital Services LLC

	  	
DocuColor (2); D25OEF12 (2); WCP265 (3); WCP232 (5)

	 	 	 
	
Dell Financial Services, L.P.

	  	
Computer Equipment and peripherals financed by secured party pursuant to a certain revolving credit account; proceeds

	 	 	 
	
Androscoggin Savings Bank and Pamco Machine Company, Inc.

	
  

	
Inseam trimmer, side and heal seat laster, staple side laster and toe laster and proceeds

Lifestyle Footwear, Inc.

None

 

  

 

  

 

Rocky Brands, Inc. (formerly EJ Footwear LLC)

	
Secured Party

	  	
Collateral

	
Pitney Bowes Credit Corporation

	  	
Leased equipment further described in Financing Statement number 1995001177 filed in Broome County, NY

	 	 	 
	
Ford Credit

	  	
Leased Ford Ranger truck, s/n 1FTYR44U74PA08512

	 	 	 
	
ComSource

	  	
Leased computer equipment described in Financing Statement number U1 1999 000721 filed in Broome County, NY

	 	 	 
	
DeLage Landen Financial Services, Inc.

	  	
Leased equipment

	 	 	 
	
Bank of America

	  	
Cash Collateral to secure Bank of America letter of credit in favor of Blue Cross Blue Shield

	 	 	 
	
Icon Financial

	
  

	
Canon Printers

Rocky Brands Wholesale LLC (formerly Georgia Boot LLC)

	
Secured Party

	  	
Collateral

	
BSFS Equipment Leasing

	  	
Leased equipment under Lease #7119124, UCC file number 20888648 filed with the Delaware Secretary of State

	 	 	 
	
Ascom Hasler Leasing

	  	
Leased postage meter and mail scale

	 	 	 
	
Bell South

	
  

	
Leased telephone/MIS equipment

Rocky Brands Retail LLC (formerly Lehigh Safety Shoe Co. LLC)

	
Secured Party

	  	
Collateral

	
Navistar Leasing Company Hardco Leasing Company, Inc.

	  	
Various leased motor vehicles

	 	 	 
	
Key Equipment Finance

	
  

	
Various leased motor vehicles

 

  

 

  

 

SCHEDULE 6.1(K)

Deposit Accounts

	
Comerica Bank

	  
	
P.O. Box 75000

	  
	
Detroit, MI  48275-8149

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Operation Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Controlled Disbursement Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Cash Collateral Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands Retail LLC/Rocky Brands Wholesale LLC

	
Type of Account:

	
Comerica Controlled Disbursement Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Merchant Account

	
Account Number:

	  
	  	  
	
First National Bank

	  
	
11 Public Square

	  
	
Nelsonville, OH  45764

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
FNB Operating Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
FNB Credit Card Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc. Payroll

	
Type of Account:

	
FNB Payroll Account

	
Account Number:

	  

  

 

  

	
Banco Popular

	  
	
P.O. Box 362708

	  
	
San Juan, Puerto Rico  00936-2708

	  
	  	  
	
Name on Account:

	
Lifestyle Footwear Inc.

	
Type of Account:

	
General Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Lifestyle Footwear Inc.

	
Type of Account:

	
Payroll Account

	
Account Number:

	  
	  	  
	
HSBC Bank USA

	  
	
243 Main Street

	  
	
Johnson City, NY  13790

	  
	  	  
	
Name on Account:

	
Rocky Brands Retail LLC

	
Type of Account:

	
General Account

	
Account Number:

	  
	  	  
	
Mellon Bank

	  
	
Mellon Client Service Center

	  
	
Room 154-1320

	  
	
500 Ross Street

	  
	
Pittsburgh, PA  15262-0001

	  
	  	  
	
Name on Account:

	
Rocky Brands Retail LLC

	
Type of Account:

	
Lockbox

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands Wholesale LLC

	
Type of Account:

	
Lockbox

	
Account Number:

	  

	
43.

	
Rocky Brands Retail LLC (formerly Lehigh Safety Shoe Co. LLC) shoe center bank accounts:

 

	
(a) 

	
1st National Bank of Scotia Account #

 

	
(b) 

	
Associated Bank Account #

 

	
(c) 

	
Banco Popular Bank Account #

 

	
(d) 

	
Bank of America Account #s

 

	
(e) 

	
Bank of Colorado Account #

 

	
(f) 

	
Bank of Hawaii Account #s

 

  

 

  

 

	
(g) 

	
Bank One Account #s

 

	
(h) 

	
Centura Bank Account #

 

	
(i) 

	
Chase Bank of Texas Account #

 

	
(j) 

	
Citizens Bank Account #s

 

	
(k) 

	
Citywide Bank Account #

 

	
(l) 

	
Comerica Bank Account #

 

	
(m) 

	
Community Bank Account #

 

	
(n) 

	
First Citizens Bank Account #s

 

	
(o) 

	
First Midwest Bank Account #

 

	
(p) 

	
Fleet Bank Account #s

 

	
(q) 

	
Frontenac Bank Account #

 

	
(r) 

	
Glen Falls National Bank Account #

 

	
(s) 

	
Key Bank Account #

 

	
(t) 

	
National City Bank Account #s

 

	
(u) 

	
PNC Bank Account #

 

	
(v) 

	
Southeast National Bank Account #

 

	
(w) 

	
Sun Trust Bank Account #

 

	
(x) 

	
Wachovia Account #s

 

	
(y) 

	
Wells Fargo Account #s

 

	
(z) 

	
Westsound Bank Account #s

 

	
(aa) 

	
Whitney National Bank Account #

 

	
(bb) 

	
J.P. Morgan Chase Bank Account #

 

	
(cc) 

	
Chase Bank #

 

	
(dd) 

	
Anchor Bank #

 

	
(ee) 

	
Regions Bank #s

 

	
(ff) 

	
M&T Bank #

 

	
(gg) 

	
Old Point National Bank #

 

	
(hh) 

	
Bank of America #

 

  

 

  

 

	
(ii) 

	
Wachovia Bank #

 

	
(jj) 

	
Lyons Bank #

SCHEDULE 6.1(L)

Bailees/Consignees/Warehouse

Collateral located at each consignee location set forth in the following distributor/consignment/ warehouse agreements and such other distribution/consignment/warehouse agreements entered into from time to time:

	
44.

	
Distributor Consignment Agreement between Lehigh Safety Supply Co. and Lehigh Safety Shoe Co. LLC dated July 1, 1978, as amended

 

	
45.

	
Distributor Consignment Agreement between Atlas Safety Equipment Company, Inc. and Lehigh Safety Shoe Co. LLC dated May 15, 2001

 

	
46.

	
Industrial Consignment Agreement between Fairmont Supply Company, Inc. and Lehigh Safety Shoe Co. LLC dated February 25, 2002, as amended

 

	
47.

	
Distributor Consignment Agreement between Fastenal Company and Lehigh Safety Shoe Co. LLC dated October 20, 2003

 

	
48.

	
Industrial Consignment Agreement between General Dynamic/Electric Boat and Lehigh Safety Shoe Co. LLC dated April 4, 2001

 

	
49.

	
Distributor Consignment Agreement between General Fire and Safety Equipment Company of Omaha, Inc. and Lehigh Safety Shoe Co. LLC dated February 20, 2003

 

	
50.

	
Distributor Consignment Agreement between Global Trading Inc. of Miami and Lehigh Safety Shoe Co. LLC dated March 1, 2004

 

	
51.

	
Distributor Consignment Agreement between Magid Glove and Safety Manufacturing Co., LLC. and Lehigh Safety Shoe Co. LLC dated November 1, 1999, as amended

 

	
52.

	
Industrial Consignment Agreement and Norfolk Naval Shipyard Co-operative Association Portsmouth, Virginia 23709-5000 Safety Shoe Consignment Agreement between Norfolk Navy Shipyard Co-operative Association and Lehigh Safety Shoe Co. LLC dated August 3, 2005

 

	
53.

	
Industrial Consignment Agreement between ORR Safety Corporation and Lehigh Safety Shoe Co. LLC dated April 13, 2004

 

	
54.

	
Distributor Consignment Agreement between Safety Source, Inc. and Lehigh Safety Shoe Co. LLC dated December 1, 1995, as amended

 

	
55.

	
Industrial Consignment Agreement between Sullivan-Brough, Inc. d/b/a Safetywear Division and Lehigh Safety Shoe Co. LLC dated August 11, 2004

 

  

 

  

	
56.

	
Warehouse and Fulfillment Services Agreement among Kane Distribution, EJ Footwear, Lehigh Safety Shoe Co. LLC and Georgia Boot dated April 18, 2002, as amended

 

	
57.

	
Horizon Solutions Distributor Consignment Agreement between Rero Distributors (Horizon) and Lehigh Safety Shoe Co. LLC dated May 15, 2000

 

  

 

  

 

SCHEDULE 6.1(Q)

Names and Locations

	
Name(s) / State of

Incorporation /

Organizational ID

Number

	  	
Acquisitions

	  	
Principal Place of

Business and

Location of Books

and Records

	  	
Other Offices

And

Locations of Collateral

	  	  	  	  	  	  	  
	
Rocky Brands, Inc.

Ohio

821674

	  	
Purchase of certain assets from Gates-Mills, Inc. on 04/15/03

 

EJ Footwear LLC (“EJ”) merged into Rocky Brands, Inc. on 12/31/06 (EJ did business as Empire, Barclay, and Long Haul)

	  	
39 East Canal Street

Nelsonville, OH  45764

(owned)

	  	
29 Fayette Street

Nelsonville, OH  45764

(owned)

	 	 	 	 	 	 	 
	
Lifestyle Footwear, Inc.

Delaware

2109896

	  	
None

	  	
Road 125 KM 3.8 BO Pueblo Industrial Park, Moca, PR  00676-0728

(leased manufacturing facility and office)

 

Books and Records:

39 East Canal Street

Nelsonville, Ohio 45764

	  	
None

 

  

 

  

 

	
Name(s) / State of

Incorporation /

Organizational ID

Number

	  	
Acquisitions

	  	
Principal Place of

Business and

Location of Books

and Records

	  	
Other Offices

And

Locations of Collateral

	 	 	 	 	 	 	 
	
Rocky Brands Wholesale LLC

Delaware

3182983

	  	
Georgia Boot Properties LLC, Durango Boot Company LLC, and Northlake Boot Company LLC merged into Georgia Boot LLC (“Georgia Boot”), with name change to Rocky Brands Wholesale LLC on 12/31/06 (Georgia Boot did business as Durango, Georgia Boot, Long Haul, Northlake)

 

	  	
39 East Canal Street

Nelsonville, OH  45764

	  	
235 Noah Drive

Franklin, TN  37064

(leased office)

 

37601 Rocky Boots Way

Logan, OH  43138

(owned warehouse)

 

Denver Merchandise Mart

451 East 58th Street

Showroom 3529&4435

Denver, CO  80216

(leased showroom)

 

Kane Distribution

612 S. Route 6 West

Tunkhannock, PA  18657

(third party facility)

	 	 	 	 	 	 	 
	
Rocky Brands Retail LLC

Delaware

3182836

	
  

	
Lehigh Safety Shoe Properties LLC and HM Lehigh Safety Shoe Co. LLC merged into Lehigh Safety Shoe Co. LLC (“Lehigh”), with name change to Rocky Brands Retail LLC on 12/31/06 (Lehigh did business as Lehigh Safety Shoe Company)

	
  

	
39 East Canal Street

Nelsonville, OH  45764

	
  

	
120 Plaza Dr.

Vestal, NY

(leased office)

 

45 East Canal Street

Nelsonville, OH  45764

(owned retail space)

 

901 Franklin Street East

Endicott, NY  13761

(owned)

 

Kane Distribution

612 S. Route 6 West

Tunkhannock, PA  18657

(third party facility)

 

See also Item D(2) of Schedule 4.1(Q) for listing of leased retail store locations and Schedule 6.1 (L) for bailee/consignee/ warehouse locationsExhibit 10.28

 

Execution Copy

REVOLVING CREDIT, GUARANTY, AND SECURITY AGREEMENT

 

PNC BANK, NATIONAL ASSOCIATION

 

(AS LENDER AND AS AGENT)

 

WITH

 

ROCKY BRANDS, INC.

LEHIGH OUTFITTERS, LLC

LIFESTYLE FOOTWEAR, INC.

ROCKY BRANDS WHOLESALE LLC,

ROCKY BRANDS INTERNATIONAL, LLC

ROCKY CANADA, INC.

 

(BORROWERS)

 

Dated as of October 20, 2010

 

  

 

  

 

TABLE OF CONTENTS

 

	
I

	
DEFINITIONS

	
1

	  	
1.1.

	
Accounting Terms

	
1

	  	
1.2.

	
General Terms

	
1

	  	
1.3.

	
Uniform Commercial Code Terms

	
34

	  	
1.4.

	
Certain Matters of Construction

	
35

	  	  	  	  
	
II

	
ADVANCES, PAYMENTS

	
35

	  	
2.1.

	
Revolving Advances

	
35

	  	
2.2.

	
Procedure for Revolving Advances Borrowing

	
36

	  	
2.3.

	
Disbursement of Advance Proceeds

	
39

	  	
2.4.

	
Amortizing Tranche of Formula Amount

	
39

	  	
2.5.

	
Maximum Advances

	
39

	  	
2.6.

	
Repayment of Advances

	
39

	  	
2.7.

	
Repayment of Excess Advances

	
40

	  	
2.8.

	
Statement of Account

	
40

	  	
2.9.

	
Letters of Credit

	
40

	  	
2.10.

	
Issuance of Letters of Credit

	
40

	  	
2.11.

	
Requirements For Issuance of Letters of Credit

	
41

	  	
2.12.

	
Disbursements, Reimbursement

	
42

	  	
2.13.

	
Repayment of Participation Advances

	
43

	  	
2.14.

	
Documentation

	
43

	  	
2.15.

	
Determination to Honor Drawing Request

	
43

	  	
2.16.

	
Nature of Participation and Reimbursement Obligations

	
44

	  	
2.17.

	
Indemnity

	
45

	  	
2.18.

	
Liability for Acts and Omissions

	
45

	  	
2.19.

	
Cash Collateral

	
47

	  	
2.20.

	
Additional Payments

	
47

	  	
2.21.

	
Manner of Borrowing and Payment

	
47

	  	
2.22.

	
Mandatory Prepayments

	
49

	  	
2.23.

	
Use of Proceeds

	
49

	  	
2.24.

	
Defaulting Lender

	
49

	  	
2.25.

	
Increase of the Maximum Revolving Advance Amount

	
50

	  	
2.26.

	
Reduction of the Maximum Revolving Advance Amount

	
51

	  	  	  	  
	
III

	
INTEREST AND FEES

	
52

	  	
3.1.

	
Interest

	
52

	  	
3.2.

	
Letter of Credit Fees

	
52

	  	
3.3.

	
Facility Fee

	
53

	  	
3.4.

	
Fee Letter

	
53

	  	
3.5.

	
Computation of Interest and Fees

	
53

	  	
3.6.

	
Maximum Charges

	
54

	  	
3.7.

	
Increased Costs

	
54

	  	
3.8.

	
Basis For Determining Interest Rate Inadequate or Unfair

	
55

	  	
3.9.

	
Capital Adequacy

	
56

	  	
3.10.

	
Gross Up for Taxes

	
56

 

  

i

  

 

	  	
3.11.

	
Withholding Tax Exemption

	
56

	  	
3.12.

	
FATCA

	
57

	  	  	  	  
	
IV

	
COLLATERAL:  GENERAL TERMS

	
57

	  	
4.1.

	
Security Interest in the Collateral

	
57

	  	
4.2.

	
Perfection of Security Interest

	
58

	  	
4.3.

	
Disposition of Property

	
58

	  	
4.4.

	
Preservation of Collateral

	
59

	  	
4.5.

	
Ownership of Collateral

	
59

	  	
4.6.

	
Defense of Agent’s and Lenders’ Interests

	
60

	  	
4.7.

	
Books and Records

	
60

	  	
4.8.

	
Reserved

	
60

	  	
4.9.

	
Compliance with Laws

	
61

	  	
4.10.

	
Inspection of Premises

	
61

	  	
4.11.

	
Insurance

	
61

	  	
4.12.

	
Failure to Pay Insurance

	
62

	  	
4.13.

	
Payment of Taxes

	
62

	  	
4.14.

	
Payment of Leasehold Obligations

	
63

	  	
4.15.

	
Receivables

	
63

	  	
4.16.

	
Inventory

	
67

	  	
4.17.

	
Maintenance of Equipment

	
67

	  	
4.18.

	
Exculpation of Liability

	
68

	  	
4.19.

	
Environmental Matters

	
68

	  	
4.20.

	
Financing Statements

	
70

	  	  	  	  
	
V

	
REPRESENTATIONS AND WARRANTIES

	
70

	  	
5.1.

	
Authority

	
70

	  	
5.2.

	
Formation, Qualification, Equity Interests, Subsidiaries

	
70

	  	
5.3.

	
Survival of Representations and Warranties

	
71

	  	
5.4.

	
Tax Returns

	
71

	  	
5.5.

	
Financial Statements

	
71

	  	
5.6.

	
Entity Names

	
72

	  	
5.7.

	
O.S.H.A. and Environmental Compliance

	
72

	  	
5.8.

	
Solvency; No Litigation, Violation, Indebtedness or Default

	
72

	  	
5.9.

	
Patents, Trademarks, Copyrights and Licenses

	
73

	  	
5.10.

	
Licenses and Permits

	
73

	  	
5.11.

	
Default of Indebtedness

	
74

	  	
5.12.

	
No Default

	
74

	  	
5.13.

	
No Burdensome Restrictions

	
74

	  	
5.14.

	
No Labor Disputes

	
74

	  	
5.15.

	
Margin Regulations

	
74

	  	
5.16.

	
Investment Company Act

	
74

	  	
5.17.

	
Disclosure

	
74

	  	
5.18.

	
Reserved

	
74

	  	
5.19.

	
Conflicting Agreements

	
75

	  	
5.20.

	
Application of Certain Laws and Regulations

	
75

	  	
5.21.

	
Business and Property of Borrowers

	
75

	  	
5.22.

	
Section 20 Subsidiaries

	
75

 

  

ii

  

 

	  	
5.23.

	
Anti-Terrorism Laws

	
75

	  	
5.24.

	
Trading with the Enemy

	
76

	  	
5.25.

	
Reserved

	
76

	  	
5.26.

	
Withholdings and Remittances

	
76

	  	  	  	  
	
VI

	
AFFIRMATIVE COVENANTS

	
76

	  	
6.1.

	
Payment of Fees

	
76

	  	
6.2.

	
Conduct of Business and Maintenance of Existence and Assets

	
77

	  	
6.3.

	
Reserved

	
77

	  	
6.4.

	
Government Receivables

	
77

	  	
6.5.

	
Fixed Charge Coverage Ratio

	
77

	  	
6.6.

	
Execution of Supplemental Instruments

	
77

	  	
6.7.

	
Payment of Indebtedness

	
77

	  	
6.8.

	
Standards of Financial Statements

	
78

	  	
6.9.

	
Reserved

	
78

	  	  	  	  
	
VII

	
NEGATIVE COVENANTS

	
78

	  	
7.1.

	
Merger, Consolidation, Acquisition and Sale of Assets

	
78

	  	
7.2.

	
Creation of Liens

	
78

	  	
7.3.

	
Guarantees

	
78

	  	
7.4.

	
Investments

	
78

	  	
7.5.

	
Loans

	
79

	  	
7.6.

	
Reserved

	
79

	  	
7.7.

	
Dividends

	
79

	  	
7.8.

	
Indebtedness

	
79

	  	
7.9.

	
Nature of Business

	
80

	  	
7.10.

	
Transactions with Affiliates

	
80

	  	
7.11.

	
Reserved

	
80

	  	
7.12.

	
Subsidiaries

	
80

	  	
7.13.

	
Fiscal Year and Accounting Changes

	
80

	  	
7.14.

	
Pledge of Credit

	
80

	  	
7.15.

	
Amendment of Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement; Change of Name

	
80

	  	
7.16.

	
Compliance with ERISA

	
81

	  	
7.17.

	
Prepayment of Indebtedness

	
81

	  	
7.18.

	
Anti-Terrorism Laws

	
81

	  	
7.19.

	
Membership/Partnership Interests

	
81

	  	
7.20.

	
Trading with the Enemy Act

	
81

	  	  	  	  
	
VIII

	
CONDITIONS PRECEDENT

	
81

	  	
8.1.

	
Conditions to Initial Advances

	
81

	  	
8.2.

	
Conditions to Each Advance

	
84

	  	  	  	  
	
IX

	
INFORMATION AS TO BORROWERS

	
85

	  	
9.1.

	
Disclosure of Material Matters

	
85

	  	
9.2.

	
Schedules

	
85

	  	
9.3.

	
Environmental Reports

	
86

	  	
9.4.

	
Litigation

	
86

	  	
9.5.

	
Material Occurrences

	
86

 

  

iii

  

 

	  	
9.6.

	
Government Receivables

	
86

	  	
9.7.

	
Annual Financial Statements

	
86

	  	
9.8.

	
Reserved

	
87

	  	
9.9.

	
Monthly Financial Statements

	
87

	  	
9.10.

	
Other Reports

	
87

	  	
9.11.

	
Additional Information

	
87

	  	
9.12.

	
Projected Operating Budget

	
87

	  	
9.13.

	
Variances From Operating Budget

	
88

	  	
9.14.

	
Notice of Suits, Adverse Events

	
88

	  	
9.15.

	
ERISA Notices and Requests

	
88

	  	
9.16.

	
Additional Documents

	
89

	  	
9.17.

	
Cash Reporting; Liquidity Calculation

	
89

	  	  	  	  
	
X

	
EVENTS OF DEFAULT

	
89

	  	
10.1.

	
Nonpayment

	
89

	  	
10.2.

	
Breach of Representation

	
89

	  	
10.3.

	
Financial Information

	
89

	  	
10.4.

	
Judicial Actions

	
90

	  	
10.5.

	
Noncompliance

	
90

	  	
10.6.

	
Judgments

	
90

	  	
10.7.

	
Bankruptcy

	
90

	  	
10.8.

	
Inability to Pay

	
90

	  	
10.9.

	
Reserved

	
90

	  	
10.10.

	
Lien Priority

	
90

	  	
10.11.

	
Cross Default

	
91

	  	
10.12.

	
Breach of Guaranty

	
91

	  	
10.13.

	
Change of Control

	
91

	  	
10.14.

	
Invalidity

	
91

	  	
10.15.

	
Licenses

	
91

	  	
10.16.

	
Seizures

	
91

	  	
10.17.

	
Operations

	
92

	  	  	  	  
	
XI

	
LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT

	
92

	  	
11.1.

	
Rights and Remedies

	
92

	  	
11.2.

	
Agent’s Discretion

	
93

	  	
11.3.

	
Setoff

	
94

	  	
11.4.

	
Appointment of Receiver

	
94

	  	
11.5.

	
Rights and Remedies not Exclusive

	
95

	  	
11.6.

	
Allocation of Payments After Event of Default

	
95

	  	  	  	  
	
XII

	
WAIVERS AND JUDICIAL PROCEEDINGS

	
96

	  	
12.1.

	
Waiver of Notice

	
96

	  	
12.2.

	
Delay

	
96

	  	
12.3.

	
Jury Waiver

	
97

	  	  	  	  
	
XIII

	
EFFECTIVE DATE AND TERMINATION

	
97

	  	
13.1.

	
Term

	
97

	  	
13.2.

	
Termination

	
97

 

  

iv

  

 

	
XIV

	
REGARDING AGENT

	
98

	  	
14.1.

	
Appointment

	
98

	  	
14.2.

	
Nature of Duties

	
98

	  	
14.3.

	
Lack of Reliance on Agent and Resignation

	
99

	  	
14.4.

	
Certain Rights of Agent

	
99

	  	
14.5.

	
Reliance

	
99

	  	
14.6.

	
Notice of Default

	
100

	  	
14.7.

	
Indemnification

	
100

	  	
14.8.

	
Agent in its Individual Capacity

	
100

	  	
14.9.

	
Delivery of Documents

	
100

	  	
14.10.

	
Borrowers’ Undertaking to Agent

	
100

	  	
14.11.

	
No Reliance on Agent’s Customer Identification Program

	
101

	  	
14.12.

	
Other Agreements

	
101

	  	
14.13.

	
Delegation

	
101

	  	  	  	  
	
XV

	
BORROWING AGENCY

	
101

	  	
15.1.

	
Borrowing Agency Provisions

	
101

	  	
15.2.

	
Waiver of Subrogation

	
102

	  	
15.3.

	
Cross Guaranty

	
102

	  	
15.4.

	
Subordination

	
103

	  	
15.5.

	
No Disposition

	
103

	  	  	  	  
	
XVI

	
MISCELLANEOUS

	
103

	  	
16.1.

	
Governing Law

	
103

	  	
16.2.

	
Entire Understanding

	
104

	  	
16.3.

	
Successors and Assigns; Participations; New Lenders

	
106

	  	
16.4.

	
Application of Payments

	
108

	  	
16.5.

	
Indemnity

	
109

	  	
16.6.

	
Notice

	
109

	  	
16.7.

	
Survival

	
111

	  	
16.8.

	
Severability

	
111

	  	
16.9.

	
Expenses

	
112

	  	
16.10.

	
Injunctive Relief

	
112

	  	
16.11.

	
Consequential Damages

	
112

	  	
16.12.

	
Captions

	
112

	  	
16.13.

	
Counterparts; Facsimile Signatures

	
112

	  	
16.14.

	
Construction

	
112

	  	
16.15.

	
Confidentiality; Sharing Information

	
113

	  	
16.16.

	
Publicity

	
113

	  	
16.17.

	
Certifications From Banks and Participants; US PATRIOT Act

	
113

	  	
16.18.

	
Language

	
113

	  	
16.19.

	
Judgment Currency

	
114

 

  

v

  

 

LIST OF EXHIBITS AND SCHEDULES

 

	
Exhibits

	  	  
	  	  	  
	
Exhibit 1.2

	  	
Borrowing Base Certificate

	
Exhibit 2.1(a)

	  	
Revolving Credit Note

	
Exhibit 4.15(j)

	  	
US Assignment

	
Exhibit 8.1(i)

	  	
Financial Condition Certificate

	
Exhibit 16.3

	  	
Commitment Transfer Supplement

	  	  	  
	
Schedules

	  	  
	  	  	  
	
Schedule 1.2(a)

	  	
Permitted Encumbrances

	
Schedule 4.5

	  	
Property, Equipment, Books & Records, and Inventory Locations

	
Schedule 4.11

	  	
Insurance

	
Schedule 4.15(c)

	  	
Chief Executive Offices

	
Schedule 4.15(h)

	  	
Deposit and Investment Accounts

	
Schedule 4.15(j)

	  	
Government Contracts

	
Schedule 5.1

	  	
Consents

	
Schedule 5.2(a)

	  	
States of Qualification and Good Standing

	
Schedule 5.2(b)

	  	
Equity Interests; Subsidiaries

	
Schedule 5.4

	  	
Federal Tax Identification Number

	
Schedule 5.5(a)

	  	
Financial Projections

	
Schedule 5.6

	  	
Prior Names

	
Schedule 5.7

	  	
OSHA and Environmental Compliance

	
Schedule 5.8(d)

	  	
ERISA Plans

	
Schedule 5.9

	  	
Intellectual Property, Source Code Escrow Agreements

	
Schedule 5.10

	  	
Licenses and Permits

	
Schedule 5.12

	  	
Material Contracts

	
Schedule 5.14

	  	
Labor Disputes

	
Schedule 7.3

	  	
Guarantees

	
Schedule 7.8

	
  

	
Existing Indebtedness

 

  

vi

  

 

REVOLVING CREDIT, GUARANTY, AND SECURITY AGREEMENT

 

Revolving Credit, Guaranty, and Security Agreement dated as of October 20, 2010 among 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”) (Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International, and Rocky Canada, collectively, the “Borrowers” and individually a “Borrower”), the financial institutions which are now or which hereafter become a party hereto (collectively, the “Lenders” and individually a “Lender”) and PNC Bank, National Association (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).

IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrowers, Lenders and Agent hereby agree as follows:

 

I             DEFINITIONS.

 

1.1.           Accounting Terms.  As used in this Agreement, the Other Documents or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this
Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the audited financial statements of Borrowers for the fiscal year ended December 31, 2009.

 

1.2.           General Terms.  For purposes of this Agreement the following terms shall have the following meanings:

 

“Access Agreement Locations” shall mean the premises leased by a Borrower in Canada, Puerto Rico, Houston, Texas, Green Bay, Wisconsin and Columbia, South Carolina and listed on Schedule 4.5.

 

“Account Control Notice” shall have the meaning set forth in Section 4.15(h)(ii).

 

 “Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(iii).

 

“Advances” shall mean and include the Revolving Advances and Letters of Credit.

 

“Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director, managing member, general partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above.  For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 20% or more of the Equity Interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such
Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.

 

  

 

  

    

“Agent” shall have the meaning set forth in the preamble to this Agreement and shall include its successors and assigns.

 

 “Agreement” shall mean this Revolving Credit, Guaranty, and Security Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open Rate in effect on such day plus 1/2 of 1% and (iii) the Daily LIBOR Rate plus 1%.  For purposes of this definition, “Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the percentage prescribed by the Federal Reserve for determining the maximum reserve requirements with respect to any eurocurrency funding by banks on such day.  For the purposes of this
definition, “Published Rate” shall mean the rate of interest published each Business Day in The Wall Street Journal “Money Rates” listing under the caption “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published Rate shall be the eurodollar rate for a one month period as published in another publication determined by Agent and used by Agent generally for determining the eurodollar rate charged to commercial lending customers).

 

“Amortizing Tranche” shall mean the portion of the Formula Amount calculated in accordance with to Section 2.1(a)(y)(v)(A).

 

“Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the Applicable Laws comprising or implementing the Bank Secrecy Act, and the Applicable Laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Applicable Laws may from time to time be amended, renewed, extended, or replaced), the Proceeds of Crime (Money Laundering), Terrorist Financing Act (Canada), the Foreign Extraterritorial Measures Act (Canada), and the respective regulations promulgated thereunder.

 

“Applicable Law” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, Other Document or contract in question, including all applicable common law and equitable principles; all provisions of all applicable state, provincial, federal and foreign constitutions, statutes, rules, regulations, treaties, directives and orders of any Governmental Body, and all orders, judgments and decrees of all courts and arbitrators.

 

 “Applicable Margin” for Revolving Advances shall mean, commencing as of the Closing Date, 1.75% per annum for Eurodollar Rate Loans and 0% per annum for Domestic Rate Loans.  Thereafter, effective as of the fifth (5th) Business Day after receipt by Agent of a Liquidity Calculation for the fiscal quarter ending December 31, 2010, and thereafter upon receipt of a Liquidity Calculation for each subsequent fiscal quarter (each day of such delivery, an “Adjustment Date”),
the Applicable Margin for each type of Advance shall be adjusted, if necessary, to the applicable percent per annum set forth in the pricing table set forth below corresponding to the Quarterly Liquidity of Borrowers during the fiscal quarter ending immediately prior to the applicable Adjustment Date:

 

  

2

  

 

	
Quarterly Liquidity

	  	
Applicable Margins for

Eurodollar Rate Loans

	  	
Applicable Margins for

Domestic Rate Loans

	 	 	 	 	 
	
≥ $17,500,000

	  	
1.50 %

	  	
- 0.25 %

	 	 	 	 	 
	
< $17,500,000 but ≥ $10,000,000

	  	
1.75 %

	  	
0 %

	 	 	 	 	 
	
< $10,000,000

	
  

	
2.00 %

	
  

	
0.25 %

If the Borrowers shall fail to deliver a Liquidity Calculation for any fiscal quarter on or before the fifth (5th) Business Day of the following fiscal quarter, each Applicable Margin shall be conclusively presumed to equal the highest Applicable Margin specified in the pricing table set forth above until the date of delivery of such Liquidity Calculation, at which time the rate will be adjusted prospectively based upon the Quarterly Liquidity reflected in such Liquidity Calculation.

 

No downward adjustment of any Applicable Margin shall occur if, at the time such downward adjustment would otherwise be made, there shall exist any Event of Default, provided that such downward adjustment shall be made on the first (1st) day of the month after the date on which the applicable Event of Default shall have been waived by Agent in writing. During any period which an Event of Default exists, the Applicable Margin(s) shall adjust to the highest Applicable Margin(s) set forth above upon direction of the Agent or the Required Lenders.

 

If the Agent determines that (a) the Liquidity Calculation as of any applicable date was inaccurate or otherwise is not consistent with Agent’s calculation of Quarterly Liquidity, which calculation of Agent shall control in the event of any inconsistency, and (b) Agent’s determination of the Quarterly Liquidity would have resulted in different pricing for any period, then (y) if Agent’s determination of the Quarterly Liquidity would have resulted in higher pricing for such period, the Borrowers shall automatically and retroactively be obligated to pay to the Agent, promptly upon demand by the Agent, an amount equal to the excess of the amount of interest and fees that should have been paid for
such period over the amount of interest and fees actually paid for such period; and (z) if Agent’s determination of the Quarterly Liquidity would have resulted in lower pricing for such period, Borrowers shall be entitled to a credit against interest or fees accruing after the date of determination; provided, that, if Agent’s determination of the Quarterly Liquidity would have resulted in higher pricing for one or more periods and lower pricing for one or more other periods, then the amount payable by the Borrowers pursuant to clause (y) above shall be based upon the excess, if any, of the amount of interest and fees that should have been paid for all applicable periods over the amounts of interest and fees actually paid for such periods.

 

“Authority” shall have the meaning set forth in Section 4.19(d).

 

  

3

  

 

“Bank Products Obligations” shall have the meaning set forth in the definition of Obligations.

 

“Bankruptcy Code” shall mean: (a) title 11 of the United States Code, (b) the Bankruptcy and Insolvency Act (Canada), (c) the Companies’ Creditors Arrangement Act (Canada), (d) the Winding-Up and Restructuring Act (Canada), as applicable, or any similar legislation in a relevant jurisdiction, in each case as in effect from time to time.

 

“Base Rate” shall mean the base commercial lending rate of PNC as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate.  This rate of interest is determined from time to time by PNC as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by PNC to any particular class or category of customers of PNC.

 

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) or a defined benefit pension plan under Canadian Employee Benefit Laws for which any Borrower or any ERISA Affiliate of any Borrower has been an “employer” (as defined in Section 3(5) of ERISA) or has held equivalent status under Canadian Employee Benefit Laws within the past six (6) years.

 

“Blocked Accounts” shall have the meaning set forth in Section 4.15(h)(i).

 

“Blocked Account Agreement” shall have the meaning set forth in Section 4.14(h)(ii).

 

“Blocked Account Bank” shall have the meaning set forth in Section 4.15(h)(i).

 

“Blocked Person” shall have the meaning set forth in Section 5.23(b).

 

“Board of Directors” shall mean the board of directors (or comparable managers) of Parent or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers).

 

“Borrower” or “Borrowers” shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Persons, and any Person that shall join this Agreement as a Borrower hereunder.

 

 “Borrowers’ Account” shall have the meaning set forth in Section 2.8.

 

“Borrowing Agent” shall mean Parent.

 

“Borrowing Base Certificate” shall mean a certificate in substantially the form of Exhibit 1.2 duly executed by the Chief Executive Officer, Chief Financial Officer or Controller of the Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Formula Amount and calculation thereof as of the date of such certificate.

 

  

4

  

 

“Business Day” shall mean any day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in East Brunswick, New Jersey, and, if the applicable Business Day relates to Rocky Canada, in Toronto, Ontario, and, if the applicable Business Day relates to any Eurodollar Rate Loans, such day must also be a day on which dealings are carried on in the London interbank market.

 

"Canadian Dollar" and "CDN$" shall mean lawful currency of Canada.

 

"Canadian Employee Benefit Laws" means the Canadian Income Tax Act, the Pension Benefits Standards Act 1985 (Canada), the Employment Insurance Act (Canada), the Pension Benefits Act (Ontario), the Workplace Safety and Insurance Act 1997 (Ontario), the Occupational Health and Safety Act (Ontario) and the Employment Standards Act 2000 (Ontario), and in each case the regulations thereunder, and any federal, provincial or local counterparts or substantial equivalents relating to employee benefits, in each case, as amended from time to time.

 

“Canadian Income Tax Act” shall mean the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended and the regulations thereunder.

 

“Canadian Pension Plan” shall mean a pension plan or plan that is a “registered pension plan” as defined in the Canadian Income Tax Act or is subject to the funding requirements of applicable pension benefits legislation in any Canadian jurisdiction and is applicable to employees or former employees resident in Canada of Rocky Canada.

 

"Canadian Security Document" shall mean the General Security Agreement, dated as of the Closing Date, between Rocky Canada and Agent, as the same may be or may have been supplemented, amended, modified or restated from time to time.

 

“Canadian Union Plan” shall mean any pension plan for the benefit of employees or former employees resident in Canada of Rocky Canada which is not maintained, sponsored or administered by Rocky Canada, but to which Rocky Canada is or was required to contribute pursuant to a collective agreement or participation agreement.

 

“Capital Expenditures” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.

 

“Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

“Cash Dominion Period” shall mean any period commencing upon the occurrence of a Triggering Event and ending upon the occurrence of a related Satisfaction Event.

 

  

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“Cash Equivalents” shall mean (a) marketable direct obligations issued or unconditionally guaranteed by the government of Canada or the United States or issued by any agency thereof and backed by the full faith and credit of Canada or the United States, as the case may be, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued by any province or territory of Canada or any state of the United States or any political subdivision of any such province, territory or state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the
time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”) or such other comparable rating companies in Canada, (c) commercial paper maturing no more than 270 days from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s or such other comparable rating companies in Canada, (d) certificates of deposit or bankers’ acceptances maturing within 1 year from the date of acquisition thereof issued by any bank organized under the laws of Canada, or the United States or any state thereof, having at the date of
acquisition thereof combined capital and surplus of not less than $250,000,000, (e) demand deposit accounts maintained with any bank organized under the laws of the United States or any state thereof or the laws of Canada so long as the amount maintained with any individual bank is less than or equal to the maximum amount insured by the Federal Deposit Insurance Corporation or the Canada Deposit Insurance Corporation, and (f) Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (e) above.

 

“CCR” shall have the meaning set forth in Section 4.15(j)(iv).

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

 

 “Change of Control” shall mean (a) other than between or among Borrowers, any merger or consolidation of or with any Borrower or sale of all or substantially all of the property or assets of any Borrower, or (b) that any Person, together with its Affiliates, acquires Equity Interests in Parent in one or more transactions such that they collectively own or control, directly or indirectly, greater than or equal to 50% of the Equity Interests of Parent, or (c) that Parent ceases to own, directly or indirectly, and control 100% of the outstanding Equity Interests of (i) each of the other Borrowers and (ii) each of its Subsidiaries,
provided that, with respect to any Foreign Subsidiary, a Change of Control shall not occur so long as Parent owns the greater of either 95% of the outstanding Equity Interests of such Foreign Subsidiary, or the largest percentage of such Equity Interests which may be owned by Parent under the laws of the jurisdiction in which such Foreign Subsidiary is organized.

 

 “Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments, including all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, Liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral, or any Borrower, Guarantor, or any of their respective Subsidiaries.

 

  

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“Closing Date” shall mean the date of this Agreement.

 

“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

 

“Collateral” shall mean and include:

 

(a)           all Receivables other than Excluded Receivables;

 

(b)           all Equipment;

 

(c)           all General Intangibles;

 

(d)           all Inventory;

 

(e)           all Investment Property;

 

(f)           all Eligible Real Property;

 

(g)           all Subsidiary Stock;

 

(h)           the Leasehold Interests;

 

(i)           all of each Borrower’s and Guarantor’s right, title and interest in and to, whether now owned or hereafter acquired and wherever located, (i) its respective goods and other property including, but not limited to, all merchandise returned or rejected by Customers, relating to or securing any of the Receivables; (ii) all of each Borrower’s and Guarantor’s rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any Borrower or Guarantor from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any goods securing the Obligations; (v) all of each Borrower’s and Guarantor’s contract rights, rights of payment which have been earned under a contract right, instruments (including promissory notes), documents, documents of title, chattel paper (including electronic chattel paper), warehouse receipts, deposit accounts, accounts, letters of credit and money; (vi) all commercial tort claims (whether now existing or hereafter arising); (vii) if and when obtained by any Borrower or Guarantor, all real and personal property of third parties in which either has been granted a lien or security interest as security for the payment or enforcement of Receivables; (viii) all letter of credit rights (whether or not the respective letter of credit is evidenced by a writing); (ix) all supporting obligations; and
(x) any other goods, personal property or real property now owned or hereafter acquired in which any Borrower or Guarantor has expressly granted a security interest or may in the future grant a security interest to Agent hereunder, or in any amendment or supplement hereto or thereto, or under any other agreement between Agent and any Borrower or Guarantor;

 

(j)           all of each Borrower’s and Guarantor’s ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any Borrower or Guarantor or in which it has an interest other than as licensee), computer programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f), (g), (h) or (i) of this Paragraph; and

 

  

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(k)           all proceeds and products of (a), (b), (c), (d), (e), (f), (g), (h), (i) and (j) in whatever form, including, but not limited to:  cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort claim proceeds.

 

Notwithstanding anything contained in this Agreement to the contrary, the term “Collateral” shall not include the following (collectively, the “Excluded Property”):

 

(i)            any Borrower’s or Guarantor’s rights or interests in or under any license, contract or agreement to the extent, but only to the extent that such a grant would, under the terms of such license, contract or agreement, constitute or result in (i) the abandonment, invalidation or unenforceability of any material right, title or interest of such Borrower or Guarantor therein, or (ii) a breach, termination, or a default under such license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions)
or pursuant to the PPSA of any relevant jurisdiction or any other Applicable Law (including any bankruptcy or insolvency laws) or principles of equity), provided that (A) immediately upon either an insolvency event of default or the ineffectiveness, lapse or termination of any such term, the Collateral shall include, and such Borrower or Guarantor shall be deemed to have granted a security interest as of the closing date in, all such rights and interests as if such term had never been in effect, and (B) to the extent that any such lease, license, contract or agreement would otherwise constitute Collateral (but for the provisions of this paragraph), all receivables from each Borrower’s or Guarantor’s performance under such license, contract or agreement and all proceeds resulting from the sale or disposition by
each Borrower or Guarantor of any rights of each Borrower or Guarantor under such license, contract or agreement shall constitute Collateral,

 

(ii)            Investment Property constituting Equity Interests of any Foreign Subsidiary (other than Rocky Canada which shall be subject to a pledge of 100% of its Equity Interests) of any Borrower or Guarantor; provided that the Agent shall have a Lien upon 65% of the Equity Interests of each such Foreign Subsidiary,

 

(iii)           any Real Property which is not Eligible Real Property, and

 

(iv)           the trademark applications, trade names, and trademarks of the Borrowers or Guarantors.

 

 “Collateral Access Agreement” shall mean an agreement in form and substance satisfactory to the Agent in its Permitted Discretion which is executed in favor of Agent by (a) a Person who owns or occupies premises at which any Collateral may be located from time to time and by which such Person shall waive or subordinate lien rights and authorize Agent from time to time to enter upon the premises to access, inspect or remove the Collateral from such premises or to use such premises to store or dispose of such Collateral, or (b) a Person who has possession, custody or control of Collateral and by which such Person shall waive lien
rights and agree to grant Agent access to the Collateral upon request and to follow the instructions of Agent with respect to the disposition of such Collateral.

 

  

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“Collection Accounts” shall have the meaning set forth in Section 4.15(h)(i).

 

“Commitment Percentage” of any Lender shall mean the percentage set forth below such Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(c) or (d).

 

“Commitment Transfer Supplement” shall mean a document in the form of Exhibit 16.3 hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement.

 

“Compliance Certificate” shall mean a compliance certificate to be signed by the Chief Financial Officer or Controller of Borrowing Agent, which shall state that, based on an examination sufficient to permit such officer to make an informed statement, no Default or Event of Default exists, or if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrowers with respect to such default and, such certificate shall have appended thereto a calculation of the Fixed Charge Coverage Ratio for the periods required by Sections 9.7 and
9.9.

 

“Consents” shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic or foreign, necessary to carry on any Borrower’s business or necessary (including to avoid a conflict or breach under any agreement, instrument, other document, license, permit or other authorization) for the execution, delivery or performance of this Agreement, the Other Documents, including any Consents required under all applicable federal, state, provincial or other Applicable Law.

 

“Consigned Inventory” shall mean Inventory of any Borrower that is in the possession of another Person on a consignment, sale or return, or other basis that does not constitute a final sale and acceptance of such Inventory.

 

 “Controlled Group” shall mean, at any time, each Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with any Borrower, are treated as a single employer under Section 414 of the Code.

 

“Customer” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with any Borrower, pursuant to which such Borrower is to deliver any personal property or perform any services.

 

“Customs” shall have the meaning set forth in Section 2.11(b).

 

  

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"Deemed Credit Request" shall have the meaning set forth in Section 2.2(b).

 

 “Default” shall mean an event, circumstance, default, or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.

 

“Default Rate” shall have the meaning set forth in Section 3.1(c).

 

“Defaulting Lender” shall have the meaning set forth in Section 2.24(a).

 

 “Designated Lender” shall have the meaning set forth in Section 16.2(c).

 

“Documents” shall have the meaning set forth in Section 8.1(c).

 

“Dollar” and the sign “$” shall mean lawful money of the United States of America.

 

“Domestic Rate Loan” shall mean any Advance that bears interest based upon the Alternate Base Rate.

 

"Domestic Subsidiary" shall mean any direct or indirect Subsidiary of a Person that is organized under the laws of any state of the United States or the District of Columbia (other than an indirect Subsidiary of a Person which is a direct or indirect Subsidiary of another Subsidiary which is not organized under such laws)

 

“Drawing Date” shall have the meaning set forth in Section 2.12(b).

 

 “Earnings Before Interest and Taxes” shall mean for any period, for Parent and its Subsidiaries on a consolidated basis, the sum of (i) net income (or loss) for such period (excluding extraordinary gains and losses), plus (ii) all interest expense for such period, plus (iii) all charges against income for such period for federal, state and local taxes.

 

“EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and Taxes for such period, plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period.

 

“Eligible Finished Goods Inventory” shall mean and include finished goods Inventory, with respect to each Borrower, valued at the lower of cost or market, determined on a first-in-first-out basis, which is not, in Agent’s Permitted Discretion, obsolete, slow moving or unmerchantable and which Agent, in its Permitted Discretion, shall not deem ineligible Inventory, based on such considerations as Agent may from time to time deem appropriate including whether the Inventory is subject to a perfected, first priority security interest in favor of Agent and no other Lien (other than a Permitted Encumbrance).  In addition,
Inventory shall not be Eligible Finished Goods Inventory if it (a) does not conform to all standards imposed by any Governmental Body which has regulatory authority over such goods or the use or sale thereof, (b) constitutes Consigned Inventory, (c) is the subject of an Intellectual Property Claim; (d) is subject to a License Agreement or other agreement that in any material respect limits, conditions or restricts any Borrower’s or Agent’s right to sell or otherwise dispose of such Inventory, unless Agent is a party to a Licensor/Agent Agreement with the Licensor under such License Agreement; (e) is situated at a location not listed on Schedule 4.5 as of the Closing Date or is situated at an Access Agreement Location and no Collateral Access Agreement is in effect in favor of Agent unless a rent reserve has been established by Agent with respect thereto, (f) unless it is
Eligible In-Transit Finished Goods Inventory, it is located outside the continental United States, Canada, or Puerto Rico, or at a location that is not listed on Schedule 4.5, provided that, finished goods Inventory located in Puerto Rico may only constitute Eligible Finished Goods Inventory to the extent that the total amount of Eligible Raw Materials Inventory located in Puerto Rico and Eligible Finished Goods Inventory located in Puerto Rico included in the Formula Amount (after application of the Finished Goods Inventory Advance Rate) would not exceed $2,000,000 at any time.  Eligible Finished Goods Inventory shall not include Inventory being acquired pursuant to a trade Letter of Credit (other than any trade Letter of Credit issued hereunder) to the extent such trade Letter of Credit remains
outstanding.

 

  

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“Eligible Government Receivable” shall have the meaning provided in the definition of “Eligible Receivables”.

 

“Eligible In-Transit Finished Goods Inventory” shall include Inventory: (a) which title has passed to a Borrower, (b) which is insured to the full value thereof with Agent as lender loss payee under the applicable insurance policy and evidence of such insurance has been provided to Agent, (c) which is in-transit with a carrier to a facility listed on Schedule 4.5, (d) which would otherwise be Eligible Finished Goods Inventory except for its location, (e) for which Agent or the customs broker or other representative shall have in its possession (i) a true and correct copy of the bill of lading and other shipping documents for such
inventory, (ii) (A) if the applicable bill of lading is non-negotiable and the Inventory is in transit within the United States, a duly executed Collateral Access Agreement from the applicable customs broker for such Inventory, or all related unpaid freight charges and customs duties related to such shipment shall be reserved for, (B) if the applicable bill of lading is negotiable, confirmation that the bill is issued in the name of a Borrower and consigned to the order of the Agent or an agent thereof, and an acceptable agreement has been executed with a Borrower’s customs broker, in which the customs broker or other representative agrees that it is holding possession of the negotiable bill as agent for the Agent and will grant the Agent access to the Inventory, (f) for which the carrier is not an Affiliate of the applicable vendor or supplier of the Inventory, and (g) the
customs broker is not an Affiliate of a Borrower; provided however that, in each case, all related unpaid freight charges and customs duties related to such shipment shall be reserved for unless a lien waiver among the applicable Borrower, the applicable customs broker, freight carrier, shipping company or shipping agent, as the case may be, and Agent has been executed and delivered to the Agent, in each case in form and substance satisfactory to the Agent in its Permitted Discretion, and provided further that, the inclusion of such Inventory in the Formula Amount shall not cause the total amount of Eligible In-Transit Finished Goods Inventory in the Formula Amount (after application of the Finished Goods Inventory Advance Rate) to exceed $8,000,000 at any
time.

 

 “Eligible Inventory” shall mean collectively Eligible Finished Goods Inventory, Eligible Raw Material Inventory, and Eligible In-Transit Finished Good Inventory.

 

  

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“Eligible Raw Materials Inventory” shall mean and include raw materials Inventory with respect to each Borrower, valued at the lower of cost or market value, determined on a first-in-first-out basis, which is not, in Agent’s Permitted Discretion, obsolete, slow moving or unmerchantable and which Agent, in its Permitted Discretion, shall not deem ineligible Inventory, based on such considerations as Agent may from time to time deem appropriate including whether the Inventory is subject to a perfected, first priority security interest in favor of Agent and no other Lien (other than a Permitted Encumbrance).  In addition,
Inventory shall not be Eligible Raw Materials Inventory if it (a) does not conform to all standards imposed by any Governmental Body which has regulatory authority over such goods or the use or sale thereof, (b) constitutes Consigned Inventory, (c) is the subject of an Intellectual Property Claim; (d) is subject to a License Agreement or other agreement that in any material respect limits, conditions or restricts any Borrower’s or Agent’s right to sell or otherwise dispose of such Inventory, unless Agent is a party to a Licensor/Agent Agreement with the Licensor under such License Agreement; (e) is situated at a location not listed on Schedule 4.5 as of the Closing Date, or is situated at an Access Agreement Location and no Collateral Access Agreement is in effect in favor of Agent unless a rent reserve has been established by Agent with respect thereto, (f) is located
outside the continental United States, Canada, or Puerto Rico, or at a location that is not listed on Schedule 4.5, provided that, raw material Inventory located in Puerto Rico may only constitute Eligible Raw Material Inventory to the extent that the total amount of Eligible Raw Materials Inventory located in Puerto Rico and Eligible Finished Goods Inventory located in Puerto Rico included in the Formula Amount (after application of the Raw Materials Inventory Advance Rate) would not exceed $2,000,000 at any time.  Eligible Raw Materials Inventory shall not include Inventory being acquired pursuant to a trade Letter of Credit to the extent such trade Letter of Credit remains outstanding.

 

“Eligible Real Property” means any Borrower’s Real Property satisfying the following requirements, as determined by Agent: (a) fee title is vested in such Borrower, free and clear of all Liens other than Permitted Encumbrances, (b) Borrower has executed and delivered to Agent a Mortgage in form and substance acceptable to Agent in its Permitted Discretion, and such Mortgage has been recorded to create a valid and enforceable first priority Lien in favor of Agent for the benefit of itself and the Lenders on such Real Property, (c) Agent shall have received an ALTA mortgagee’s title policy (2006 form) with respect to the
Mortgage on such Real Property with no exceptions other than Permitted Encumbrances and otherwise in form and substance acceptable to Agent in its Permitted Discretion, (d) Agent shall have received an ALTA survey of such Real Property prepared and certified to Agent, applicable title insurance company, and the applicable title insurance agency by a surveyor acceptable to Agent including such Table A items as Agent shall reasonably request, (e) Agent shall have received an opinion of counsel in the state in which such Real Property is located in form and substance and from counsel satisfactory to Agent in its Permitted Discretion, (f) Agent shall have received an environmental assessment with respect to such Real Property specified by Agent from firm(s) satisfactory to Agent, which assessment shall indicate that such Real Property is not subject to any recognized environmental condition
and shall otherwise be acceptable to Agent in its Permitted Discretion, (g) Agent shall have received an independent flood plain certificate indicating that such Real Property and improvements are not located in a flood hazard area, or if in such an area, evidence of flood insurance acceptable to Agent, (h) Agent shall have received an appraisal of the as-is fair market value of such Real Property in form and substance and from an appraiser satisfactory to Agent in its Permitted Discretion, and (i) Agent shall have received such other information, documentation, and certifications with respect to such Real Property as may be reasonably required by Agent.

 

  

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 “Eligible Receivables” shall mean and include with respect to each Borrower, each Receivable of such Borrower arising in the Ordinary Course of Business and which Agent, in its Permitted Discretion, shall deem to be an Eligible Receivable, based on such considerations as Agent may from time to time deem appropriate.  A Receivable shall not be deemed eligible unless such Receivable is subject to Agent’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence reasonably satisfactory to Agent.  In addition,
no Receivable shall be an Eligible Receivable if:

 

(a)           it arises out of a sale made by any Borrower to an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower;

 

(b)           for Receivables with payment terms of thirty (30) days or less, it is due or unpaid more than the sooner of sixty (60) days after the original due date or ninety (90) days after the original invoice date;

 

(c)           for Receivables with payment terms of greater than thirty (30) days but not in excess of sixty (60) days, it is due or unpaid more than the sooner of sixty (60) days after the original due date or one hundred twenty (120) days after the original invoice date;

 

(d)           for Receivables with payment terms of greater than sixty (60) days, it is due or unpaid more than the sooner of thirty (30) days after the original due date or one hundred eighty (180) days after the original invoice date;

 

(e)           fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible Receivables hereunder;

 

(f)           any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached in any material respect;

 

(g)           the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal or foreign bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief or reorganization of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;

 

(h)           the sale is to a Customer outside the continental United States of America or Canada, unless the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Agent in its Permitted Discretion;

 

(i)           the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;

 

  

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(j)            Agent believes, in its Permitted Discretion, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer’s financial inability to pay;

 

(k)           the Customer is the United States, any state, territory, or any department, agency or instrumentality of any of them, provided that such a Receivable may be an Eligible Receivable if (a) such Receivable would otherwise qualify as an Eligible Receivable, (b) such Receivable has payment terms of thirty (30) days or less, and (c) the applicable Borrower complies with Section 4.15(j) with respect to such Receivable (each an “Eligible Government Receivable”);

 

(l)           the Receivable is an Eligible Government Receivable and would cause the total amount of Eligible Government Receivables in the Formula Amount (after application of the Receivables Advance Rate) to exceed $2,500,000 at any time, but only to the extent of such excess;

 

(m)           the Customer is the government of Canada, any province, territory, or any department, agency or instrumentality of any of them;

 

(n)           the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;

 

(o)           the Receivable would cause the total amount of Eligible Receivables due from a specific Customer to constitute more than ten percent (10%) of all Eligible Receivables of Borrowers, but only to the extent of such excess;

 

(p)           the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the Customer is also a creditor or supplier of a Borrower or the Receivable is contingent in any respect or for any reason, but only to the extent of any such offset, deduction, defense, or other dispute;

 

(q)           the applicable Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;

 

(r)           any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed;

 

(s)           such Receivable is not payable to a Borrower;

 

(t)           such Receivable is not otherwise satisfactory to Agent as determined by Agent in its Permitted Discretion; or

 

(u)           such Receivable is an Excluded Receivable.

 

  

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“Environmental Complaint” shall have the meaning set forth in Section 4.19(d).

 

“Environmental Laws” shall mean all federal, state, provincial, and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state, provincial, and local governmental agencies and authorities with respect thereto.

 

“Equipment” shall mean and include as to each Borrower all of such Borrower’s goods (other than Inventory) whether now owned or hereafter acquired and wherever located including all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.

 

"Equivalent Amount" shall mean, on any date, the amount of Dollars into which Canadian Dollars may be converted based on such conversion rate or rates as may from time to time be available to Agent in its usual and customary practices for such currencies on such date.

 

“Equity Interests” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the rules and regulations promulgated thereunder.

 

“Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current Interest Period relating thereto the interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which US dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by Agent which has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying
rates at which US dollar deposits are offered by leading banks in the London interbank deposit market (an “Alternative Source”), at approximately 11:00 a.m., London time two (2) Business Days prior to the first day of such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by Agent at such time (which determination shall be conclusive absent manifest error)) for an amount comparable to such Eurodollar Rate Loan and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Reserve Percentage.

 

The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan that is outstanding on the effective date of any change in the Reserve Percentage as of such effective date.  Agent shall give prompt notice to the Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.

 

  

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“Eurodollar Rate Loan” shall mean an Advance at any time that bears interest based on the Eurodollar Rate.

 

“Event of Default” shall have the meaning set forth in Article X.

 

 “Exchange Act” shall have the mean the Securities Exchange Act of 1934, as amended.

 

“Excluded Property” shall have the meaning set forth in the definition of Collateral.

 

“Excluded Receivables” shall mean any Receivable owing by a Customer that is a Blocked Person or that arises out of a transaction or activity that would violate the Trading with the Enemy Act.

 

“Executive Order No. 13224” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

 

“FATCA” means Sections 1471 through 1474 of the Code and any current or future regulations or official interpretations thereof.

 

“Federal Funds Effective Rate” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as
of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.

 

“Federal Funds Open Rate” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by PNC (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute
screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by Agent and used by Agent generally for determining the daily federal funds open rate at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day.  If and when the Federal Funds Open Rate changes, the rate of interest with respect to any advance to which the Federal Funds Open Rate applies will change automatically without notice to the Borrowers, effective on the date of any such change.

 

  

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 “Federal Assignment of Claims Act” shall mean the Assignment of Claims Act of 1940, as amended, 31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq., as the same now exists or may from time to time hereafter be amended, modified, recodified, or supplemented, together with all rules, regulations, and interpretations thereunder or related thereto.

 

“Fee Letter” shall mean the fee letter dated as of the Closing Date among PNC and the Borrowers.

 

“FEMA” shall have the meaning set forth in Section 5.23(d).

 

“Finished Goods Inventory Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(ii).

 

“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, 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.

 

“Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person that is not a Domestic Subsidiary.

 

 “Formula Amount” shall have the meaning set forth in Section 2.1(a)(y).

 

 “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time.

 

“GECC Loan” shall have the meaning set forth in Section 2.23.

 

“General Intangibles” shall mean and include as to each Borrower all of such Borrower’s general intangibles or intangibles (other than trademark applications, trade names and trademarks), whether now owned or hereafter acquired, including all payment intangibles, all choses in action, causes of action, corporate or other business records, inventions, designs, patents, patent applications, equipment formulations, manufacturing procedures, quality control procedures, trade secrets, goodwill, copyrights, design rights, software, computer information, source codes, codes, records and updates, registrations, licenses, franchises,
customer lists, tax refunds, tax refund claims, computer programs, all claims under guaranties, security interests or other security held by or granted to such Borrower to secure payment of any of the Receivables by a Customer (other than to the extent covered by Receivables) all rights of indemnification and all other intangible property of every kind and nature (other than Receivables, trademark applications, trade names and trademarks).

 

  

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 “Governmental Acts” shall have the meaning set forth in Section 2.17.

 

“Governmental Body” shall mean any nation or government, any state, province, or other political subdivision thereof or any entity, authority, agency, division or department exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.

 

“Guarantor” shall mean any Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and “Guarantors” means collectively all such Persons.   As of the Closing Date, there are no Guarantors.

 

“Guarantor Security Agreement” shall mean any Security Agreement executed by any Guarantor in favor of Agent securing the Guaranty of such Guarantor, in form and substance satisfactory to Agent and such Guarantor.

 

“Guaranty” shall mean any guaranty of the obligations of Borrowers executed by a Guarantor in favor of Agent for its benefit and for the ratable benefit of Lenders, in form and substance satisfactory to Agent and such Guarantor.

 

“Hazardous Discharge” shall have the meaning set forth in Section 4.19(d).

 

“Hazardous Substance” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et  seq.), RCRA, or any other applicable Environmental Law and in the regulations adopted pursuant thereto.

 

“Hazardous Wastes” shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state or provincial law, and any other applicable Federal, provincial, and state laws now in force or hereafter enacted relating to hazardous waste disposal.

 

“Hedge Agreement” shall mean any and all transactions, agreements, or documents now existing or hereafter entered into by any Borrower that provides for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Borrowers’ exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

 

“Hedge Liabilities” shall have the meaning provided in the definition of “Lender-Provided Hedge”.

 

  

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 “Indebtedness” of a Person at a particular date shall mean all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise, customer deposits, trade payables and other accrued expenses and liabilities incurred in the Ordinary Course of Business (not constituting Indebtedness for borrowed money)) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required
prepayment dates of such indebtedness, and  all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person.  Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.

 

“Ineligible Security” shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

 

“Insolvency Proceeding” shall mean any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other national, state, provincial or federal bankruptcy or insolvency law, assignments for the benefit of creditors, or proceedings seeking reorganization, arrangement, liquidation, or other similar relief.

 

“Intellectual Property” shall mean property constituting under any Applicable Law a patent, patent application, copyright, trademark, service mark, trade name, mask work, trade secret or license or other right to use any of the foregoing.

 

“Intellectual Property Claim” shall mean the assertion by any Person of a claim that the ownership, use, marketing, sale or distribution of any Inventory or Intellectual Property violates any ownership of or right to use any Intellectual Property of such Person which results in a cease and desist order with respect to such Inventory or Intellectual Property or the practical equivalent of such an order.

 

“Intercompany Obligations” shall have the meaning set forth in Section 15.4.

 

“Interest Period” shall mean the period provided for any Eurodollar Rate Loan pursuant to Section 2.2(c).

 

 “Inventory” shall mean and include as to each Borrower all of such Borrower’s now owned or hereafter acquired goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.

 

 “Investment Property” shall mean and include as to each Borrower, all of such Borrower’s now owned or hereafter acquired securities (whether certificated or uncertificated), securities entitlements, securities accounts, commodities contracts and commodities accounts.

 

  

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“Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a draft pursuant to the terms hereof.

 

“Leasehold Interests” shall mean all of each Borrower’s right, title and interest in and to the premises leased by each Borrower.

 

“Lender” and “Lenders” shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a transferee, successor or assign of any Lender.

 

“Lender-Provided Hedge” shall mean a Hedge Agreement with any Lender and with respect to which the Agent confirms meets the following requirements:  (i) it is documented on a standard International Swap Dealer Association Agreement or other form agreement acceptable to Agent, (ii) it provides for the method of calculating the reimbursable amount of the provider's credit exposure in a reasonable and customary manner, and (iii) it is entered into for hedging (rather than speculative) purposes.  The liabilities of any Borrower to the provider of any Lender-Provided Hedge (the “Hedge Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under each Guaranty and secured obligations hereunder, and otherwise treated as Obligations for purposes of each of the Other Documents.  The Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the Other Documents.

 

“Letter of Credit Fees” shall have the meaning set forth in Section 3.2.

 

“Letter of Credit Borrowing” shall have the meaning set forth in Section 2.12(d).

 

“Letter of Credit Sublimit” shall mean $7,500,000.

 

“Letters of Credit” shall have the meaning set forth in Section 2.9.

 

“License Agreement” shall mean any agreement between any Borrower and a Licensor pursuant to which such Borrower is authorized to use any Intellectual Property of such Licensor in connection with the manufacturing, marketing, sale or other distribution of any Inventory of such Borrower.

 

“Licensor” shall mean any Person from whom any Borrower obtains the right to use (whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with such Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection with such Borrower’s business operations.

 

“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor, in form and content satisfactory to Agent and such Licensor, by which Agent is given the right, vis-a-vis such Licensor, to enforce Agent’s Liens with respect to and to dispose of any Borrower’s Inventory with the benefit of any Intellectual Property applicable thereto, irrespective of such Borrower’s default under any License Agreement with such Licensor.

 

  

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“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, hypothec, assignment, security interest, lien (whether statutory or otherwise), Charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code, the PPSA, or comparable law of any jurisdiction.

 

“Liquidity Calculation” shall mean a calculation by Borrowing Agent of the Quarterly Liquidity of Borrowers using Agent’s on-line Collateral monitoring system and including both a schedule of the amount of Qualified Cash as of the end of each Business Day during the applicable fiscal quarter and the amount owing to Borrowers’ trade creditors which are 60 days or more past due as of the end of such quarter, executed by the Chief Executive Officer, Chief Financial Officer or Controller of the Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Quarterly Liquidity
and calculation thereof as of the date of such certificate.

 

 “Material Adverse Effect” shall mean a material adverse effect on (a) the condition (financial or otherwise), results of operations, assets, business, or properties of the Borrowers, and their respective Subsidiaries taken as a whole, (b) the ability of the Borrowers taken as a whole to duly and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the value of the Collateral, taken as a whole, or Agent’s Liens on the Collateral or the priority of such Liens or (d) the practical realization of the benefits of Agent’s and each Lender’s rights and remedies under this Agreement, or under
any Other Document in any material respect.

 

“Material Contract” shall mean, with respect to any Person, each contract or agreement to which such Person or any of its Subsidiaries is a party, the loss, termination or modification of which could reasonably be expected to result in a Material Adverse Effect.

 

“Maximum Face Amount” shall mean, with respect to any outstanding Letter of Credit, the face amount of such Letter of Credit including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

 

 “Maximum Revolving Advance Amount” shall mean $70,000,000.

 

“Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of Credit, the amount of such Letter of Credit that is or may become available to be drawn, including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

 

“Modified Commitment Transfer Supplement” shall have the meaning set forth in Section 16.3(d).

 

“Mortgage” shall mean collectively the mortgages on the Eligible Real Property securing the Obligations together with all extensions, renewals, amendments, supplements, modifications, substitutions and replacements thereto and thereof.

 

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections 3(37) and 4001(a)(3) of ERISA.

 

  

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“Multiple Employer Plan” shall mean a Plan which has two or more contributing sponsors (including any Borrower or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

 

 “Note” shall mean any Revolving Credit Note.

 

“Obligations” shall mean and include: (a) any and all Indebtedness, loans, advances, debts, liabilities, guaranties, obligations, covenants and duties owing by any Borrower or Guarantor to Lenders or Agent or to any other direct or indirect subsidiary or affiliate of Agent or any Lender under this Agreement and the Other Documents, including any Lender-Provided Hedge, of any kind or nature, present or future (including any interest or other amounts accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower or
Guarantor, whether or not a claim for post-filing or post-petition interest or other amounts is allowed in such proceeding), plus (b) any and all Indebtedness, liabilities, debts or advances arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of the Agent’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements (such Indebtedness, liabilities, debts or advances described in this clause (b), the “Bank Products Obligations”), and, in the case of both clauses (a) and (b), whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced and all costs and expenses of Agent and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower or Guarantor to Agent or Lenders to perform acts or refrain from taking any action.

 

“Ordinary Course of Business” shall mean with respect to any Borrower, the ordinary course of such Borrower’s business as conducted on the Closing Date.

 

 “Other Documents” shall mean any Mortgage, any Note, the Fee Letter, any Guaranty, the Canadian Security Document, any Guarantor Security Agreement, any Lender-Provided Hedge and any and all other agreements, instruments and documents, including guaranties, pledges, powers of attorney, consents, interest or currency swap agreements or other similar agreements and all other writings heretofore, now or hereafter executed by any Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of the transactions contemplated by this Agreement.

 

“Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(d).

 

“Parent” is defined in the preamble.

 

“Parent and its Subsidiaries on a consolidated basis” shall mean the consolidation in accordance with GAAP of the accounts or other items of Parent and its respective Subsidiaries.

 

  

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 “Participant” shall mean each Person who shall be granted the right by any Lender to participate in any of the Advances and who shall have entered into a participation agreement in form and substance satisfactory to such Lender.

 

“Participation Advance” shall have the meaning set forth in Section 2.12(d).

 

“Participation Commitment” shall mean each Lender’s obligation to buy a participation of the Letters of Credit issued hereunder.

 

“Payee” shall have the meaning set forth in Section 3.10.

 

“Payment Office” shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any, which it may designate by notice to Borrowing Agent and to each Lender to be the Payment Office.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.

 

“Pension Benefit Plan” shall mean at any time any employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.

 

“Permitted Acquisition” shall mean any acquisition made by any Borrower or Subsidiary of a Borrower, provided, that:

 

(a)          immediately before and after the consummation of such acquisition, no Default or Event of Default shall have occurred and be continuing;

 

(b)          Borrowing Agent shall have furnished to Agent at least ten (10) Business Days (or such shorter period as permitted by Agent in its reasonable discretion) prior to the consummation of such acquisition;

 

	
  

	
(i)

	
written notice of such proposed acquisition;

 

	
  

	
(ii)

	
a term sheet and/or commitment letter, executed if available, setting forth in reasonable detail the terms and conditions of such acquisition and, at the request of Agent, such other information and documents that Agent may reasonably request;

 

	
  

	
(iii)

	
pro forma consolidated financial statements for the twelve (12) month period immediately following the expected date of the consummation of such acquisition, presented in accordance with GAAP, taking into consideration such acquisition and funding of all loans in connection therewith;

 

  

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(iv)

	
a certificate of Borrowing Agent’s chief financial officer demonstrating, on a pro forma basis, (x) compliance with the Fixed Charge Coverage Ratio for one (1) year following the consummation of such acquisition, and (y) Undrawn Availability, plus Qualified Cash of no less than $10,000,000 immediately prior to and after giving effect to such acquisition and the Revolving Advances to be funded in connection therewith.  The calculation of Undrawn Availability for purposes of clause (y) herein shall exclude any and all of the acquired (or to be acquired) assets of any Person unless Agent has first completed field exams and appraisals (to the extent deemed necessary by the Agent in its sole discretion) relating to such assets with results satisfactory to the Agent in its
Permitted Discretion and such assets are otherwise Eligible Inventory or Eligible Receivables;

 

	
  

	
(v)

	
copies of all financial information presented to the Board of Directors in connection with such acquisition;

 

(c)           all property to be so acquired in connection with such acquisition shall be free and clear of any and all Liens, except for Permitted Encumbrances (and if any such property is subject to any Lien not permitted by this clause (c), then concurrently with such acquisition such Lien shall be released);

 

(d)           the Subsidiary to be acquired or formed as a result of such acquisition shall be, in the reasonable judgment of the Borrowers, engaged in the same line of business or a business ancillary, complementary or reasonably related thereto of the Borrowers and such Subsidiary will be a direct wholly-owned Subsidiary of a Borrower, provided that such Subsidiary may be an indirect wholly-owned Subsidiary of a Borrower if the Agent consents in writing, provided further that any such business would not subject the Agent or any Lender to regulatory or third-party approvals in connection with
the exercise of its rights and remedies under this Agreement or any Other Documents other than approvals applicable to the exercise of such rights and remedies with respect to Borrowers prior to such acquisition;

 

(e)           such acquisition shall be effected in such a manner so that the acquired Equity Interests or assets (if an asset acquisition) are owned by a Borrower and, if effected by merger, amalgamation, or consolidation involving a Borrower, the continuing or surviving Person shall be a Borrower;

 

(f)           such acquisition shall have been approved by the board of directors or other governing body of the Person whose Equity Interests or assets are proposed to be acquired to the extent required by the governing documents of the Person whose Equity Interests or assets are proposed to be acquired or by Applicable Law;

 

(g)           Agent shall be satisfied that all acts necessary to perfect Agent’s Liens in the assets acquired by any Borrower, Guarantor or Domestic Subsidiary have been taken; provided that, in the case of an acquisition of assets constituting Equity Interests, Agent’s Liens shall be perfected with respect to the Equity Interests in and the assets of the acquired Person (other than in the case of a Foreign Subsidiary, where Agent shall have a perfected Lien upon 65% of the Equity Interests of such Foreign Subsidiary only);

 

  

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(h)           all or substantially all of the business and assets of the entity being acquired are located in the United States, Canada, Puerto Rico or other country acceptable to Agent;

 

(i)            the Purchase Price for such acquisition shall not individually or in the aggregate with all other acquisitions during any calendar year exceed $20,000,000, provided, that in connection with any Permitted Acquisitions, such amounts shall be increased on a dollar for dollar basis by the amount of Purchase Price paid from the actual proceeds of the issuance of Equity Interests by any Borrower; and

 

(j)            nothing contained in this definition of Permitted Acquisition shall permit a Borrower to make any acquisition prohibited by any other provision of this Agreement.

 

“Permitted Advances” shall mean (a) Accounts owing to Borrowers, customer deposits, prepaid expenses and accrued expenses created or acquired in the Ordinary Course of Business and payable on customary trade terms of a Borrower, (b) advances to sales representatives of Borrowers in the Ordinary Course of Business and consistent with past practices not to exceed $100,000 per sales representative and $1,000,000 in the aggregate with respect to all sales representatives in each case for Parent and its Subsidiaries on a Consolidated Basis, and (c) any loans or advances that are included in the definition of “Permitted
Investments.”

 

“Permitted Discretion” shall mean a determination made in the exercise of reasonable (from the perspective of a secured asset based lender) judgment.

 

“Permitted Dispositions” shall have the meaning set forth in Section 4.3.

 

“Permitted Encumbrances” shall mean:

 

(a)           Liens in favor of Agent for the benefit of Agent and Lenders;

 

(b)           Liens for taxes, assessments or other governmental charges not delinquent or being Properly Contested;

 

(c)           Liens disclosed in the financial statements referred to in Section 5.5, the existence of which Agent has consented to in writing;

 

(d)           deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance;

 

(e)           deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business;

 

(f)           Liens arising by virtue of the rendition, entry or issuance against any Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (i) is in existence for less than 20 consecutive days after it first arises or is being Properly Contested and (ii) is at all times junior in priority to any Liens in favor of Agent;

 

  

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(g)           mechanics’, workers’, materialmen’s, warehouse, statutory landlord or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being Properly Contested;

 

(h)           Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (i) any such Lien shall not encumber any other property of any Borrower and (ii) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases shall not exceed the amount provided for in Section 7.8(b);

 

(i)            Canadian statutory Liens in respect of deemed statutory trusts under pensions benefits and employment standards legislation; and

 

 (j)           Liens disclosed on Schedule 1.2(a); provided that such Liens shall secure only those obligations which they secure on the Closing Date (and extensions, renewals and refinancings of such obligations permitted by Section 7.8) and shall not subsequently apply to any other property or assets of any Borrower.

 

(k)           Liens securing Indebtedness permitted under Section 7.8(b) which attach solely to the assets being leased or financed;

 

(l)            Liens securing Indebtedness for financing insurance premiums which attach solely to the applicable insurance policies and proceeds thereof;

 

(m)          Liens of any licensor or licensee on Intellectual Property arising in connection with license agreements entered into in the Ordinary Course of Business;

 

(n)           any Lien, UCC-1 or PPSA financing statement, interest or title of a lessor under any operating lease entered into in the Ordinary Course of Business, or any interest or title of any lessee under any leases or subleases of real property, with respect solely to the leased property and not to any Collateral;

 

(o)           with respect solely to Real Property, defects and irregularities in title, survey exceptions, non-monetary encumbrances, licenses, covenants, restrictions, easements or reservations of others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other similar purposes;outstanding mineral rights or reservations (including rights with respect to the removal of material resources) which do not materially diminish the value of the Real Property, assuming usage of such surface estate similar to that being carried on by any Person as of the Closing Date, and Liens arising with respect to zoning restrictions, licenses,
covenants, building restrictions and other similar charges or encumbrances on the use of Real Property of such Person which do not materially interfere with the ordinary conduct of such Person’s business thereon; provided that, with respect to the Eligible Real Property, all of the foregoing must be acceptable to Agent in its Permitted Discretion;

 

  

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(p)           Liens consisting of UCC-1 financing statements or similar notices filed by a Person of a type listed in Section 9-505 of the UCC solely in such capacity;

 

(q)           Liens arising in connection with a judgment or attachment that would not constitute an Event of Default under this Agreement; and

 

(r)            Extensions, renewals and replacements of Liens referred to in clauses (a) through (q) above; provided, however, that any such extension, renewal or replacement Lien shall be limited to the property or assets covered by the Lien extended, renewed or replaced and that the obligations secured by any such extension, renewal or replacement Lien shall be in an amount not greater than the amount of the obligations secured by the Lien extended, renewed or replaced.

 

“Permitted Guarantees” shall mean (a) warranties made in the Ordinary Course of Business, (b) any guaranty by a Borrower of any liabilities of any other Borrower or a Subsidiary of a Borrower to any lessor or licensor, (c) indemnities in agreements evidencing Indebtedness permitted hereunder, (d) any indemnities by any Borrower of any liability of its directors, officers and employees in their capacities as such as permitted by Applicable Law, (e) any guaranty of any Indebtedness permitted under this Agreement,  and (f) indemnities in respect of statutory obligations, bonding agreements, brokerage and deposit agreements,
engagement letters, commitment letters, and agreements for, acquisitions, divestures and other like agreements.

 

“Permitted Investments” shall mean any of the following:

 

(a)           obligations or securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof or any Canadian equivalent thereof;

 

(b)           United States dollar-denominated time deposits, certificates of deposit and bankers acceptances of any bank whose short-term debt rating from Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (“S&P”), is at least A-1 or the equivalent or whose short-term debt rating from Moody’s Investors Service, Inc. (“Moody’s”) is at least P-1 or the equivalent with maturities of not more than six months from the date of acquisition or any Canadian equivalent thereof;

 

(c)           commercial paper with a rating of at least A-1 or the equivalent by S&P or at least P-1 or the equivalent by Moody’s maturing within six months after the date of acquisition or any Canadian equivalent thereof;

 

(d)           marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within six months from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s;

 

(e)           Investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (d) above;

 

  

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(f)           Deposit Accounts maintained in accordance with the Blocked Account Agreements;

 

(g)          Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the Ordinary Course of Business;

 

(h)          deposits made in the Ordinary Course of Business consistent with past practices to secure the performance of leases or in connection with bidding on government contracts;

 

(i)            loans to employees in an aggregate amount not in excess of $100,000 at any one time per such employee (not to exceed in the aggregate at any time outstanding the sum of $1,000,000 with respect to all employees of the Borrowers), for the purpose of funding such employees’ purchase of Equity Interests of the Parent, in each case for Parent and its Subsidiaries on a Consolidated Basis;

 

(j)            Investments or intercompany loans and advances of (i) Parent or a Subsidiary in or to any other Subsidiary (subject to a maximum amount of such loans and advances (which, for clarification, do not include trade payables incurred in the Ordinary Course of Business) by Parent and any other Borrower to any and all such Subsidiaries of $10,000,000 in the aggregate at any one time outstanding (provided that upon request by Agent, each such loan and advance shall be evidenced by a promissory note in form and substance satisfactory to Agent which is pledged by the payee as additional security for the Obligations)), or (ii) any Subsidiary in or to the
Parent;

 

 (k)           additional Investments not otherwise permitted in this Section not to exceed $1,000,000 in the aggregate at any one time outstanding for Parent and its Subsidiaries on a Consolidated Basis;

 

(l)            Investments in certificates of deposit and bank deposits with financial institutions located in Puerto Rico and the Dominican Republic, solely to the extent necessary to maintain preferred tax treatment or country of origin status in such locations, not to exceed $5,000,000 in the aggregate at any time outstanding for Parent and its Subsidiaries on a Consolidated Basis;

 

(m)           Investments constituting Permitted Acquisitions;

 

(n)           Investments in Hedge Agreements, derivative agreements, materials future contracts or other arrangements in connection with Indebtedness, in all cases not for speculative purposes, not to exceed in the aggregate a notional amount of $35,000,000 at any time outstanding for Parent and its Subsidiaries on a Consolidated Basis; and

 

(o)           Deposit Accounts with financial institutions available for withdrawal on demand, subject to the provisions of Section 4.15(h).

 

  

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“Person” shall mean any individual, sole proprietorship, partnership, limited partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited or unlimited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Body (whether federal, state, provincial, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).

 

 “PNC” shall have the meaning set forth in the preamble to this Agreement and shall extend to all of its successors and assigns.

 

“PPSA” shall mean the Personal Property Security Act of the applicable Canadian province or provinces in respect of Rocky Canada and in the Province of Quebec, shall mean the applicable provisions of the Civil Code of Quebec, each as amended from time to time.

 

“Priority Payables” shall mean the full amount of the liabilities of any Borrower which (i) have a trust imposed to provide for payment or a security interest, pledge, lien, hypothec or charge ranking or capable of ranking senior to or pari passu with security interests, liens, hypothecs or charges securing the Obligations on any Collateral under any federal, provincial, state, county, district, municipal, or local law of Canada or (ii) have a right imposed to provide for payment ranking or capable of ranking senior to or pari
passu with the Obligations under federal, provincial, state, county, district, municipal, local law, regulation or directive of Canada, including, but not limited to, claims for unremitted and/or accelerated rents, taxes, wages, withholdings taxes, value added taxes, amounts payable to an insolvency administrator, employee withholdings or deductions, vacation pay, severance and termination pay, workers’ compensation obligations, government royalties or pension obligations in each case to the extent such trust, or security interest, lien hypothec or charge has been or may be imposed.

 

“Projections” shall have the meaning set forth in Section 5.5(a).

 

 “Properly Contested” shall mean, in the case of any Indebtedness or Lien, as applicable, of any Person (including any taxes) that is not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the amount thereof, (a) such Indebtedness or Lien, as applicable, is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (b) such Person has established appropriate reserves as shall be required in conformity with GAAP; (c) the non-payment of such Indebtedness will not have a Material Adverse Effect and
will not result in the forfeiture of any assets of such Person that will have a Material Adverse Effect; (d) no Lien is imposed upon any of such Person’s assets with respect to such Indebtedness unless such Lien is at all times junior and subordinate in priority to the Liens in favor of the Agent (except only with respect to Charges that have priority as a matter of Applicable Law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (e) if such Indebtedness or Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (f) if such contest is abandoned, settled or determined adversely (in whole or in
part) to such Person, such Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in connection therewith.

 

  

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“Purchase Price” shall mean, with respect to any acquisition, the sum of, without duplication, (a) the aggregate consideration, whether cash, property (including the face amount of any promissory note or any other debt instrument issued in connection with such acquisition) or securities (including the fair market value of any Equity Interests of any Borrower issued in connection therewith), paid or delivered by a Borrower, plus (b) the aggregate amount of Indebtedness of the acquired business, plus (c) all transaction costs and contingent obligations incurred by a Borrower.

 

“Purchasing CLO” shall have the meaning set forth in Section 16.3(d).

 

“Purchasing Lender” shall have the meaning set forth in Section 16.3(c).

 

“Qualified Cash” shall mean, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of Borrowers that is in deposit accounts maintained by PNC at a branch office of PNC located within the United States or Canada, or over which the Agent has determined it has exclusive springing control regardless of whether a Triggering Event has occurred.

 

“Quarterly Liquidity” shall mean, for any fiscal quarter (other than the fiscal quarter ending December 31, 2010), 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 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.  The fiscal quarter ending December 31, 2010 shall be determined as above for the period from November 15, 2010 through December 31, 2010.

 

“Questionnaire” shall mean the Disclosure Schedule and the responses thereto provided by Borrowers and delivered to Agent.

 

“Raw Material Inventory Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(iii).

 

“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.

 

“Real Property” shall mean all of each Borrower’s right, title and interest in and to the real estate identified on Schedule 4.5 hereto and related improvements, or which is hereafter owned or leased by any Borrower.

 

“Receivables” shall mean and include, as to each Borrower, all of such Borrower’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to Agent hereunder.

 

  

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“Receivables Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(i).

 

“Register” shall have the meaning set forth in Section 16.3(e).

 

“Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b).

 

“Release” shall have the meaning set forth in Section 5.7(c)(i).

 

“Reportable Event” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder.

 

“Required Lenders” shall mean Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding sixty-six and two-thirds percent (66 2/3%) of the Commitment Percentages; provided, however, if there are fewer than three (3) Lenders, Required Lenders shall mean all Lenders.

 

“Reserve Percentage” shall mean as of any day the maximum percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”.

 

“Revolving Advances” shall mean Advances made other than Letters of Credit.

 

“Revolving Credit Note” shall mean, collectively, the promissory notes referred to in Section 2.1(a).

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate plus the Applicable Margin with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus the Applicable Margin with respect to Eurodollar Rate Loans.

 

“Satisfaction Event” shall mean the first (1st) date after a Triggering Event on which both of the following conditions are satisfied: (a) Undrawn 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.

 

“SEC” shall mean the Securities and Exchange Commission or any successor thereto.

 

“Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company controlling PNC, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

  

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“Senior Debt Payments” shall mean and include all cash actually expended by any Borrower to make (a) interest payments on any Advances hereunder, plus (b) net payments on account of all Hedging Agreements, plus (c) payments for all fees, commissions and charges paid to Agent, Issuer, or any Lender set forth herein and with respect to any Advances, plus (d) payments on Capitalized Lease Obligations, plus (e) payments with respect to any other Indebtedness for borrowed money (other than the Revolving Advances and Letters of Credit) but excluding the satisfaction of any Indebtedness to the extent simultaneously refinanced with the proceeds
of any Indebtedness permitted to be incurred hereunder other than the proceeds Revolving Advances, provided that the prepayment of the GECC Loan from the proceeds of the Amortizing Tranche shall not constitute a Senior Debt Payment, and provided that any Indebtedness refinanced by the initial Advances made hereunder shall not constitute a Senior Debt Payment.

 

“Senior Obligations” shall have the meaning set forth in Section 15.4.

 

“Settlement Date” shall mean the Closing Date and thereafter Wednesday or Thursday of each week or more frequently if Agent deems appropriate unless such day is not a Business Day in which case it shall be the next succeeding Business Day.

 

“Solvent” shall mean as to any Person (i) the ability to pay its debts as they mature, (ii) having capital sufficient to carry on its business and all businesses in which it is about to engage, and (iii) (A) as of the Closing Date, the fair present saleable value of its assets, calculated on a going concern basis, is in excess of the amount of its liabilities, and (B) subsequent to the Closing Date, the fair saleable value of its assets (calculated on a going concern basis) will be in excess of the amount of its liabilities; provided, however, that (w) the determination of
whether a Person is Solvent shall take into account all such Person's properties and liabilities regardless of whether, or the amount at which, any such property or liability is included on a balance sheet of such Person prepared in accordance with GAAP, including properties such as contingent contribution or subrogation rights, business prospects, distribution channels and goodwill; (x) the determination of the sum of a Person's properties at a fair valuation or the present fair saleable value of a Person's properties shall be made on a going concern basis; (y) in computing the amount of contingent or unrealized assets or contingent or unliquidated liabilities at any time, such assets and liabilities will be computed at the amounts which, in light of all the facts and circumstances existing at such time, represent the amount that reasonably can be expected to become realized assets or
matured liabilities, as the case may be; and (z) in computing the amount that would be required to pay a Person's probable liability on its existing debts as they become absolute and matured, reasonable valuation techniques, including a present value analysis, shall be applied using such rates over such periods as are appropriate under the circumstances.

 

“Subsidiary” of any Person shall mean a corporation or other entity of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person; provided, however, that the term “Subsidiary” shall not include EJ Asia Limited.

 

  

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“Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests of any Subsidiary owned by any Borrower (not to exceed 65% of the Equity Interests of any Foreign Subsidiary other than Rocky Canada).

 

“Term” shall have the meaning set forth in Section 13.1.

 

“Termination Event” shall mean (i) a Reportable Event with respect to any Pension Benefit Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of the Controlled Group from a Pension Benefit Plan or Multiemployer Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Pension Benefit Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Pension Benefit Plan or Multiemployer Plan; (v) any event or condition (a)
which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Benefit Plan or Multiemployer Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA;  (vi) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group from a Multiemployer Plan; (vii) providing any security to any Pension Benefit Plan under Section 436(f) of the Code by Borrower or any member of the Controlled Group or (viii) any event, action, condition, proceeding or otherwise that constitutes (a) the institution by any Governmental Body of proceedings to terminate a Canadian Pension Plan under pension benefit laws of Canada or (b) an event or condition that provides a basis under pension benefit laws of
Canada for the termination by any Governmental Body of, or the appointment of a Governmental Body of an administrator of, any Canadian Pension Plan.

 

 “Toxic Substance” shall mean and include any material present on the Real Property which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances.  “Toxic Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

 

“Trading with the Enemy Act” shall mean the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling legislation or executive order relating thereto.

 

 “Transferee” shall have the meaning set forth in Section 16.3(d).

 

“Triggering Event” shall mean either: (a) the occurrence of an Event of Default, or (b) the first (1st) date (or the most recent Satisfaction Event if a Triggering Event has previously occurred) on which the sum of Undrawn Availability, plus Qualified Cash, has equaled less than $10,000,000 for a period of ten (10) or more consecutive days after the 45th day following the Closing Date.

 

“Undrawn Availability” at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount, or (ii) the Maximum Revolving Advance Amount, minus the Maximum Undrawn Amount of all Letters of Credit, minus (b) the sum of (i) the outstanding amount of Revolving Advances, plus (ii) amounts due and owing to any Borrower’s trade creditors which are outstanding sixty (60) days or more past the due date thereof.

 

  

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“Unfinanced Capital Expenditures” shall mean all Capital Expenditures of Borrower other than those made utilizing financing provided by the applicable seller or third party lenders.  For the avoidance of doubt, a Capital Expenditure made by a Borrower utilizing a Revolving Advance shall be deemed an Unfinanced Capital Expenditure unless such Revolving Advance is repaid during the same fiscal quarter that such Capital Expenditure is made with financing permitted hereunder and provided by the applicable seller or third-party lenders.

 

“Uniform Commercial Code” shall have the meaning set forth in Section 1.3.

 

“US Assignment” shall have the meaning set forth in Section 4.15(j).

 

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

 

“Week” shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the following Tuesday.

 

“Withholding Agent” means Borrowers and Agent.

 

1.3.           Uniform Commercial Code Terms.  All terms used herein and defined in the Uniform Commercial Code as adopted in the State of Ohio from time to time (the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, unless otherwise defined herein, the terms “accounts”, “chattel paper”, “commercial tort claims”, “instruments”, “general intangibles”, “goods”, “payment intangibles”,
“proceeds”, “supporting obligations”, “securities”, “investment property”, “documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”, as and when used in the description of Collateral shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision. All terms used herein and defined in the PPSA (in respect of Collateral located in Canada) shall have the meaning given therein unless otherwise defined
herein.  Without limiting the foregoing, the terms “accounts”, “chattel paper”, “goods”, “instruments”, “intangibles”, “proceeds”, “securities”, “investment property”, “document of title”, “inventory”, “equipment” and “fixtures”, as and when used in the description of Collateral located in Canada shall have the meanings given to such terms in the PPSA.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the PPSA, such expanded definition will apply automatically as of the date of such amendment, modification or revision.

 

  

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1.4.           Certain Matters of Construction.  The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Any pronoun used shall be deemed to cover all genders.  Wherever appropriate in the context, terms used herein in the singular
also include the plural and vice versa.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  Unless otherwise provided, all references to any instruments or agreements to which Agent is a party, including references to any of the Other Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.  All references herein to the time of day shall mean the time in Ohio.  All references herein to “province” or like terms shall include territory and like terms.  Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a first-in, first-out basis.  Whenever the words “including” or “include” shall be used, such words
shall be understood to mean “including, without limitation” or “include, without limitation”.  All references to “province” or like terms shall include “territory” or like terms.  A Default or Event of Default shall be deemed to exist and be continuing at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or is cured within any period of cure expressly provided for in this Agreement.  Any Lien referred to in this Agreement or any of the Other Documents as having been created in favor of Agent, any agreement entered into by Agent pursuant to this Agreement or any of the Other Documents, any payment made by or to or funds received by Agent pursuant to or as
contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be taken by Agent, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge” or words of similar import relating to the knowledge or the awareness of any Borrower are used in this Agreement or Other Documents, such phrase shall mean and refer to the actual knowledge of a senior officer of any Borrower.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such
action is taken or condition exists.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder. To the extent it is necessary to determine Undrawn Availability, the occurrence of any Event of Default, or compliance with any provision hereof for which measurement is based on Dollars, any amount of Canadian Dollars shall be deemed to be the Equivalent Amount of Dollars.

 

II            ADVANCES, PAYMENTS.

 

2.1.         Revolving Advances.

 

(a)           Amount of Revolving Advances.  Subject to the terms and conditions set forth in this Agreement including Section 2.1(b), each Lender, severally and not jointly, will make Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all Letters of Credit or (y) an amount equal to the sum of:

 

  

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(i)           up to 85% (“Receivables Advance Rate”), of Eligible Receivables, plus

 

(ii)          up to the lesser of (A) 75% of the value of Eligible Finished Goods Inventory (“Finished Goods Inventory Advance Rate”), or (B) 85% of the appraised net orderly liquidation value of Eligible Finished Goods Inventory (as evidenced by an Inventory appraisal satisfactory to Agent in its Permitted Discretion), plus

 

(iii)         up to the lesser of (A) 50% of the value of the Eligible Raw Material Inventory (“Raw Material Inventory Advance Rate” and together with the Finished Goods Inventory Advance Rate and the Receivables Advance Rate, collectively, the “Advance Rates”), or (B) 85% of the appraised net orderly liquidation value of Eligible Raw Materials Inventory (as evidenced by an Inventory appraisal satisfactory to Agent in its Permitted Discretion), minus

 

(iv)         the amount by which the sum of Section 2.1(a)(y)(ii) plus Section 2.1(a)(y)(iii) exceeds $40,000,000, plus

 

(v)          (A) up to the lesser of (I) $7,500,000, or (II) 70% of the as-is fair market value of Eligible Real Property, minus (B) the scheduled reductions to the Amortizing Tranche required by Section 2.4, minus

 

(vi)         the Maximum Undrawn Amount of all Letters of Credit, minus

 

(vii)        such reserves as Agent may deem proper and necessary from time to time in its Permitted Discretion, including with respect to the Priority Payables.

 

The amount derived from the sum of Sections 2.1(a)(y) at any time and from time to time shall be referred to as the “Formula Amount”.  The Revolving Advances shall be evidenced by one or more secured promissory notes (collectively, the “Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).

 

(b)           Discretionary Rights.  The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its Permitted Discretion.  Each Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing or imposing reserves may limit or restrict Advances requested by Borrowing Agent.  Agent shall give Borrowing Agent five (5) days prior written notice of its intention to decrease the Advance Rates.  The rights of Agent under this subsection are subject to the
provisions of Section 16.2(b).

 

2.2.         Procedure for Revolving Advances Borrowing.

 

(a)           Domestic Rate Loan Requests. Borrowing Agent on behalf of any Borrower may notify Agent prior to 12:00 Noon on a Business Day of a Borrower’s request to incur, on that day, a Revolving Advance comprised of a Domestic Rate Loan hereunder.

 

  

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(b)           Deemed Credit Requests.  The Borrowers shall be deemed to have made a request for a Revolving Advance (a "Deemed Credit Request"), which Deemed Credit Request shall be irrevocable upon any interest, principal, fee or other Obligation of the Borrowers hereunder becoming due, for a Revolving Advance comprised of a Domestic Rate Loan in an amount necessary to pay such interest, principal, fee or other Obligation.  Each Lender agrees that its obligation to make or participate in Revolving Advances
pursuant to a Deemed Credit Request is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence of any Default or Event of Default or the failure of any condition precedent.

 

(c)           Eurodollar Rate Loan Requests. In the event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent written notice by no later than 12:00 Noon on the day which is three (3) Business Days prior to the date such Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which shall be a Business Day), (ii) the type of borrowing and the amount on the date of such Advance to be borrowed, which amount shall be in an aggregate principal amount that is not less than $1,000,000 and integral multiples of $500,000 in excess
thereof, and (iii) the duration of the first Interest Period therefor.  Interest Periods for Eurodollar Rate Loans shall be for one, two, three or six months; provided, if an Interest Period would end on a day that is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Interest Period shall end on the next preceding Business Day.  No Eurodollar Rate Loan shall be made available to any Borrower during the continuance of a Default or an Event of Default.  After giving effect to each requested Eurodollar Rate Loan, including those which are converted from a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more than six (6) Eurodollar Rate Loans, in the aggregate.  Each
Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan is made and shall end on such date as Borrowing Agent may elect as set forth in subsection (c)(iii) above provided that the exact length of each Interest Period shall be determined in accordance with the practice of the interbank market for offshore Dollar deposits and no Interest Period shall end after the last day of the Term.  Borrowing Agent shall elect the initial Interest Period applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.2(c) or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the case may be.  Borrowing Agent shall elect the duration of each succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not later than 12:00 Noon on the day which is three (3) Business Days prior to the last day of the then current Interest Period applicable to such Eurodollar Rate Loan.  If Agent does not receive timely notice of the Interest Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have elected to convert to a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.

 

(d)           Rate Conversions and Continuations.  Provided that no Event of Default shall have occurred and be continuing, Borrowing Agent may, on the last Business Day of the then current Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert or continue any such loan into a loan of another type in the same aggregate principal amount provided that any conversion or continuation of a Eurodollar Rate Loan shall be made only on the last
Business Day of the then current Interest Period applicable to such Eurodollar Rate Loan.  If Borrowing Agent desires to convert or continue a loan, Borrowing Agent shall give Agent written notice by no later than 12:00 Noon (i) on the day which is three (3) Business Days’ prior to the date on which such conversion or continuation is to occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan or a continuation of a Eurodollar Rate Loan as a Eurodollar Rate Loan, or (ii) on the day which is one (1) Business Day prior to the date on which such conversion is to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying, in each case, the date of such conversion or continuation, the loans to be converted or continued and if the conversion is from a Domestic Rate Loan to any other type of loan, the duration
of the first Interest Period therefor.

 

  

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(e)           Eurodollar Rate Loan Prepayments.  At its option and upon written notice given prior to 12:00 Noon at least three (3) Business Days’ prior to the date of such prepayment, any Borrower may prepay the Eurodollar Rate Loans in whole at any time or in part from time to time with accrued interest on the principal being prepaid to the date of such repayment.  Such Borrower shall specify the date of prepayment of Advances which are Eurodollar Rate Loans and the amount of such prepayment.  In the event that any prepayment of a Eurodollar Rate Loan is
required or permitted on a date other than the last Business Day of the then current Interest Period with respect thereto, such Borrower shall indemnify Agent and Lenders therefor in accordance with Section 2.2(f).

 

(f)           Indemnity.  Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders harmless from and against any and all losses or expenses that Agent and Lenders may sustain or incur as a consequence of any prepayment, conversion of or any default by any Borrower in the payment of the principal of or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof has been given, including, but not limited to, any interest payable by Agent or Lenders to
lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Agent or any Lender to Borrowing Agent shall be conclusive absent manifest error.

 

(g)           Illegality of Eurodollar Rate Loans.  Notwithstanding any other provision hereof, if any Applicable Law, or any change therein or in the interpretation or application thereof, shall make it unlawful for any Lender (for purposes of this subsection (g), the term “Lender” shall include any Lender and the office or branch where any Lender or any corporation or bank controlling such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder shall forthwith be
cancelled and Borrowers shall, if any affected Eurodollar Rate Loans are then outstanding, promptly upon request from Agent, either pay all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans of another type.  If any such payment or conversion of any Eurodollar Rate Loan is made on a day that is not the last day of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such amount or amounts as may be necessary to compensate Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a result of such payment or conversion, including (but not limited to) any interest or other amounts payable by Lenders to lenders of funds obtained by Lenders in order to make or maintain such Eurodollar Rate Loan.  A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive absent manifest error.

 

  

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2.3.         Disbursement of Advance Proceeds.  All Advances shall be disbursed from whichever office or other place Agent may designate from time to time and, together with any and all other Obligations of Borrowers to Agent or Lenders, shall be charged to Borrowers’ Account on Agent’s books.  During the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions hereof.  The proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any Borrower shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances, be made available to the applicable Borrower on the day so requested by way of credit to such Borrower’s operating account at PNC, or such other bank as Borrowing Agent may designate following notification to Agent, in immediately available federal funds or other immediately available funds or, with respect to Deemed Credit Requests, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such deemed request.

 

2.4.         Amortizing Tranche of Formula Amount.   The Amortizing Tranche shall be reduced on the fifteenth (15th) day of each month, beginning November 15, 2010, by an amount equal to 1/60th of the maximum amount thereof during the Term.

 

2.5.         Maximum Advances.  The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all Letters of Credit or (b) the Formula Amount.

 

2.6.         Repayment of Advances.

 

(a)           The Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided.

 

(b)           Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the date received.  In consideration of Agent’s agreement to conditionally credit Borrowers’ Account as of the next Business Day following the Agent’s receipt of those items of payment, each Borrower agrees that, in computing the charges under this Agreement, all items of payment shall be deemed applied by Agent on account of the Obligations one (1) Business Day after (i) the Business Day following the Agent’s receipt of such
payments via wire transfer or electronic depository check or (ii) in the case of payments received by Agent in any other form, the Business Day such payment constitutes good funds in Agent’s account.  Agent is not, however, required to credit Borrowers’ Account for the amount of any item of payment which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the amount of any item of payment which is returned to Agent unpaid.

 

(c)           All payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents shall be made to Agent at the Payment Office not later than 1:00 p.m. on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to Agent.  Agent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by a Deemed Credit Request as provided in Section 2.2(b).

 

  

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(d)           Borrowers shall pay principal, interest, and all other amounts payable hereunder, or under any Other Document, without any deduction whatsoever, including, but not limited to, any deduction for any withholding, setoff or counterclaim.

 

2.7.         Repayment of Excess Advances.  The aggregate balance of Advances outstanding at any time in excess of the maximum amount of Advances permitted hereunder shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred.

 

2.8.         Statement of Account.  Agent shall maintain, in accordance with its customary procedures, a loan account (“Borrowers’ Account”) in the name of Borrowers in which shall be recorded the date and amount of each Advance made by Agent and the date and amount of each payment in respect thereof; provided, however, the failure by Agent to record the date and amount of any Advance shall not adversely affect Agent or any Lender.  Each
calendar month, Agent shall send to Borrowing Agent a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Agent and Borrowers during such month.  The monthly statements shall be deemed correct and binding upon Borrowers in the absence of manifest error and shall constitute an account stated between Lenders and Borrowers unless Agent receives a written statement of Borrowers’ specific exceptions thereto within thirty (30) days after such statement is received by Borrowing Agent.  The records of Agent with respect to the loan account shall be conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto.

 

2.9.         Letters of Credit.  Subject to the terms and conditions hereof, Agent shall issue or cause the issuance of standby and/or trade letters of credit (“Letters of Credit”) for the account of any Borrower; provided, however, that Agent will not be required to issue or cause to be issued any Letters of Credit to the extent that the issuance thereof would then cause the sum of (a) the Revolving Advances plus (b) the Maximum Undrawn Amount of all
Letters of Credit to exceed the lesser of (i) the Maximum Revolving Advance Amount or (ii) the Formula Amount.  The Maximum Undrawn Amount of all Letters of Credit shall not exceed in the aggregate at any time the Letter of Credit Sublimit.  All disbursements or payments related to Letters of Credit shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and shall bear interest at the Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that have not been drawn upon shall not bear interest.

 

2.10.       Issuance of Letters of Credit.

 

(a)           Borrowing Agent, on behalf of Borrowers, may request Agent to issue or cause the issuance of a Letter of Credit by delivering to Agent at the Payment Office, prior to 12:00 Noon at least five (5)  Business Days’ prior to the proposed date of issuance, Agent’s form of Letter of Credit Application (the “Letter of Credit Application”) completed to the satisfaction of Agent; and, such other certificates, documents and other papers and information as Agent may reasonably request.  Borrowing Agent, on behalf of Borrowers, also has the right to
give instructions and make agreements with respect to any application, any applicable letter of credit and security agreement, any applicable letter of credit reimbursement agreement and/or any other applicable agreement, any letter of credit and the disposition of documents, disposition of any unutilized funds, and to agree with Agent upon any amendment, extension or renewal of any Letter of Credit.

 

  

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(b)           Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts, other written demands for payment, or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than twenty-four (24) months after such Letter of Credit’s date of issuance and in no event later than the last day of the Term.  Each standby Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits as  most recently published by the International
Chamber of Commerce at the time a Letter of Credit is issued (the “UCP”) or the International Standby Practices (ISP98 International Chamber of Commerce Publication Number 590) (the “ISP98 Rules”)), and any subsequent revision thereof at the time a standby Letter of Credit is issued, as determined by Agent in its Permitted Discretion, and each trade Letter of Credit shall be subject to the UCP.

 

(c)           Agent shall use its reasonable efforts to notify Lenders of the request by Borrowing Agent for a Letter of Credit hereunder.

 

2.11.       Requirements For Issuance of Letters of Credit.

 

(a)           Borrowing Agent shall authorize and direct any Issuer to name the applicable Borrower as the “Applicant” or “Account Party” of each Letter of Credit.  If Agent is not the Issuer of any Letter of Credit, Borrowing Agent shall authorize and direct the Issuer to deliver to Agent all instruments, documents, and other writings and property received by the Issuer pursuant to the Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit, the application therefor or any acceptance therefor.

 

(b)           In connection with all Letters of Credit issued or caused to be issued by Agent under this Agreement, each Borrower hereby appoints Agent, or its designee, as its attorney, with full power and authority if an Event of Default shall have occurred and be continuing, (i) to sign and/or endorse such Borrower’s name upon any warehouse or other receipts, letter of credit applications and acceptances, (ii) to sign such Borrower’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department or the equivalent in Canada (“Customs”) in the name of such Borrower or Agent or Agent’s designee, and to sign and deliver to Customs officials powers of attorney in the name of such Borrower for such purpose; and (iv) to complete in such Borrower’s name or Agent’s, or in the name of Agent’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof.  Neither Agent nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Agent’s or its attorney’s willful misconduct.  This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.

 

  

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2.12.       Disbursements, Reimbursement.

 

(a)           Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount of such Letter of Credit and the amount of such drawing, respectively.

 

(b)           In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, Agent will promptly notify Borrowing Agent.  Provided that Borrowing Agent shall have received such notice, the Borrowers shall reimburse (such obligation to reimburse Agent shall sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon on each date that an amount is paid by Agent under any Letter of Credit (each such date, a “Drawing Date”) in an
amount equal to the amount so paid by Agent.  In the event Borrowers fail to reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, on the Drawing Date, Agent will promptly notify each Lender thereof, and Borrowers shall be deemed to have requested that a Revolving Advance maintained as a Domestic Rate Loan be made by the Lenders to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the lesser of Maximum Revolving Advance Amount or the Formula Amount and subject to Section 8.2.  Any notice given by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such
notice.

 

(c)           Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an amount in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to have made a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in that amount.  If any Lender so notified fails to make available to Agent the amount of such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m. on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from
the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Revolving Advances maintained as a Domestic Rate Loans on and after the fourth day following the Drawing Date.  Agent will promptly give notice of the occurrence of the Drawing Date, but failure of Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.12(c), provided that such Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) until and commencing from the date of receipt of notice
from Agent of a drawing.

 

(d)           With respect to any unreimbursed drawing that is not converted into a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or in part as contemplated by Section 2.12(b), because of Borrowers’ failure to satisfy the conditions set forth in Section 8.2 (other than any notice requirements) or for any other reason, Borrowers shall be deemed to have incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and
shall bear interest at the rate per annum applicable to a Revolving Advance maintained as a Domestic Rate Loan.  Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a “Participation Advance” from such Lender in satisfaction of its Participation Commitment under this Section 2.12.

 

  

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(e)           Each Lender’s Participation Commitment shall continue until the last to occur of any of the following events:  (i) Agent ceases to be obligated to issue or cause to be issued Letters of Credit hereunder; (ii) no Letter of Credit issued or created hereunder remains outstanding and uncancelled and (iii) all Persons (other than the Borrowers) have been fully reimbursed for all payments made under or relating to Letters of Credit.

 

2.13.       Repayment of Participation Advances.

 

(a)           Upon (and only upon) receipt by Agent for its account of immediately available funds from Borrowers (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of interest on such a payment made by Agent under such a Letter of Credit, Agent will pay to each Lender, in the same funds as those received by Agent, the amount of such Lender’s Commitment Percentage of such funds, except Agent shall retain the amount of the Commitment Percentage of such funds of any Lender that did not make a Participation Advance in respect of such
payment by Agent.

 

(b)           If Agent is required at any time to return to any Borrower, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of the payments made by Borrowers to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus interest at the Federal Funds Effective Rate.

 

2.14.       Documentation.  Each Borrower agrees to be bound by the terms of the Letter of Credit Application and by Agent’s interpretations of any Letter of Credit issued on behalf of such Borrower and by Agent’s written regulations and customary practices relating to letters of credit, though Agent’s interpretations may be different from such Borrower’s own.  In the event of a conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern.  Except in the case of gross negligence or willful misconduct (as determined by a court
of competent jurisdiction in a final non-appealable judgment), Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following the Borrowing Agent’s or any Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.

 

2.15.       Determination to Honor Drawing Request.  In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.

 

  

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2.16.       Nature of Participation and Reimbursement Obligations.  Each Lender’s obligation in accordance with this Agreement to make the Revolving Advances or Participation Advances as a result of a drawing under a Letter of Credit, and the obligations of Borrowers to reimburse Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.16 under all circumstances, including the following circumstances:

 

(i)           any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Agent, any Borrower or any other Person for any reason whatsoever;

 

(ii)          the failure of any Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving Advance, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.12;

 

(iii)         any lack of validity or enforceability of any Letter of Credit;

 

(iv)         any claim of breach of warranty that might be made by Borrower or any Lender against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, cross-claim, defense or other right which any Borrower or any Lender may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any
Borrower or any Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit was procured);

 

(v)          the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provisions of services relating to a Letter of Credit, in each case even if Agent or any of Agent’s Affiliates has been notified thereof;

 

(vi)         payment by Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;

 

(vii)        the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

 

(viii)       any failure by the Agent or any of Agent’s Affiliates to issue any Letter of Credit in the form requested by Borrowing Agent, unless the Agent has received written notice from Borrowing Agent of such failure within three (3) Business Days after the Agent shall have furnished Borrowing Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

 

  

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(ix)          any Material Adverse Effect;

 

(x)           any breach of this Agreement or any Other Document by any party thereto;

 

(xi)          the occurrence or continuance of an Insolvency Proceeding with respect to any Borrower, Guarantor, or any of their respective Subsidiaries;

 

(xii)         the fact that a Default or Event of Default shall have occurred and be continuing;

 

(xiii)        the fact that the Term shall have expired or this Agreement or the Obligations hereunder shall have been terminated; and

 

(xiv)        any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

 

2.17.       Indemnity.  In addition to amounts payable as provided in Section 16.5, each Borrower hereby agrees to protect, indemnify, pay and save harmless Agent from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (a) the gross negligence or willful misconduct of
the Agent as determined by a final and non-appealable judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the Agent of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Body (all such acts or omissions herein called “Governmental Acts”).

 

2.18.       Liability for Acts and Omissions.  As between Borrowers and Agent and Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the respective foregoing, Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged (even if Agent shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Borrower against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Agent, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding sentence shall relieve Agent from liability for Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final
non-appealable judgment) in connection with actions or omissions described in such clauses (i) through (viii) of such sentence.  In no event shall Agent be liable to any Borrower for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

 

  

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Without limiting the generality of the foregoing, Agent (i) may rely on any oral or other communication believed in good faith by Agent or  such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially
been honored, together with any interest paid by Agent; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on Agent in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with
any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

 

In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment), shall not put Agent under any resulting liability to any Borrower or any Lender.

 

  

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2.19.       Cash Collateral. On demand, following the occurrence of an Event of Default, Borrowers will cause cash to be deposited and maintained in an account with Agent, as cash collateral, in an amount equal to one hundred and five percent (105%) of the Maximum Undrawn Amount of all Letters of Credit, and each Borrower hereby irrevocably authorizes Agent, in its discretion, on such Borrower’s behalf and in such Borrower’s name, to open such an account and to make and maintain deposits therein, or in an account opened by such Borrower, in the amounts required to be made by such Borrower, out of the
proceeds of Receivables or other Collateral or out of any other funds of such Borrower coming into any Lender’s possession at any time.  Agent will invest such cash collateral (less applicable reserves) in such short-term money-market items as to which Agent and such Borrower mutually agree and the net return on such investments shall be credited to such account and constitute additional cash collateral.  No Borrower may withdraw amounts credited to any such account except upon the cure of such Event of Default or the occurrence of all of the following: (a) payment and performance in full of all Obligations, (b) expiration of all Letters of Credit and (c) termination of this Agreement.

 

2.20.       Additional Payments.  Any sums expended by Agent or any Lender due to any Borrower’s failure to perform or comply with its obligations under this Agreement or any Other Document including any Borrower’s obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1, may be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations.

 

2.21.       Manner of Borrowing and Payment.

 

(a)           Each borrowing of Revolving Advances shall be advanced according to the applicable Commitment Percentages of Lenders.

 

(b)           Each payment (including each prepayment) by any Borrower on account of the principal of and interest on the Revolving Advances, shall be applied to the Revolving Advances pro rata according to the applicable Commitment Percentages of Lenders.  Except as expressly provided herein, all payments (including prepayments) to be made by any Borrower on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to Agent on behalf of the Lenders to the Payment Office, in each case on or prior to 1:00 P.M. in Dollars and in immediately available funds.

 

(c)           (i)           Notwithstanding anything to the contrary contained in Sections 2.21(a) and (b), commencing with the first Business Day following the Closing Date, each borrowing of Revolving Advances shall be advanced by Agent and each payment by any Borrower on account of Revolving Advances shall be applied first to those Revolving Advances advanced by Agent.  On or before 1:00 P.M. on each Settlement Date commencing with the first Settlement Date following the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent with funds in an amount equal to its applicable Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of the difference between (y) such repayments and (z) such Revolving Advances.

 

  

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(i)           Each Lender shall be entitled to earn interest at the applicable Revolving Interest Rate on outstanding Revolving Advances which it has funded.

 

(ii)           Promptly following each Settlement Date, Agent shall submit to each Lender a certificate with respect to payments received and Advances made during the Week immediately preceding such Settlement Date.  Such certificate of Agent shall be conclusive in the absence of manifest error.

 

(d)           If any Lender or Participant (a “Benefited Lender”) shall at any time receive any payment of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender’s Advances, or interest thereon, and such greater proportionate payment or receipt of Collateral is not expressly permitted hereunder, such Benefited Lender shall purchase for cash from the other
Lenders a participation in such portion of each such other Lender’s Advances, or shall provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the other Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.  Each Lender so purchasing a portion of another Lender’s Advances may exercise all rights of payment (including rights of set-off) with respect to such portion as fully as if such Lender were the
direct holder of such portion.

 

(e)           Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would constitute its applicable Commitment Percentage of the Revolving Advances available to Agent, Agent may (but shall not be obligated to) assume that such Lender shall make such amount available to Agent on the next Settlement Date and, in reliance upon such assumption, make available to Borrowers a corresponding amount.  Agent will promptly notify Borrowing Agent of its receipt of any such notice from a Lender.  If such amount is made available to Agent on a date after such next
Settlement Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the daily average Federal Funds Rate (computed on the basis of a year of 360 days) during such period as quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to Agent.  A certificate of Agent submitted to any Lender with respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of manifest error.  If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after such Settlement Date, Agent shall be entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder, on demand from Borrowers; provided, however, that Agent’s right to such recovery shall not prejudice or otherwise adversely affect Borrowers’ rights (if any) against such Lender.

 

  

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2.22.       Mandatory Prepayments.  Subject to Section 4.3, when any Borrower sells or otherwise disposes of any Collateral other than Inventory in the Ordinary Course of Business, Borrowers shall repay the Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable costs of such sales or other dispositions), such repayments to be made promptly but in no event more than one (1) Business Day following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Agent.  The foregoing shall not be deemed to be
implied consent to any such sale otherwise prohibited by the terms and conditions hereof. Such repayments shall be applied to the Revolving Advances subject to Borrowers’ ability to reborrow Revolving Advances in accordance with the terms hereof, provided however, if the Collateral disposed of is Eligible Real Property, there shall be a corresponding reduction in the Amortizing Tranche.

 

2.23.       Use of Proceeds.

 

(a)           Borrowers shall apply the proceeds of Advances to (a) refinance the Borrowers’ existing working capital credit facility agented by GMAC, (b) refinance the Borrowers’ 11.5% term loan payable to Laminar Direct Capital, L.L.C. SPV Capital Funding, L.L.C., Whitebox Hedged High Yield Partners, L.P., and successor to GPC LIX, L.L.C. (c) pay the early termination fee in conjunction with such term loan, (d) refinance the Borrowers’ term  loans payable to GE Capital Corp. or its Affiliates and pay any early termination fee in conjunction with such term loan (the “GECC Loan”), (e) partially fund permitted capital expenditures, (f) fund Permitted Acquisitions and dividends permitted hereunder, (g) pay the fees and expenses associated with this transaction at closing, (h) provide for working capital needs and reimburse drawings under Letters of Credit, and (i) for other lawful purposes of Parent and its Subsidiaries permitted under the Agreement.

 

(b)           Without limiting the generality of Section 2.23(a) above, neither the Borrowers, the Guarantors, nor any of their respective Subsidiaries, nor any other Person which may in the future become party to this Agreement or the Other Documents as a Borrower or Guarantor, intends to use nor shall they use any portion of the proceeds of the Advances, directly or indirectly, for any purpose in violation of the Trading with the Enemy Act.

 

2.24.       Defaulting Lender.

 

(a)           Notwithstanding anything to the contrary contained herein, in the event any Lender has failed, within two (2) Business Days of the date required hereunder (and such failure constitutes a breach by such Lender of its obligations under this Agreement) to make available its portion of any Advance, its participation in any Letter of Credit, or any payment due on a Settlement Date, or (x) notifies either Agent or Borrowing Agent that it does not intend to make available its portion of any Advance or any such participation or payment or (y) has otherwise failed to pay over to Agent or any other Lender any other amount required to be paid by it
hereunder within two (2) Business Days of the date when due, or (z) has since the date of this Agreement been deemed insolvent by a Governmental Body or become the subject of a bankruptcy, receivership, monitorship, conservatorship or insolvency proceeding, or has a parent company that since the date of this Agreement been deemed insolvent by a Governmental Body or become the subject of a bankruptcy, receivership, monitorship, conservatorship or insolvency proceeding  (each, a “Lender Default”), all rights and obligations hereunder of such Lender (a “Defaulting Lender”) as to which a Lender Default is in effect and of the other parties hereto shall be modified to the extent of the express provisions of this Section 2.24 while
such Lender Default remains in effect.

 

  

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(b)           Advances shall be incurred pro rata from Lenders which are not Defaulting Lenders (the “Non-Defaulting Lenders”) based on their respective Commitment Percentages, and no Commitment Percentage of any Lender or any pro rata share of any Advances required to be advanced by any Lender shall be increased as a result of such Lender Default.  Amounts received in respect of principal of any type of Advances shall be applied to reduce the applicable Advances of each Lender (other than any Defaulting Lender) pro rata based on the aggregate of the outstanding Advances of
that type of all Lenders at the time of such application; provided, that, Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees).  Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent.  Agent may hold and, in its discretion, re-lend to a Borrower the amount of such payments received or retained by it for the account of such Defaulting Lender.

 

(c)           A Defaulting Lender shall not be entitled to give instructions to Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the Other Documents.  All amendments, waivers and other modifications of this Agreement and the Other Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of “Required Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have either Advances outstanding or a Commitment Percentage.

 

(d)           Other than as expressly set forth in this Section 2.24, the rights and obligations of a Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall remain unchanged.  Nothing in this Section 2.24 shall be deemed to release any Defaulting Lender from its obligations under this Agreement and the Other Documents, shall alter such obligations, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder.

 

(e)           In the event a Defaulting Lender retroactively cures to the satisfaction of Agent the breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as a Lender under this Agreement.

 

2.25.       Increase of the Maximum Revolving Advance Amount.   Borrowers shall have the option, upon at least thirty (30) days' prior written notice to Agent, to increase the Maximum Revolving Advance Amount by up to $10,000,000, subject to the following conditions precedent:

 

(a)           no Default or Event of Default shall have occurred and be continuing on the date of such notice or on the date which such increase is to become effective;

 

(b)           the representations and warranties set forth in Article V shall be true and correct on and as of the date on which such increase is to become effective, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date;

 

(c)           such increase shall be in a minimum amount of $5,000,000 and in integral multiples of $1,000,000 in excess thereof;

 

  

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(d)           Borrowers shall have solicited and obtained additional lenders to join in this Agreement and provide the additional commitments necessary to fund the increase in the Maximum Revolving Advance Amount, which additional lenders must not be Affiliates of any Borrower and must be acceptable to the Agent and Lenders in their reasonable discretion; provided that any then-existing Lender shall be acceptable;

 

(e)           Agent shall have received all documents (including appropriate authorizing resolutions) it may reasonably request relating to the corporate or other necessary authority for such increase, and any other matters relevant thereto, all in form and substance reasonably satisfactory to Agent; and

 

(f)           all costs and expenses of Agent and Lenders incurred in connection with any such increase or requested increase, including reasonable attorneys’ fees and expenses shall be paid by Borrowers.

 

The foregoing option may be exercised once during the Term and such increase shall apply to the Maximum Revolving Advance Amount in effect at the time of the Borrowers’ notice to Agent.  Promptly following receipt of a notice under this Section, the Agent shall advise the Lenders thereof.  Each notice delivered by the Borrowers pursuant to this Section shall be irrevocable. An increase to the Maximum Revolving Advance Amount shall not require or cause a change in the commitment of any existing Lender in effect at such time, unless such existing Lender chooses, in its sole discretion, to fund in whole or in part, the increase in the Maximum Revolving Advance Amount.  Agent shall
not be obligated to solicit or obtain lenders to provide the additional commitments necessary for such increase.

 

2.26.       Reduction of the Maximum Revolving Advance Amount.   Borrowers shall have the option, upon at least thirty (30) days' prior written notice to Agent, to reduce the Maximum Revolving Advance Amount by up to $10,000,000, subject to the following conditions precedent:

 

(a)           no Default or Event of Default shall have occurred and be continuing on the date of such notice or on the date which such reduction is to become effective;

 

(b)           such reduction shall be in a minimum amount of $1,000,000 and in integral multiples of $1,000,000 in excess thereof;

 

(c)           after giving effect to any concurrent prepayment of the Advances, the sum of the outstanding Revolving Advances shall not exceed the lesser of: (i) the Maximum Revolving Advance Amount minus the Maximum Undrawn Amount of all Letters of Credit, and (ii) the Formula Amount.

 

The foregoing option may be exercised once during the Term and such reduction shall apply to the Maximum Revolving Advance Amount in effect at the time of the Borrowers’ notice to Agent; provided, however, nothing contained herein shall limit the Borrowers’ ability to pay in full all Obligations and terminate this Agreement at any time in accordance with Section 13.1.  Promptly following receipt of a notice under this Section, the Agent shall advise the Lenders thereof.  Each notice delivered by the Borrowers pursuant to this Section shall be irrevocable. Any reduction of the Maximum Revolving Advance Amount shall be permanent subject only to an increase in accordance with Section
2.25.  Each reduction shall be made ratably among the Lenders in accordance with their Commitment Percentages.

 

  

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III           INTEREST AND FEES.

 

3.1.         Interest.

 

(a)           Payment.  Interest on Advances shall be payable in arrears on the first day of each month with respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar Rate Loans with an Interest Period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar Rate Loan or (b) the end of the Interest Period.

 

(b)           Rate Changes.  Interest charges shall be computed on the actual principal amount of Revolving Advances outstanding during the month at a rate per annum equal to the applicable  Revolving Interest Rate.  Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is increased or decreased, the applicable Revolving Interest Rate for Domestic Rate Loans shall be similarly changed without notice or demand of any kind by an amount equal to the amount of such change in the Alternate Base Rate during the time such change or changes remain in
effect.  The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without notice or demand of any kind on the effective date of any change in the Reserve Percentage as of such effective date.

 

(c)           Default Rate.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, (i) at the option of Agent or at the direction of Required Lenders, the Obligations  shall bear interest at the highest Revolving Interest Rate payable under this Agreement plus two (2%) percent per annum (as applicable, the “Default Rate”).

 

3.2.         Letter of Credit Fees.  Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by the Applicable Margin for Eurodollar Rate Loans then in effect per annum, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable quarterly in arrears on the first day of each quarter and on the
last day of the Term, and (y) to the Issuer, a fronting fee of one quarter of one percent (0.25%) per annum, together with any and all administrative, issuance, amendment, payment and negotiation charges with respect to Letters of Credit and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection with any Letter of Credit, including in connection with the opening, amendment or renewal of any such Letter of Credit and any acceptances created thereunder and shall reimburse Agent for any and all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter of Credit Fees”).  All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the
termination of this Agreement for any reason.  Any such charge in effect at the time of a particular transaction shall be the charge for that transaction, notwithstanding any subsequent change in the Issuer’s prevailing charges for that type of transaction.  All Letter of Credit Fees and Acceptance Fees payable hereunder shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent or at the direction of Required Lenders, the Letter of Credit Fees described in clause (x) of this Section 3.2 shall be increased by an additional two percent (2%) per annum.

 

  

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3.3.         Facility Fee.  If, for any calendar quarter during the Term, the average daily unpaid balance of the Revolving Advances and the Maximum Undrawn Amount of all Letters of Credit for each day of such calendar quarter does not equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent for the ratable benefit of Lenders a fee at a rate equal to one quarter of one percent (0.25%) per annum on the amount by which the Maximum Revolving Advance Amount exceeds such average daily unpaid balance.  Such fee shall be payable to Agent in arrears on the first day of
each calendar quarter with respect to the previous calendar quarter.

 

3.4.         Fee Letter. Borrowers shall pay the amounts required to be paid in the Fee Letter in the manner and at the times required by the Fee Letter.

 

3.5.         Computation of Interest and Fees.

 

(a)          Interest and fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed.  If any payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the applicable Revolving Interest Rate during such extension.

 

(b)          Notwithstanding anything to the contrary contained in this Agreement or in any Other Document:

 

(i)           whenever interest payable by Rocky Canada is calculated on the basis of a period which is less than the actual number of days in a calendar year, each rate of interest determined pursuant to such calculation is, for the purposes of the Interest Act (Canada), equivalent to such rate multiplied by the actual number of days in the calendar year in which such rate is to be ascertained and divided by the number of days used as the basis of such calculation;

 

(ii)           in no event shall the aggregate “interest” (as defined in Section 347 of the Criminal Code, R.S.C. 1985, c. C-46, as the same shall be amended, replaced or re-enacted from time to time) payable by Rocky Canada to the Agent or any Lender under this Agreement or any Other Document exceed the effective annual rate of interest on the “credit advanced” (as defined in that section) under this Agreement or such Other Document lawfully permitted under that section and, if any payment, collection or demand pursuant to this Agreement or any Other Document in respect of “interest” (as defined in that section) is
determined to be contrary to the provisions of that section, such payment, collection or demand shall be deemed to have been made by mutual mistake of the Agent or the Lender and Rocky Canada and the amount of such payment or collection shall be refunded by the Agent or such Lender to Rocky Canada.  For the purposes of this Agreement and each Other Document to which Rocky Canada is a party, the effective annual rate of interest payable by Rocky Canada shall be determined in accordance with generally accepted actuarial practices and principles over the term of the loans on the basis of annual compounding for the lawfully permitted rate of interest and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Agent for the account of Rocky Canada will be conclusive for the purpose of such determination in the absence of evidence
to the contrary; and

 

  

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(iii)           all calculations of interest payable by Rocky Canada under this Agreement or any Other Document are to be made on the basis of the nominal interest rate described herein and therein and not on the basis of effective yearly rates or on any other basis which gives effect to the principle of deemed reinvestment of interest.  The parties acknowledge that there is a material difference between the stated nominal interest rates and the effective yearly rates of interest and that they are capable of making the calculations required to determine such effective yearly rates of interest.

 

3.6.          Maximum Charges.  In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under law. In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount shall be first applied to any unpaid principal balance owed by Borrowers, and if the then remaining excess amount is greater than the previously unpaid principal balance, Lenders shall promptly refund such excess amount to Borrowers and the provisions hereof shall be deemed amended to provide for such
permissible rate.

 

3.7.          Increased Costs.  In the event that any Applicable Law, or any change therein or in the interpretation or application thereof, or compliance by any Lender (for purposes of this Section 3.7, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority,
shall:

 

(a)           subject Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement or any Other Document or change the basis of taxation of payments to Agent or any Lender of principal, fees, interest or any other amount payable hereunder or under any Other Documents (except for changes in the rate of tax on the overall net income of Agent or any Lender by the jurisdiction in which it maintains its principal office);

 

(b)           impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by, any office of Agent or any Lender, including pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or

 

(c)           impose on Agent or any Lender or the London interbank Eurodollar market any other condition with respect to this Agreement or any Other Document;

 

  

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and the result of any of the foregoing is to increase the cost to Agent or any Lender of making, renewing or maintaining its Advances hereunder by an amount that Agent or such Lender deems to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Advances by an amount that Agent or such Lender deems to be material, then, in any case Borrowers shall promptly pay Agent or such Lender, upon its demand, such additional amount as will compensate Agent or such Lender for such additional cost or such reduction, as the case may be.  Agent or such Lender shall certify the amount of such additional cost or reduced amount to Borrowing Agent, and
such certification shall be conclusive absent manifest error.

 

3.8.         Basis For Determining Interest Rate Inadequate or Unfair.  In the event that Agent or any Lender shall have determined in the exercise of Permitted Discretion that:

 

(a)           reasonable means do not exist for ascertaining the Eurodollar Rate applicable pursuant to Section 2.2 for any Interest Period; or

 

(b)           Dollar deposits in the relevant amount and for the relevant maturity are not available in the London interbank Eurodollar market, with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,

 

then Agent shall give Borrowing Agent prompt written or telephonic of such determination.  If such notice is given, (i) any such requested Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify Agent no later than 12:00 Noon two (2) Business Days prior to the date of such proposed borrowing, that its request for such borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to an affected type of Eurodollar Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 12:00 Noon two (2)
Business Days prior to the proposed conversion, shall be maintained as an unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 12:00 Noon two (2) Business Days prior to the last Business Day of the then current Interest Period applicable to such affected Eurodollar Rate Loan, shall be converted into an unaffected type of Eurodollar Rate Loan, on the last Business Day of the then current Interest Period for such affected Eurodollar Rate Loans.  Until such notice has been withdrawn, Lenders shall have no obligation to make an affected type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan
into an affected type of Eurodollar Rate Loan.

 

  

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3.9.         Capital Adequacy.

 

(a)           In the event that Agent or any Lender shall have determined in the exercise of Permitted Discretion that any Applicable Law or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Body, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Agent or any Lender (for purposes of this Section 3.9, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar Rate Loans with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on Agent or any Lender’s capital as a consequence of its obligations hereunder to a level below that which Agent or such Lender could have achieved but for such adoption, change or compliance (taking into consideration Agent’s and each Lender’s policies with respect to capital adequacy) by an amount deemed by Agent or any Lender to be material, then, from time to time, Borrowers shall pay upon demand to Agent or such Lender such additional amount or amounts as will compensate Agent or such Lender for such reduction.  In determining such amount or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods.  The protection of this Section 3.9 shall be available to Agent and each Lender regardless of any possible contention of invalidity or inapplicability with respect to the Applicable Law or condition.

 

(b)           A certificate of Agent or such Lender setting forth such amount or amounts as shall be necessary to compensate Agent or such Lender with respect to Section 3.9(a) when delivered to Borrowing Agent shall be conclusive absent manifest error.

 

3.10.       Gross Up for Taxes.  If any Borrower shall be required by Applicable Law to withhold or deduct any taxes from or in respect of any sum payable under this Agreement or any of the Other Documents to Agent, or any Lender, assignee of any Lender, or Participant (each, individually, a “Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or Payees, as the case may be, shall be increased as may be necessary so that, after
making all required withholding or deductions, the applicable Payee or Payees receives an amount equal to the sum it would have received had no such withholding or deductions been made (the “Gross-Up Payment”), (b) such Borrower shall make such withholding or deductions, and (c) such Borrower shall pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with Applicable Law.  Notwithstanding the foregoing, no Borrower shall be obligated to make any portion of the Gross-Up Payment that is attributable to any withholding or deductions that would not have been paid or claimed had the applicable Payee or Payees properly claimed a complete exemption with respect thereto pursuant to Section 3.11.

 

3.11.       Withholding Tax Exemption.

 

(a)           Each Payee that is not incorporated under the Applicable Laws of the United States of America or a state thereof (and, upon the written request of Agent, each other Payee) agrees that it will deliver to Borrowing Agent and Agent two (2) duly completed appropriate valid Withholding Certificates (as defined under §1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”)) certifying its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an exemption
provided by the Code.  The term “Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under §1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in §1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code or Regulations that certify or establish the status of a payee or beneficial owner as a U.S. or foreign person.

 

  

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(b)           Each Payee required to deliver to Borrowing Agent and Agent a valid Withholding Certificate pursuant to Section 3.11(a) shall deliver such valid Withholding Certificate as follows:  (A) each Payee which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate at least five (5) Business Days prior to the first date on which any interest or fees are payable by any Borrower hereunder for the account of such Payee; (B) each Payee shall deliver such valid Withholding Certificate at least five (5) Business Days before the effective date of such assignment or participation (unless Agent in its sole discretion
shall permit such Payee to deliver such Withholding Certificate less than five (5) Business Days before such date in which case it shall be due on the date specified by Agent).  Each Payee which so delivers a valid Withholding Certificate further undertakes to deliver to Borrowing Agent and Agent two (2) additional copies of such Withholding Certificate (or a successor form) on or before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrowing Agent or Agent.

 

(c)           Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or exemption from U.S. withholding tax required under Section 3.11(b), Agent shall be entitled to withhold United States federal income taxes at the full 30% withholding rate if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under §1.1441-7(b) of the Regulations.  Further, Agent is indemnified under §1.1461-1(e) of the Regulations against any claims and demands of any Payee for the amount of any tax it deducts and withholds in accordance with regulations under
§1441 of the Code.

 

3.12.       FATCA.  If a payment made to a Payee under this Agreement would be subject to U.S. Federal withholding tax imposed by FATCA if such Payee were to fail to comply with the applicable reporting requirements of FATCA (including those containing in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Withholding Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Withholding Agent, such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Withholding Agent as may be necessary for the Withholding Agent to comply with its obligations under FATCA, to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

 

IV           COLLATERAL:  GENERAL TERMS

 

4.1.         Security Interest in the Collateral.

 

(a)           Grant.  To secure the prompt payment and performance to Agent and each Lender of the Obligations, each Borrower hereby assigns, pledges and grants to Agent for its benefit and for the ratable benefit of each Lender a continuing security interest in and to and Lien on all of its Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located.

 

  

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(b)           Books and Records.  Each Borrower shall mark its books and records as may be necessary or appropriate to evidence, protect and perfect Agent’s security interest and shall cause its financial statements to reflect such security interest.

 

(c)           Commercial Tort Claims.  Each Borrower other than Rocky Canada shall promptly provide Agent with written notice of each commercial tort claim which involves in excess of $500,000 in damages, such notice to contain the case title together with the applicable court and a brief description of the claim(s).  Upon delivery of each such notice, such Borrower shall be deemed to hereby grant to Agent a security interest and lien in and to such commercial tort claims and all proceeds thereof.

 

4.2.         Perfection of Security Interest.  Each Borrower shall take all action that may be necessary or desirable, or that Agent may reasonably request, so as at all times to maintain the validity, perfection, enforceability and priority of Agent’s security interest in and Lien on the Collateral or to enable Agent to protect, exercise or enforce its rights hereunder and in the Collateral, including, but not limited to, (i) immediately discharging all Liens other than Permitted Encumbrances, (ii) obtaining Collateral Access Agreements for Access Agreement Locations or locations not
owned by a Borrower at which material Inventory is located after the Closing Date, including Inventory which is in the possession, custody or control of a third-party, (iii) delivering to Agent, endorsed or accompanied by such instruments of assignment as Agent may specify, and stamping or marking, in such manner as Agent may specify, any and all chattel paper, instruments, letters of credits and advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox and other custodial arrangements reasonably satisfactory to Agent, and (v) executing and delivering financing statements, control agreements, instruments of pledge, mortgages, notices and assignments, in each case in form and substance reasonably satisfactory to Agent, relating to the creation, validity, perfection, maintenance or continuation of Agent’s security interest
and Lien under the Uniform Commercial Code, PPSA, or other Applicable Law.  By its signature hereto, each Borrower hereby authorizes Agent to file against such Borrower, one or more financing, continuation or amendment statements pursuant to the Uniform Commercial Code and the PPSA in form and substance satisfactory to Agent (which statements may have a description of all assets of the Borrowers and Guarantors, other than Excluded Property).  All charges, expenses and fees Agent may incur in doing any of the foregoing, and any local taxes relating thereto, may be immediately charged to Borrowers’ Account as a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and for the ratable benefit of Lenders within five (5) days after demand.  Each such charge to
Borrowers’ Account or demand shall be accompanied by a reasonable description of such charge to Borrowing Agent.

 

4.3.         Disposition of Property.   Except for Permitted Dispositions, each Borrower, Guarantor, and their respective Subsidiaries will safeguard and protect all Collateral for Agent’s general account.  Each Borrower, Guarantor, and their respective Subsidiaries shall make no disposition of assets whether by sale, lease or otherwise except the following (the “Permitted Dispositions”): (a) the sale of Inventory in the Ordinary Course of Business; (b) the sale, disposition or transfer of obsolete
and worn-out Equipment in the Ordinary Course of Business; (c) the sale, disposition or transfer of any assets outside the Ordinary Course of Business during any fiscal year having an aggregate fair market value of not more than $100,000 for Parent and its Subsidiaries on a Consolidated Basis; (d) the sale, disposition or transfer of Excluded Property; (e) assignments and licenses of Intellectual Property in the Ordinary Course of Business; (f) the sale, disposition or transfer of property of any Borrower to any other Borrower; and (g) subleases or leases of Real Property other than the Eligible Real Property which, at the time of such transaction, is then not currently being utilized in the business of the Borrowers, Guarantors, or any of their respective Subsidiaries.

 

  

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4.4.         Preservation of Collateral.  Following the occurrence and during the continuance of an Event of Default, in addition to the rights and remedies set forth in Section 11.1, Agent: (a) may at any time take such steps as Agent deems necessary to protect Agent’s interest in and to preserve the Collateral, including the hiring of such security guards or the placing of other security protection measures as Agent may deem appropriate; (b) may employ and maintain at any of any Borrower’s premises a custodian who shall have full authority to do all acts necessary to protect
Agent’s interests in the Collateral; (c) may lease warehouse facilities to which Agent may move all or part of the Collateral; (d) may use any Borrower’s owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (e) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of Borrower’s owned or leased property.  Each Borrower shall cooperate fully with all of Agent’s efforts to preserve the Collateral and will take such actions to preserve the Collateral as Agent may reasonably direct.  All of Agent’s expenses of preserving the Collateral, including any expenses relating to the bonding of a custodian, may be immediately charged to Borrowers’ Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and for the ratable benefit of Lenders within five (5) days after demand.  Each such charge to Borrowers’ Account or demand shall be accompanied by a reasonable description of such charge to Borrowing Agent.

 

4.5.         Ownership of Collateral.

 

(a)           With respect to the Collateral, at the time the Collateral becomes subject to Agent’s security interest:  (i) each Borrower shall be the sole owner of and fully authorized and able to sell, transfer, pledge and/or grant a first priority security interest in each and every item of the its respective Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall be free and clear of all Liens and encumbrances whatsoever; (ii) each document and agreement executed by each Borrower or delivered to Agent or any Lender in connection with this Agreement shall be true and correct in all material respects; (iii) all
signatures and endorsements of each Borrower that appear on such documents and agreements shall be genuine and each Borrower shall have full capacity to execute same; and (iv) each Borrower’s Equipment and Inventory shall be located as set forth on Schedule 4.5 and shall not be removed from such location(s) without the prior written consent of Agent except to the extent permitted in Section 4.3.

 

  

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(b)            (i) There is no location at which any Borrower has any Inventory (except for Inventory in transit,  Inventory located on Lehigh vehicles, or Inventory at other locations with a value of not in excess of $75,000 each) other than those locations listed on Schedule 4.5, which may be updated from time to time; (ii) Schedule 4.5 hereto contains a correct and complete list, as of the Closing Date, of the addresses of each warehouse at which Inventory of any Borrower is stored;  none of the receipts received by any Borrower from any warehouse states that the goods covered thereby are to be delivered to bearer or to the order of a
named Person or to a named Person and such named Person’s assigns;  (iii) Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of (A) each place of business of each Borrower and (B) the chief executive office of each Borrower; and (iv) Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of the location, by state or province and street address, of all Real Property owned or leased by each Borrower.

 

4.6.         Defense of Agent’s and Lenders’ Interests.  Until (a) payment and performance in full of all of the Obligations and (b) termination of this Agreement, Agent’s interests in the Collateral shall continue in full force and effect.  During such period no Borrower shall, without Agent’s prior written consent, pledge, sell (except to the extent permitted in Section 4.3), assign, transfer, create or suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral.  Each Borrower shall defend Agent’s interests in the Collateral against any and all Persons whatsoever.  At any time after the occurrence and during the continuance of an Event of Default and following demand by Agent for payment of all Obligations, (i) Agent shall have the right, to the extent permitted by Applicable Law, to take possession of the indicia of the Collateral and the Collateral in whatever physical form contained, including:  labels, stationery, documents, instruments and advertising materials; (ii) if Agent exercises this right to take possession of the Collateral, Borrowers shall, upon demand, assemble it in the best manner possible and make it available to Agent at a place reasonably convenient to Agent; (iii) in addition, with respect to all Collateral, Agent and Lenders shall be entitled to all of the rights and
remedies set forth herein and further provided by the Uniform Commercial Code, the PPSA, or other Applicable Law; (iv) each Borrower shall, and Agent may, at its option, instruct all suppliers, carriers, forwarders, warehousers or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver same to Agent and/or subject to Agent’s order and if they shall come into any Borrower’s possession, they, and each of them, shall be held by such Borrower in trust as Agent’s trustee, and such Borrower will immediately deliver them to Agent in their original form together with any necessary endorsement.

 

4.7.         Books and Records.  Each Borrower shall (a) keep proper books of record and account in which full, true and correct entries in all material respects will be made of all dealings or transactions of or in relation to its business and affairs; (b) set up on its books accruals with respect to all taxes, assessments, charges, levies and claims; and (c) on a reasonably current basis set up on its books, from its earnings, allowances against doubtful Receivables, advances and investments and all other proper accruals (including by reason of enumeration, accruals for premiums, if any, due
on required payments and accruals for depreciation, obsolescence, or amortization of properties), which should be set aside from such earnings in connection with its business.  All determinations pursuant to this subsection shall be made in accordance with, or as required by, GAAP consistently applied in the opinion of such independent public accountant as shall then be regularly engaged by Borrowers.

 

4.8.         Reserved.

 

  

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4.9.         Compliance with Laws.  Each Borrower shall comply in all material respects with all Applicable Laws with respect to the Collateral or any part thereof or to the operation of such Borrower’s business the non-compliance with which could reasonably be expected to have a Material Adverse Effect.  The assets of Borrowers, Guarantors and their respective Subsidiaries at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the such assets so that such insurance shall remain in full force and
effect.

 

4.10.       Inspection of Premises.  At all reasonable times (and if no Event of Default is continuing reasonable prior notice shall be given), subject to the terms of this Agreement, including confidentiality provisions, Agent and each Lender shall have full access to and the right to audit, check, inspect and make abstracts and copies from each Borrower’s books, records, audits, correspondence and all other papers relating to the Collateral and the operation of each Borrower’s business.  Agent, any Lender and their agents may enter upon any premises of any Borrower, at all
reasonable times (and if no Event of Default is continuing reasonable prior notice shall be given), and from time to time, for the purpose of inspecting the Collateral and any and all records pertaining thereto and the operation of such Borrower’s business; provided however, that Agent may conduct only two (2) complete field examinations during each fiscal year, provided further that, field examinations conducted prior to the Closing Date, in connection with a Permitted Acquisition, or during the continuance of a Default or an Event of Default shall not be subject to the foregoing limitation.

 

4.11.       Insurance.  Schedule 4.11 sets forth a list of all insurance maintained by each Borrower, Guarantor, and their respective Subsidiaries on the Closing Date. The assets and properties of each Borrower at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets and properties of such Borrower so that such insurance shall remain in full force and effect.  Each Borrower shall bear the full risk of any loss of any nature whatsoever with respect to the Collateral.  At each Borrower’s own
cost and expense in amounts and with carriers reasonably acceptable to Agent, each Borrower shall (a) keep all its insurable properties (including all properties in which such Borrower has an interest) insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to such Borrower’s including business interruption insurance; (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to such Borrower insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Borrower either directly or through authority to draw
upon such funds or to direct generally the disposition of such assets; (c) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (d) maintain all such worker’s compensation or similar insurance required under the laws of any state or jurisdiction in which such Borrower is engaged in business; (e) furnish Agent with (i) copies of all policies upon request of Agent and evidence of the maintenance of such policies by the renewal thereof at least two (2) Business Days before any expiration date, and (ii) appropriate loss payable endorsements in form and substance reasonably satisfactory to Agent, naming Agent as a co-insured and loss payee as its interests may appear with respect to all insurance coverage on properties in which such Borrower has an interest and all insurance coverage referred to in clause (c)
above, and providing (A) that all proceeds thereunder shall be payable to Agent, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and loss payable clauses may not be cancelled, amended or terminated unless at least thirty (30) days’ prior written notice is given to Agent.  In the event of any loss thereunder, the carriers named therein hereby are directed by Agent and the applicable Borrower to make payment for such loss to Agent and not to such Borrower and Agent jointly.  If any insurance losses are paid by check, draft or other instrument payable to any Borrower and Agent jointly, Agent may endorse such Borrower’s name thereon and do such other things as Agent may deem advisable to reduce the same to cash.  If an Event of Default has
occurred and is continuing, Agent is hereby authorized to adjust and compromise claims under insurance coverage referred to in clauses (a) and (b) above.  If an Event of Default has occurred and is continuing, all loss recoveries received by Agent upon any such insurance may be applied to the Obligations pursuant to Section 11.6.  Any surplus shall be paid by Agent to Borrowers or applied as may be otherwise required by law.  Any deficiency thereon shall be paid by Borrowers to Agent, on demand.  Anything hereinabove to the contrary notwithstanding, and subject to the fulfillment of the conditions set forth below, Agent shall remit to Borrowing Agent insurance proceeds received by Agent under insurance policies procured and maintained by Borrowers which insure Borrowers’ insurable properties to the extent such insurance proceeds do not
exceed $1,000,000 per occurrence.   In the event the amount of insurance proceeds received by Agent for any occurrence exceeds $1,000,000, then Agent shall not be obligated to remit the insurance proceeds to Borrowing Agent unless Borrowing Agent shall provide Agent with evidence reasonably satisfactory to Agent that the insurance proceeds will be used by Borrowers to repair, replace or restore the insured property which was the subject of the insurable loss.  The agreement of Agent to remit insurance proceeds in the manner above provided shall be subject in each instance to satisfaction of each of the following conditions: (x) no Event of Default or Default shall then have occurred, and (y) Borrowers shall use such insurance proceeds to repair, replace or restore the insurable property which was the subject of the insurable loss and for no other
purpose.

 

  

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4.12.       Failure to Pay Insurance.  If any Borrower fails to obtain insurance as hereinabove provided, or to keep the same in force, Agent, if Agent so elects, may obtain such insurance and pay the premium therefor on behalf of such Borrower, and charge Borrowers’ Account therefor as a Revolving Advance of a Domestic Rate Loan and such expenses so paid shall be part of the Obligations.  Agent shall promptly provide Borrowing Agent copies of invoices for any such expense.

 

4.13.       Payment of Taxes.  Except for Properly Contested taxes, assessments and other Charges, each Borrower will pay or remit, when due, all taxes, assessments and other Charges lawfully levied or assessed upon such Borrower or any of the Collateral including real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefits, withholding, and sales taxes.  If any tax by any Governmental Body is or may be imposed on or as a result of any transaction between any Borrower and Agent or any Lender which Agent or any Lender may be required to
withhold or pay or remit or if any taxes, assessments, or other Charges remain unpaid after the date fixed for their payment, or if any claim shall be made which, in Agent’s or any Lender’s reasonable opinion, may possibly create a valid Lien on the Collateral, Agent may upon notice to Borrowers pay the taxes, assessments or other Charges and each Borrower hereby indemnifies and holds Agent and each Lender harmless in respect thereof; provided, however, Agent will not pay any taxes, assessments or Charges to the extent that any applicable Borrower has Properly Contested those taxes, assessments or Charges.  The amount of any payment by Agent under this Section 4.13 shall be charged to Borrowers’ Account as a Revolving Advance maintained as a Domestic Rate Loan and added to the Obligations and, until Borrowers shall furnish Agent with an indemnity therefor (or
supply Agent with evidence reasonably satisfactory to Agent that due provision for the payment thereof has been made), Agent may hold without interest any balance standing to Borrowers’ credit and Agent shall retain its security interest in and Lien on any and all Collateral held by Agent.

 

  

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4.14.       Payment of Leasehold Obligations.  Except for Properly Contested payments, each Borrower shall at all times pay, when and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect and, at Agent’s request will provide evidence of having done so.

 

4.15.       Receivables.

 

(a)           Nature of Receivables.  Each of the Receivables shall be a bona fide and valid account representing a bona fide indebtedness incurred by the Customer therein named, for a fixed sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice errors and customary discounts shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated terms of a Borrower, or work, labor or services theretofore rendered by a Borrower as of the date each Receivable is created.  Same shall be due
and owing in accordance with the applicable Borrower’s standard terms of sale without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by Borrowers to Agent.

 

(b)           Solvency of Customers.  Each Customer, to each Borrower’s actual knowledge, as of the date each Receivable is created, is solvent and able to pay all Receivables on which the Customer is obligated in full when due or with respect to such Customers of any Borrower who are not solvent such Borrower has set up on its books and in its financial records bad debt reserves adequate to cover such Receivables.

 

(c)           Location of Borrowers.  Each Borrower’s chief executive office and each location where any Borrower, Guarantor, or their respective Subsidiaries maintains assets in Canada is designated on Schedule 4.15(c).  Until written notice is given to Agent by Borrowing Agent of any other office at which any Borrower keeps its records pertaining to Receivables, all such records shall be kept at the address for such records designated on Schedule 4.15(c).

 

(d)           Collection of Receivables.  Subject to Agent’s rights under Section 4.15(e), during a Cash Dominion Period, each Borrower will, at such Borrower’s sole cost and expense, collect in trust for Agent all amounts received on Receivables (other than Excluded Receivables), and shall not commingle such collections with any Borrower’s funds or use the same except to pay Obligations.  Each Borrower shall deposit in the Blocked Accounts or Collection Accounts, or, upon request by Agent, deliver to Agent, in original form and on the date of receipt
thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness, other than those arising from Excluded Receivables.

 

  

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(e)           Notification of Assignment of Receivables.  At any time following the occurrence and during the continuance of an Event of Default, Agent shall have the right to send notice of the assignment of, and Agent’s security interest in and Lien on, the Receivables to any and all Customers or any third party holding or otherwise concerned with any of the Collateral.  Thereafter, Agent shall have the sole right to collect the Receivables, take possession of the Collateral, or both.  Agent’s actual collection expenses, including, but not limited to,
stationery and postage, telephone and telegraph, secretarial and clerical expenses and the salaries of any collection personnel used for collection, may be charged to Borrowers’ Account and added to the Obligations, and prompt notice and evidence thereof shall be sent to Borrowing Agent.

 

(f)           Power of Agent to Act on Borrowers’ Behalf.  Agent shall have the right to receive, endorse, assign and/or deliver in the name of Agent or any Borrower any and all checks, drafts and other instruments for the payment of money relating to the Receivables, and each Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed.  Upon the occurrence and during the continuance of an Event of Default, each Borrower hereby constitutes Agent or Agent’s designee as such Borrower’s attorney with power (i) to endorse
such Borrower’s name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (ii) to sign such Borrower’s name on any invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments and verifications of Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to sign such Borrower’s name on all financing statements or any other documents or instruments deemed necessary or appropriate by Agent to preserve, protect, or perfect Agent’s interest in the Collateral and to file same; (v) to demand payment of the Receivables; (vi) to enforce payment of the Receivables by legal proceedings or otherwise; (vii) to exercise all of such Borrower’s rights and remedies with respect to the collection of the Receivables and any other Collateral; (viii) to settle, adjust,
compromise, extend or renew the Receivables; (ix) to settle, adjust or compromise any legal proceedings brought to collect Receivables; (x) to prepare, file and sign such Borrower’s name on a proof of claim in bankruptcy or similar document against any Customer; (xi) to prepare, file and sign such Borrower’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables; and (xii) to do all other acts and things reasonably necessary to carry out this Agreement.  All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously, with willful misconduct or with gross (not mere) negligence (as determined by a court of competent
jurisdiction in a final non-appealable judgment); this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid.  Agent shall have the right at any time following the occurrence of an Event of Default or Default, to change the address for delivery of mail addressed to any Borrower to such address as Agent may designate and to receive, open and dispose of all mail addressed to any Borrower.

 

(g)           No Liability.  Neither Agent nor any Lender shall, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof, or for any damage resulting therefrom.  Following the occurrence and during the continuance of an Event of Default, Agent may, without notice or consent from any Borrower, sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash, credit or
upon any terms any of the Receivables or any other securities, instruments or insurance applicable thereto and/or release any obligor thereof.  Agent is authorized and empowered to accept following the occurrence and during the continuance of an Event of Default the return of the goods represented by any of the Receivables, without notice to or consent by any Borrower, all without discharging or in any way affecting any Borrower’s liability hereunder.

 

  

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(h)          Establishment of a Lockbox Account, Dominion Account.

 

(i)           All cash, Cash Equivalents, and the proceeds of all Collateral shall be deposited directly into either (a) a lockbox account, dominion account or such other “blocked account” (“Blocked Accounts”) established at a bank or banks (each such bank, a “Blocked Account Bank”) pursuant to an arrangement with such Blocked Account Bank as may be selected by Borrowing Agent and be reasonably acceptable to Agent (which  arrangement shall permit Borrowers to access accounts absent a
Cash Dominion Period), or (b) separate lockbox depository accounts (“Collection Accounts”) established at the Agent for the deposit of such cash, Cash Equivalents, and proceeds.  Collection Accounts shall be used solely for collections.  All disbursements shall be made from separate disbursement accounts established with Agent.

 

(ii)           Each applicable Borrower, Agent and each Blocked Account Bank shall enter into a deposit account control agreement in form and substance reasonably satisfactory to Agent (each, a “Blocked Account Agreement”) granting Agent exclusive control over the Blocked Accounts and directing such Blocked Account Bank to transfer such funds deposited therein to Agent without offset or deduction upon written notice from Agent (each an “Account Control Notice”), either to any account maintained by Agent at
said Blocked Account Bank or by wire transfer to appropriate account(s) of Agent.  Neither Agent nor any Lender assumes any responsibility for such blocked account arrangement, including any claim of accord and satisfaction or release with respect to deposits accepted by any Blocked Account Bank thereunder. Each Blocked Account Agreement shall require that the applicable Blocked Account Bank provide account statements and such other account information as is reasonably requested by Agent from time to time.

 

(iii)           Agent shall only be entitled to give an Account Control Notice to each Blocked Account Bank and to exercise exclusive control over all Blocked Accounts and Collection Accounts during a Cash Dominion Period.  Upon the issuance of an Account Control Notice by Agent during a Cash Dominion Period, all funds then held and thereafter deposited in Blocked Accounts and Collection Accounts shall immediately become subject to the exclusive control of Agent and property of Agent and applied to the Obligations in accordance with the terms hereof except to the extent set forth in Section 4.15(h)(v).  Agent may maintain the foregoing in
effect notwithstanding the waiver or cure of the event or circumstance which caused the Triggering Event; provided that, upon a Satisfaction Event, Agent shall, at the request of any Borrowing Agent, promptly rescind each Account Control Notice, permit Borrowers access to funds on deposit in the Blocked Accounts and Collection Accounts, and cease the daily application of collections to the Obligations until a subsequent Triggering Event occurs.

 

(iv)           As of the Closing Date, set forth on Schedule 4.15(h) are all of the deposit accounts and securities accounts of each Borrower, Guarantor and their respective Subsidiaries, including, with respect to each bank or securities intermediary (i) the name and address of such Person, and (ii) the account numbers of the deposit accounts and securities accounts maintained with such Person.  Borrowing Agent shall update Schedule 4.15(h) from time to time to disclose any additional account maintained under Section 4.15(h)(v)(A) which contains a collected balance in excess of $50,000.

 

  

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(v)           So long as no Event of Default has occurred and is continuing: (A) notwithstanding the requirements of Section 4.15(h)(i) or a pending Cash Dominion Period, Borrowers may deposit the proceeds of cash sales to retail Customers into depository accounts that are neither Collection Accounts nor subject to Blocked Account Agreements, provided that if the aggregate amount deposited in such accounts exceeds $200,000 on the last Business Day of any calendar week, such excess shall be immediately transferred to a Collection Account, and Borrowers shall use commercially reasonable efforts
to substitute Agent as the depository bank for such accounts, (B) notwithstanding the requirements of Section 4.15(h)(iii) or a pending Cash Dominion Period, Borrowers may continue to maintain balances in Blocked Accounts located in Canada, provided that on the last Business Day of each calendar month, Borrowers shall cause the aggregate amount on deposit in such accounts in excess of CDN$100,000 to be transferred to a Collection Account, and (C) notwithstanding the requirements of Section 4.15(h)(iii) or a pending Cash Dominion Period, Borrowers may continue to maintain disbursement account balances in Blocked Accounts located in Puerto Rico, provided that on the last Business Day of each calendar month, Borrowers shall cause the aggregate amount on deposit
in such accounts in excess of $1,000,000 to be transferred to a Collection Account.

 

(i)           Adjustments.  No Borrower will, without Agent’s consent, compromise or adjust any material amount of the Receivables (or extend the time for payment thereof) or accept any material returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as have been heretofore customary in the business of such Borrower.

 

(j)           United States Government Receivables.

 

(i)           Existing Contracts.  As of the Closing Date, all contracts of a Borrower with the United States or Canada, or any department, agency or instrumentality of any of them, copies of which have been delivered to Agent, are set forth on Schedule 4.15(j).  None of such existing contracts have been assigned in whole or part to any Person.  None of such existing contracts nor future contracts with the United States or Canada, or any department, agency or instrumentality of any of them, nor, in any case, the right to the payment of money thereunder, shall be
assigned in whole or part to any Person other than Agent.

 

(ii)            Contract Assignments.  Borrower shall deliver to Agent (A) on or before the Closing Date, a copy of each contract set forth on Schedule 4.15(j), and (B) after the Closing Date, each material amendment to or extension of a contract on Schedule 4.15(j) and, in the event Borrowing Agent requests that any amounts payable under any contract with the United States, or any department, agency or instrumentality of it, constitute Eligible Governmental Receivables, the applicable Borrower shall deliver a copy of such contract, together with an assignment thereof executed by the
applicable Borrower in the form attached hereto as Exhibit 4.15(j) (the “US Assignment”), which will assign the right to payment of any Receivable thereunder to Agent and will include the identity of the contracting officer related thereto.  Agent may, at any time in its sole discretion, upon notice to Borrowing Agent, (A) elect to complete such assignment and deliver it to the applicable contracting officer for acknowledgment and acceptance by such contracting officer and any other Person necessary to comply with the Federal Assignment of Claims Act, and (B) take such other actions as may be required under the Federal Assignment of Claims Act to effect the assignment of such Receivable in accordance with the Federal Assignment of Claims Act.  In such event, Agent may, at any time upon
notice to Borrowing Agent, change the payment instructions for all such Receivables assigned to Agent from any Borrower to Agent.

 

  

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(iii)           Further Assurances.  Upon the request of Agent, made in the Permitted Discretion of Agent, Borrowers shall take all reasonable steps necessary to protect Agent’s interest in any Eligible Government Receivable under the Federal Assignment of Claims Act and all other applicable state or local statutes or ordinances and deliver to Agent appropriately endorsed, any instrument or chattel paper connected with any Receivable arising out of contracts between any Borrower and the United States, or any department, agency or instrumentality of it. Each Borrower irrevocably
designates and appoints Agent (and all persons designated by Agent) as such Borrower’s true and lawful attorney in fact to (A) take any action as may be necessary or desirable to complete any such US Assignment on behalf of such Borrower and to direct the payment of the proceeds thereof; and (B) to execute and deliver the US Assignment on behalf of such Borrower.

 

(iv)           Central Contractor Registration. No Borrower shall change its registration in the United States Central Contractor Registration database or any replacement registration system established by the United States for the purpose of registering government contractors and accepting payment instructions with respect to Receivables due from the United States, or any department, agency or instrumentality of it (the “CCR”).  Each registered Borrower shall annually update its registration in the CCR and
take all other steps necessary to maintain an effective registration with payment instructions for all such Receivables to the Collection Accounts only.   In the event any Borrower changes its registration such that such Receivables are not paid directly and solely to the Collection Accounts, Agent may exercise the power of attorney granted pursuant to Section 4.15(f) to alter such Borrower’s registration as Agent deems appropriate in its sole discretion.

 

4.16.      Inventory.  To the extent Inventory held for sale or lease has been produced by any Borrower, it has been and will be produced by such Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder.

 

4.17.      Maintenance of Equipment.  The Equipment shall be maintained in good operating condition and repair (reasonable wear and tear excepted) and all necessary replacements of and repairs thereto shall be made so that the value and operating efficiency of the Equipment shall be maintained and preserved (reasonable wear and tear excepted).  Each Borrower shall have the right to sell Equipment to the extent set forth in Section 4.3.

 

  

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4.18.      Exculpation of Liability.  Nothing herein contained shall be construed to constitute Agent or any Lender as any Borrower’s agent for any purpose whatsoever, nor shall Agent or any Lender be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof, except to the extent caused by Agent’s or such Lender’s gross negligence or willful misconduct.  Neither Agent nor any Lender, whether by anything herein or in any assignment or otherwise, will assume any of
any Borrower’s obligations under any contract or agreement assigned to Agent or such Lender, and neither Agent nor any Lender shall be responsible in any way for the performance by any Borrower of any of the terms and conditions thereof.

 

4.19.      Environmental Matters.

 

(a)           Borrowers shall ensure that the Real Property and all operations and businesses conducted thereon remains in compliance with all Environmental Laws, and they shall not place or permit to be placed any Hazardous Substances on any Real Property except as permitted by Applicable Law or appropriate governmental authorities and except to the extent that any noncompliance or failure is not reasonably likely to have a Material Adverse Effect.

 

(b)           Borrowers shall establish and maintain a system to assure and monitor continued compliance with all applicable Environmental Laws which system shall include periodic reviews of such compliance, except to the extent that any noncompliance or failure is not reasonably likely to have a Material Adverse Effect.

 

(c)           Borrowers shall (i) employ in connection with the use of the Real Property appropriate technology necessary to maintain compliance with any applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste generated at the Real Property only at facilities and with carriers that maintain valid permits under RCRA and any other applicable Environmental Laws.  Borrowers shall comply with all Applicable Law in connection with the transport or disposal of any Hazardous Waste generated at the Real Property.

 

(d)           In the event any Borrower obtains, gives or receives notice of any Release or threat of Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event being hereinafter referred to as a “Hazardous Discharge”) or receives any notice of violation, request for information or notification that it is potentially responsible for investigation or cleanup of environmental conditions at the Real Property, demand letter or complaint, order, citation, or other written notice with regard to any Hazardous Discharge or violation of Environmental
Laws affecting the Real Property or any Borrower’s interest therein (any of the foregoing is referred to herein as an “Environmental Complaint”) from any Person, including any governmental agency responsible in whole or in part for environmental matters in the state in which the Real Property is located (any such person or entity hereinafter the “Authority”), in each instance which is reasonably likely to have a Material Adverse Effect, then Borrowing Agent shall, within five (5) Business Days, give written notice of same to Agent detailing facts and circumstances of which any Borrower is aware giving rise to the Hazardous Discharge or Environmental Complaint.  Such information is to be provided to allow Agent to
protect its security interest in and Lien on the Real Property and the Collateral and is not intended to create nor shall it create any obligation upon Agent or any Lender with respect thereto.

 

(e)           [reserved].

 

  

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(f)           Borrowers shall respond promptly to any such Hazardous Discharge or Environmental Complaint and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral or Real Property to any Lien.  If any Borrower shall fail to respond promptly to any such Hazardous Discharge or Environmental Complaint or any Borrower shall fail to comply with any of the requirements of any Environmental Laws, and Agent shall determine that any such failure could have a Material Adverse Effect, Agent on behalf of Lenders may, but without the obligation to do so, for the sole purpose of protecting Agent’s
interest in the Collateral:  (A) give such notices or (B) enter onto the Real Property (or authorize third parties to enter onto the Real Property) and take such actions as Agent (or such third parties as directed by Agent) deem reasonably necessary or advisable, to clean up, remove, or mitigate any such Hazardous Discharge or Environmental Complaint.  All reasonable costs and expenses incurred by Agent and Lenders (or such third parties) in the exercise of any such rights, including any sums paid in connection with any judicial or administrative investigation or proceedings, fines and penalties, together with interest thereon from the date expended at the Default Rate for Domestic Rate Loans constituting Revolving Advances shall be paid upon demand by Borrowers, and until paid shall be added to and become a part of the Obligations secured by the Liens created by the
terms of this Agreement or any other agreement between Agent, any Lender and any Borrower.  Evidence of any such expense shall be submitted promptly to Borrowing Agent.

 

(g)           Promptly upon the written reasonable request of Agent from time to time, Borrowers shall provide Agent, at Borrowers’ expense, with an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to assess the existence of a Hazardous Discharge and the potential costs in connection with abatement, cleanup and removal of any Hazardous Substances found on, under, at or within the Real Property.  Any report or investigation of such Hazardous Discharge proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent.  If such estimates, individually or in the aggregate, exceed $1,000,000, Agent shall have the right to require Borrowers to post a bond, letter of credit or other security reasonably satisfactory to Agent to secure payment of these costs and expenses.

 

(h)           Borrowers shall defend and indemnify Agent and Lenders and hold Agent, Lenders and their respective employees, agents, directors and officers harmless from and against all loss, liability, damage and expense, claims, costs, fines and penalties, including attorney’s fees, suffered or incurred by Agent or Lenders under or on account of any Environmental Laws, including the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the presence of any Hazardous Substances affecting the Real Property, whether or not the same originates or emerges from the Real Property or any contiguous real estate, including any loss of value
of the Real Property as a result of the foregoing except to the extent such loss, liability, damage and expense is attributable to any Hazardous Discharge resulting from actions on the part of Agent or any Lender.  Borrowers’ obligations under this Section 4.19 shall arise upon the discovery of the presence of any Hazardous Substances at the Real Property, whether or not any federal, state, provincial, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Substances.  Borrowers’ obligation and the indemnifications hereunder shall survive the termination of this Agreement.

 

  

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(i)           For purposes of Section 4.19 and 5.7, all references to Real Property shall be deemed to include all of each Borrower’s right, title and interest in and to its owned and leased premises.

 

4.20.      Financing Statements.  Except as respects the financing statements filed by Agent and the financing statements described on Schedule 1.2(a) and Permitted Encumbrances, no financing statement covering any of the Collateral or any proceeds thereof is on file in any public office.

 

V           REPRESENTATIONS AND WARRANTIES.

 

Each Borrower represents and warrants as follows:

 

5.1.        Authority.  Each Borrower has full power, authority and legal right to enter into this Agreement and the Other Documents and to perform all its respective Obligations hereunder and thereunder.  This Agreement and the Other Documents have been duly executed and delivered by each Borrower, and this Agreement and the Other Documents constitute the legal, valid and binding obligation of such Borrower enforceable in accordance with their terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’
rights generally.  The execution, delivery and performance of this Agreement and of the Other Documents (a) are within such Borrower’s corporate or limited liability company powers, have been duly authorized by all necessary corporate or company action, are not in contravention of law or the terms of such Borrower’s by-laws or certificate or articles of incorporation, or operating agreement or certificate of formation, or other applicable documents relating to such Borrower’s formation or to the conduct of such Borrower’s business or of any material agreement or undertaking to which such Borrower is a party or by which such Borrower is bound, (b) will not conflict with or violate any law or regulation, or any judgment, order or decree of any Governmental Body, (c) will not require the Consent of any Governmental Body or any other Person, except those
Consents set forth on Schedule 5.1 hereto, all of which will have been duly obtained, made or compiled prior to the Closing Date and which are in full force and effect and (d) will not conflict with, nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any Lien except Permitted Encumbrances upon any asset of such Borrower under the provisions of any agreement, charter document, instrument, by-law, operating agreement, or other instrument to which such Borrower is a party or by which it or its property is a party or by which it may be bound.

 

5.2.        Formation, Qualification, Equity Interests, Subsidiaries.

 

(a)           Each Borrower is duly incorporated or organized and in good standing under the laws of the jurisdiction listed on Schedule 5.2(a) and is qualified to do business and is in good standing in the jurisdictions listed on Schedule 5.2(a) which constitute all jurisdictions in which qualification and good standing are necessary for such Borrower to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect on such Borrower.  Each Borrower has delivered to Agent true and complete copies of its certificate of incorporation and by-laws or certificate of formation
and operating agreement and will promptly notify Agent of any material amendment or changes thereto.

 

  

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(b)           Set forth on Schedule 5.2(b), is a complete and accurate description, as of the Closing Date, of the authorized Equity Interests of each Borrower (other than the Parent) and their respective Subsidiaries, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding.  Other than as described on Schedule 5.2(b), there are no subscriptions, options, warrants, or calls relating to any Equity Interests of each Borrower or  any of their respective Subsidiaries, including any right of conversion or exchange under any outstanding security or other
instrument.  Other than as described on Schedule 5.2(b), as of the Closing Date, no Borrower is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any Equity Interest or any security convertible into or exchangeable for any of its Equity Interests.

 

(c)           As of the Closing Date, the only Subsidiaries of each Borrower are listed on Schedule 5.2(b).

 

5.3.        Survival of Representations and Warranties.  All representations and warranties of such Borrower contained in this Agreement and the Other Documents shall be true in all material respects at the time of such Borrower’s execution of this Agreement and the Other Documents, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto.

 

5.4.        Tax Returns.  Each Borrower’s federal tax identification number or federal business number, as applicable, is set forth on Schedule 5.4.  Each Borrower has filed all federal (including the federal government of Canada), state, provincial, and material local tax returns and other reports each is required by law to file and has paid all material taxes, assessments, fees and other governmental charges that are due and payable, except to the extent Properly Contested.  The provision for taxes on the books of each Borrower is adequate for all years not closed by
applicable statutes, and for its current fiscal year, and no Borrower has any knowledge of any material deficiency or additional material assessment in connection therewith not provided for on its books.

 

5.5.        Financial Statements.

 

(a)          The cash flow, income statement and balance sheet projections of Parent and its Subsidiaries on a consolidated basis, copies of which are annexed hereto as Schedule 5.5(a) (the “Projections”) are based on underlying assumptions which provide a reasonable basis for the projections contained therein and reflect Borrowers’ judgment based on present circumstances of the most likely set of conditions and course of action for the projected period.

 

(b)          The consolidated balance sheets of Parent and its Subsidiaries as of December 31, 2009, and the related consolidated statement of income, changes in stockholder’s equity, and changes in cash flow for the period ended on such date, all accompanied by reports thereon containing opinions without qualification by independent certified public or chartered accountants, copies of which have been delivered to Agent, have been prepared in accordance with GAAP, consistently applied (except for changes in application in which such accountants concur) and present fairly the financial position of Parent and its Subsidiaries on a consolidated basis at such
date and the results of their operations for such period.  Since December 31, 2009, there has been no change in the condition, financial or otherwise, of Parent or its Subsidiaries as shown on the consolidated balance sheet as of such date and no change in the aggregate value of machinery, equipment and Real Property owned by Parent or its Subsidiaries, in each instance, which individually or in the aggregate has had a Material Adverse Effect.

 

  

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5.6.        Entity Names.  Except as set forth on Schedule 5.6, no Borrower, Guarantor or any of their respective Subsidiaries has been known by any other corporate name after December 31, 2006 and does not sell Inventory under any other name, nor has any of them been the surviving or continuing corporation or company of a merger , amalgamation, or consolidation or acquired all or substantially all of the assets of any Person after December 31, 2006.

 

5.7.        O.S.H.A. and Environmental Compliance.

 

(a)           Except as set forth on Schedule 5.7, and for noncompliance that is not reasonably likely to have a Material Adverse Effect, each Borrower has duly complied with, and its facilities, business, assets, property, leaseholds, Real Property and Equipment are in compliance in all material respects with, the provisions of the Federal Occupational Safety and Health Act, the analogous Canadian statutes, and all other Environmental Laws. Except as set forth on Schedule 5.7, there have been no outstanding citations, notices or orders of non-compliance issued to any Borrower or relating to its business, assets, property, leaseholds or Equipment under any
such laws, rules or regulations and for noncompliance that is not reasonably likely to have a Material Adverse Effect.

 

(b)           Each Borrower has been issued all required federal, state, provincial, and local licenses, certificates or permits relating to all applicable Environmental Laws except where the failure to obtain the same is not reasonably likely to have a Material Adverse Effect.

 

(c)           Except as set forth on Schedule 5.7, and except for any of the listed items which are not reasonably likely to have a Material Adverse Effect, (i) there are no visible signs of releases, spills, discharges, leaks or disposal (collectively referred to as “Releases”) of Hazardous Substances at, upon, under or within any Real Property; (ii) there are no underground storage tanks or polychlorinated biphenyls on the Real Property; (iii) the Real Property has never been used as a treatment, storage or disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are
present on the Real Property or any premises leased by any Borrower, excepting such quantities as are managed in accordance with all applicable manufacturer’s instructions and governmental regulations and as are necessary for the operation of the commercial business of any Borrower or of its tenants, and naturally occurring Hazardous Substances.

 

5.8.        Solvency; No Litigation, Violation, Indebtedness or Default.

 

(a)           Parent and its Subsidiaries on a consolidated basis are Solvent.

 

(b)           No Borrower has (i) any pending or threatened litigation, arbitration, actions or proceedings that individually or in the aggregate is reasonably likely to have a Material Adverse Effect, or (ii) any liabilities or indebtedness for borrowed money other than the Obligations and any Indebtedness permitted under this Agreement.

 

(c)           No Borrower is in violation of any applicable statute, law, rule, regulation or ordinance which violation could reasonably be expected to have a Material Adverse Effect, nor is any Borrower in material violation of any order of any court, Governmental Body or arbitration board or tribunal.

 

  

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(d)           No Borrower nor any member of the Controlled Group maintains or contributes to any Pension Benefit Plan other than those listed on Schedule 5.8(d).   Except to the extent that any of the following are not reasonably likely to have a Material Adverse Effect, no Pension Benefit Plan has incurred any “accumulated funding deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and each Borrower and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA and under Canadian Employee Benefit Laws in respect of each
Plan to which it is obligated to contribute.  No Termination Event has occurred nor has any other event occurred that is likely to result in a Termination Event, except to the extent that such Termination Event is not reasonably likely to have a Material Adverse Effect.  Except as set forth on Schedule 5.8(d), none of the Borrowers or any of the Controlled Group is required to provide security to any Pension Benefit Plan under Section 436(f) of the Code or under Canadian Employee Benefit Laws.   As of the Closing Date, Rocky Canada is not and has never been required to contribute to a Canadian Union Plan.

 

5.9.        Patents, Trademarks, Copyrights and Licenses.  Except for immaterial items of Intellectual Property, all active registered patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, trade names, owned or utilized by any Borrower are set forth on Schedule 5.9 (as of the Closing Date and as such schedule is updated from time to time upon request by Agent), are valid and have been duly registered or filed with all appropriate Governmental Bodies and constitute all of the intellectual property
rights which are necessary for the operation of its business.  There is no objection to or pending challenge to the validity of any such registered patent, trademark, copyright, design rights, trade name and no Borrower is aware of any grounds for any challenge, except as set forth in Schedule 5.9 hereto that is reasonably likely to have a Material Adverse Effect.  Except for immaterial items of Intellectual Property, each patent, patent application, patent license, trademark, trademark application, trademark license, service mark, service mark application, service mark license, design rights, copyright, copyright application and copyright license owned or held by any Borrower and all trade secrets used by any Borrower consist of original material or property developed by such Borrower or was lawfully acquired by such Borrower from the proper and lawful owner
thereof.   Borrowers have used commercially reasonable efforts to maintain each of such items used in their business.  With respect to all software used by any Borrower, such Borrower is in possession of all source and object codes related to each piece of software or is the beneficiary of a source code escrow agreement, each such source code escrow agreement being listed on Schedule 5.9 hereto, except where the failure to have such possession would not reasonably be expected to have a Material Adverse Effect.

 

5.10.      Licenses and Permits.  Except as set forth in Schedule 5.10, each Borrower (a) is in compliance with, and (b) has procured and is now in possession of, all material licenses or permits required by any applicable federal, state, provincial or local law, rule or regulation for the operation of its business in each jurisdiction wherein it is now conducting or proposes to conduct business and where the failure to procure such licenses or permits is reasonably likely to have a Material Adverse Effect.

 

  

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5.11.      Default of Indebtedness.  No Borrower is in default in the payment of the principal of or interest on any Indebtedness in excess of $500,000 or under any instrument or agreement under or subject to which such Indebtedness has been issued and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an event of default thereunder.

 

5.12.      No Default.  No Borrower is in default in the payment or performance of any of Material Contract.  All Material Contracts are listed on Schedule 5.12 (as it may be updated from time to time), are in full force and effect and no notice of default or termination has been delivered or threatened with respect thereto.

 

5.13.      No Burdensome Restrictions.  No Borrower is party to any contract or agreement the performance of which could have a Material Adverse Effect.  As of the Closing Date each Borrower has heretofore delivered to Agent true and complete copies of all Material Contracts to which it is a party or to which it or any of its properties is subject.  No Borrower has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.

 

5.14.      No Labor Disputes.  No Borrower is involved in any labor dispute; there are no strikes or walkouts or union organization of any Borrower’s employees threatened or in existence and no labor contract is scheduled to expire during the Term other than as set forth on Schedule 5.14 hereto; except where any of the same are not reasonably likely to have a Material Adverse Effect.

 

5.15.      Margin Regulations.  No Borrower is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect.  No part of the proceeds of any Advance will be used for “purchasing” or “carrying” “margin stock” as defined in Regulation
U of such Board of Governors.

 

5.16.      Investment Company Act.  No Borrower is an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such a company.

 

5.17.      Disclosure.  No representation or warranty made by any Borrower in this Agreement or in any financial statement, report, certificate or any other document furnished in connection herewith contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading.  There is no fact known to any Borrower or which reasonably should be known to such Borrower which such Borrower has not disclosed to Agent in writing with respect to the transactions contemplated by this Agreement which could reasonably be expected to
have a Material Adverse Effect.

 

5.18.      Reserved.

 

  

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5.19.      Conflicting Agreements.  No provision of any mortgage, indenture, contract, agreement, judgment, decree or order binding on any Borrower or affecting the Collateral conflicts with, or requires any Consent which has not already been obtained to, or would in any way prevent the execution, delivery or performance of, the terms of this Agreement or the Other Documents.

 

5.20.      Application of Certain Laws and Regulations.  No Borrower nor any Subsidiary is subject to any law, statute, rule or regulation which regulates the incurrence of any Indebtedness, including laws, statutes, rules or regulations relative to common or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services.

 

5.21.      Business and Property of Borrowers.  Upon and after the Closing Date, Borrowers do not propose to engage in any business other than the manufacture, import, export, distribution, and sale of branded footwear and apparel, and related products, and activities necessary to conduct the foregoing and any business reasonably incidental thereto.  On the Closing Date, each Borrower will own all the property and possess all of the rights and Consents necessary for the conduct of the business of such Borrower.

 

5.22.      Section 20 Subsidiaries.  Borrowers do not intend to use and shall not use any portion of the proceeds of the Advances, directly or indirectly, to purchase during the underwriting period, or for 30 days thereafter, Ineligible Securities being underwritten by a Section 20 Subsidiary.

 

5.23.      Anti-Terrorism Laws.

 

(a)           General.  Neither any Borrower nor any Affiliate of any Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction  that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

(b)           Executive Order No. 13224.  Neither any Borrower nor any Affiliate of any Borrower or their respective agents acting or benefiting in any capacity in connection with the Advances or other transactions hereunder, is any of the following (each a “Blocked Person”):

 

(i)           a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

 

(ii)          a Person owned or  controlled  by, or acting for or on behalf  of,  any  Person  that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

 

(iii)         a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)         a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;

 

  

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(v)          a Person or entity that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list, or

 

(vi)         a Person or entity who is affiliated or associated with a Person or entity listed above.

 

(c)           Transactions.  Neither any Borrower nor to the knowledge of any Borrower, any of its agents acting in any capacity in connection with the Advances or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.

 

(d)           Foreign Extraterritorial Measures Act (Canada).  It shall not be considered a breach of the representations and warranties contained in Section 5.23 or Section 5.24 if Rocky Canada is unable to make any of the foregoing representations and warranties regarding its activities and affairs due to compliance by it with the Foreign Extraterritorial Measures Act (Canada) (“FEMA”) or any other Applicable Law in effect in Canada.

 

5.24.      Trading with the Enemy.  No Borrower has engaged, nor does it intend to engage, in any business or activity prohibited by the Trading with the Enemy Act.

 

5.25.      Reserved.

 

5.26.      Withholdings and Remittances.  Each Borrower has withheld from each payment made to any of its present or former employees, officers and directors, and to all persons who are non-residents of Canada for the purposes of the Canadian Income Tax Act and provincial tax legislation all amounts required by Applicable Law to be withheld, including all payroll deductions required to be withheld, and furthermore, has remitted such withheld amounts within the prescribed periods to the appropriate Governmental Body.  Each Borrower has remitted all Benefit Plan normal or regular contributions,
provincial pension plan contributions, all contributions required under the Canada Pension Plan Act (Canada), employment insurance premiums, employer health taxes and other taxes payable by it in respect of its employees and has remitted such amounts to the proper Governmental Body within the time required under Applicable Law.

 

VI          AFFIRMATIVE COVENANTS.

 

Each Borrower shall, and shall cause Guarantor, and each of their respective Domestic Subsidiaries to, until payment in full of the Obligations and termination of this Agreement:

 

6.1.        Payment of Fees.  Pay to Agent on demand all usual and customary fees and expenses which Agent incurs in connection with (a) the forwarding of Advance proceeds and (b) the establishment and maintenance of any Blocked Accounts or Collection Accounts as provided for in Section 4.15(h).  Agent may, without making demand, charge Borrowers’ Account for all such fees and expenses.

 

  

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6.2.        Conduct of Business and Maintenance of Existence and Assets.  (a) Conduct continuously and operate actively its business according to good business practices and maintain all of its properties useful or necessary in its business in good working order and condition (reasonable wear and tear excepted and except as may be disposed of in accordance with the terms of this Agreement), including all licenses, patents, copyrights, design rights, tradenames, trade secrets and trademarks and take all actions necessary to enforce and protect the validity of any intellectual property right or other
right included in the Collateral except where the failure to do so could reasonably be expected to have a Material Adverse Effect; (b) keep in full force and effect its existence and comply in all material respects with Applicable Law governing the conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect; and (c) make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required to maintain its rights, licenses, leases, powers and franchises under the laws of the United States or Canada or any political subdivision thereof where the failure to do so could reasonably be expected to have a Material Adverse Effect.

 

6.3.        Reserved.

 

6.4.        Government Receivables.  Take all steps necessary to protect Agent’s interest in any Eligible Government Receivable under the Federal Assignment of Claims Act, the Uniform Commercial Code, the PPSA, and all other Applicable Law and deliver to Agent appropriately endorsed, any instrument or chattel paper connected with any such Receivable arising out of contracts between any Borrower and the United States, any state or any department, agency or instrumentality of any of them.

 

6.5.        Fixed Charge Coverage Ratio.  Cause to be maintained for Parent and its Subsidiaries on a consolidated basis, a Fixed Charge Coverage Ratio of not less than 1.10 to 1.00; provided that testing of compliance with the foregoing Fixed Charge Coverage Ratio requirement shall not occur until a Triggering Event.  Upon a Triggering Event, the Fixed Charge Coverage Ratio shall be calculated and tested for the twelve (12) months preceding the calendar month in which the Triggering Event occurs. Testing shall continue as of
each fiscal quarter end thereafter on a historical rolling four (4) quarters basis until a Satisfaction Event occurs.

 

6.6.        Execution of Supplemental Instruments.  Execute and deliver to Agent from time to time, upon demand, such supplemental agreements, statements, assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments as Agent may reasonably request, in order that the full intent of this Agreement may be carried into effect.

 

6.7.        Payment of Indebtedness.  Pay, discharge or otherwise satisfy at or before maturity (subject, where applicable, to specified grace periods and matters which may be Properly Contested in accordance with this Agreement, and, in the case of the trade payables, to normal payment practices) all its obligations and liabilities of whatever nature, except when the failure to do so could not reasonably be expected to have a Material Adverse Effect or when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and each Borrower shall have provided for
such reserves as Agent may reasonably deem proper and necessary, subject at all times to any applicable subordination arrangement in favor of Lenders.

 

  

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6.8.        Standards of Financial Statements.  Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.13 as to which GAAP is applicable to be complete and correct in all material respects (subject, in the case of interim financial statements, to normal year-end audit adjustments) and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as concurred in by such reporting accountants or officer, as the case may be, and disclosed therein).

 

6.9.        Reserved.

 

VII         NEGATIVE COVENANTS.

 

No Borrower, Guarantor, nor any of their respective Subsidiaries shall, until satisfaction in full of the Obligations and termination of this Agreement:

 

7.1.        Merger, Consolidation, Acquisition and Sale of Assets.

 

(a)           Other than a Permitted Acquisition, and any merger, consolidation, amalgamation, or other reorganization of a Borrower into another Borrower, enter into any merger, consolidation, amalgamation, or other reorganization with or into any other Person or permit any other Person to consolidate with or merge or amalgamate with it.

 

(b)           Other than a Permitted Acquisition, any Permitted Investment and any acquisition, transfer or contribution of assets of a Borrower to another Borrower, acquire: (i) all or substantially all of the assets of any business, or any operating unit or division of any Person, whether through the purchase of assets, merger, combination, amalgamation or otherwise, or (ii) acquire a majority (by number of share or voting power) of the voting interests or other Equity Interests of any Person.

 

(c)           Sell, lease, transfer or otherwise dispose of any of its properties or assets, except Permitted Dispositions; it being understood that nothing in this clause (c) is intended to restrict advances and payment of customer deposits, trade payables and other accrued expenses and liabilities incurred in the Ordinary Course of Business of Borrowers and Guarantors.

 

7.2.        Creation of Liens.  Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Encumbrances.

 

7.3.        Guarantees.  Become liable upon the obligations or liabilities of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Agent or Lenders) except (a) as disclosed on Schedule 7.3, (b) guarantees made in the Ordinary Course of Business up to an aggregate amount of $100,000 outstanding for Parent and its Subsidiaries on a Consolidated Basis, (c) the endorsement of checks in the Ordinary Course of Business, and (d) Permitted Guarantees.

 

7.4.        Investments.  Purchase or acquire obligations or Equity Interests of, or any other interest in, any Person, except Permitted Investments.

 

  

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7.5.        Loans.  Make advances, loans or extensions of credit to any Person, including any Affiliate except for Permitted Advances.

 

7.6.        Reserved.

 

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 in
an amount not in excess of 50% of the net income of the Parent and its Subsidiaries on a consolidated basis for the immediately prior 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) Undrawn Availability is at least $7,000,000 immediately after giving effect to each such payment, (d) the proforma Fixed Charge Coverage Ratio of Parent and its Subsidiaries on a consolidated basis is at least 1.25 to 1.00 for the twelve (12) month period ending on the last day of the fiscal month prior to the month of the proposed payment, after giving effect to such payment, as evidenced by a pro-forma Compliance Certificate delivered by the Borrowing Agent,
and (e) 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.

 

7.8.        Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness except in respect of (a) Indebtedness to Lenders; (b) Indebtedness incurred for Capital Expenditures in an amount not in excess of $5,000,000 outstanding at any time for Parent and its Subsidiaries on a Consolidated Basis; (c) Indebtedness included within the Purchase Price for a Permitted Acquisition, provided such Indebtedness is subject to a subordination agreement acceptable to Agent in its sole discretion; (d) intercompany Indebtedness (which, for
clarification, does not include trade payables incurred in the Ordinary Course of Business) between any Borrowers, or between Parent and its Subsidiaries, provided that the aggregate outstanding amount of any such intercompany Indebtedness owing at any time by Subsidiaries that are not Borrowers to Borrowers shall not exceed $10,000,000 outstanding; (e) Indebtedness to shareholders of Parent from share repurchases and redemptions under the stockholders agreements not to exceed $500,000 in the aggregate incurred in any Fiscal Year for Parent and its Subsidiaries on a Consolidated Basis; (f) other Indebtedness in the aggregate at any time outstanding of $1,000,000 for Parent and its Subsidiaries on a Consolidated Basis; (g) Indebtedness of any Borrower listed on Schedule 7.8; (h) Indebtedness incurred in connection with the financing of Borrowers’ insurance premiums; (i)
Indebtedness incurred in connection with Hedge Agreements, in all cases not for speculative purposes, not to exceed in the aggregate a maximum liability for the termination of such any and all such agreements of $7,500,000 at any time outstanding for Parent and its Subsidiaries on a Consolidated Basis; (j) obligations under any lease which is accounted for by the lessee as an operating lease and under which the lessee is intended to be the “owner” of the leased property for Federal income tax purposes; and (k) Indebtedness permitted by Section 7.3.

 

  

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7.9.        Nature of Business.  (a) Substantially change the nature of the businesses in which it is presently engaged, or (b) fail to promptly notify Agent in the event that any Foreign Subsidiary that is not a Borrower or Guarantor, sells goods or services to any Person other than an Affiliate.

 

7.10.      Transactions with Affiliates.  Other than any transaction by and between, or among, Parent, Borrowers and their respective Subsidiaries, in each such case in a manner that is not materially economically detrimental to any Borrower, no Borrower or Guarantor shall directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal with, any Affiliate, except to the extent otherwise expressly permitted hereby or pursuant to the reasonable requirements of the Borrowers' businesses and upon fair and reasonable
terms no less favorable to Borrowers than would be obtained in a comparable arm's-length transaction with a Person other than an Affiliate.

 

7.11.      Reserved.

 

7.12.      Subsidiaries.  Form any Subsidiary unless (a) (i) in the case of a Domestic Subsidiary, it expressly joins in this Agreement as a borrower or Guarantor and becomes jointly and severally liable for the Obligations, or (ii) in the case of a Foreign Subsidiary, 65% of the Equity Interests of such Foreign Subsidiary are pledged as Collateral, and (b) Agent shall have received all documents, including legal opinions, it may reasonably require to establish compliance with each of the foregoing conditions.

 

7.13.      Fiscal Year and Accounting Changes.  Change its fiscal year from December 31 or make any significant change (a) in accounting treatment and reporting practices except as required by GAAP or (b) in tax reporting treatment except as required by law.

 

7.14.      Pledge of Credit.  Now or hereafter pledge Agent’s or any Lender’s credit on any purchases or for any purpose whatsoever or use any Advances in or for any business other than Borrowers’ or otherwise in accordance with this Agreement.

 

7.15.      Amendment of Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement; Change of Name.

 

(a)           Amend, modify or waive any term or material provision of its Articles of Incorporation, By-Laws, Certificate of Formation, or Operating Agreement unless required by law but subject to Section 7.15(b).

 

(b)           Change its name, FEIN, organizational identification number, business number assigned by the Canada Revenue Agency, company number, jurisdiction of organization, or organizational identity or status; provided, however, that a Borrower may change its name and Rocky Canada may continue into another jurisdiction other than Ontario upon at least 15 days’ prior written notice by the applicable Borrower to Agent of such change or continuation and so long as, at the time of such written notification, such Borrower provides any financing or registration statements necessary to
perfect and continue perfected Agent’s Liens.

 

  

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7.16.      Compliance with ERISA.  (a) Become obligated, or permit a member of the Controlled Group to become obligated, to contribute to a Benefit Plan except the Rocky Brands, Inc. Retirement Plan or as required pursuant to collective bargaining, or (b) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code with respect to any Benefit Plans in a manner reasonably likely to have a Material Adverse Effect.

 

7.17.      Prepayment of Indebtedness.  Except for the repayment in full of the GECC Loan, at any time, directly or indirectly, prepay any Indebtedness in an amount exceeding $500,000 (other than to Lenders), or repurchase, redeem, retire or otherwise acquire any Indebtedness of any Borrower.

 

7.18.      Anti-Terrorism Laws.  No Borrower shall, until satisfaction in full of the Obligations and termination of this Agreement, nor shall it permit any Affiliate or agent to:

 

(a)           Conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person.

 

(b)           Deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.

 

(c)           Engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law.  Borrower shall deliver to Lenders any certification or other evidence requested from time to time by any Lender in its sole discretion, confirming Borrower’s compliance with this Section.

 

Provided, however, that Rocky Canada shall be required to comply with Section 7.18 or Section 7.20 to the extent that such compliance would violate or otherwise contravene FEMA or any other Applicable Law in effect in Canada.

 

7.19.      Membership/Partnership Interests.  Elect to treat or permit any of its Subsidiaries to (a) treat its limited liability company membership interests or partnership interests, as the case may be, as securities as contemplated by the definition of “security” in Section 8-102(15) and by Section 8-103 of Article 8 of Uniform Commercial Code or by the Securities Transfer Act of any Canadian jurisdiction, or (b) certificate its limited liability company membership interests or partnership interests, as the case may be.

 

7.20.      Trading with the Enemy Act.  No Borrower shall, until satisfaction in full of the Obligations and termination of this Agreement, nor shall it permit any Affiliate or agent to engage in any business or activity in violation of the Trading with the Enemy Act.

 

VIII       CONDITIONS PRECEDENT.

 

8.1.        Conditions to Initial Advances.  The agreement of Lenders to make the initial Advances requested to be made on the Closing Date is subject to the satisfaction, or waiver by Agent, immediately prior to or concurrently with the making of such Advances, of the following conditions precedent:

 

  

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(a)           Note.  Agent shall have received the Note duly executed and delivered by an authorized officer of each Borrower;

 

(b)           Filings, Registrations and Recordings.  Each document (including any Uniform Commercial Code or PPSA financing statement) required by this Agreement, any related agreement or under law or reasonably requested by the Agent to be filed, registered or recorded in order to create, in favor of Agent, a perfected security interest in or Lien upon the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required or requested, and Agent shall have received an acknowledgment copy, or
other evidence reasonably satisfactory to it, of each such filing, registration or recordation and reasonably satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto;

 

(c)           Corporate Proceedings of Borrowers.  Agent shall have received a copy of the resolutions in form and substance reasonably satisfactory to Agent, of the board of directors or managers of each Borrower authorizing (i) the execution, delivery and performance of this Agreement and the Other Documents (collectively the “Documents”) and (ii) the granting by each Borrower of the security interests in and liens upon the Collateral in each case certified by the Secretary or an Assistant Secretary of each
Borrower as of the Closing Date; and, such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate;

 

(d)           Incumbency Certificates of Borrowers.  Agent shall have received a certificate of the Secretary or an Assistant Secretary of each Borrower, dated the Closing Date, as to the incumbency and signature of the officers of each Borrower executing this Agreement, the Other Documents, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary;

 

(e)           Certificates.  Agent shall have received a copy of the Articles or Certificate of Incorporation or Formation of each Borrower, and all amendments thereto, certified by the Secretary of State or other appropriate official of its jurisdiction of incorporation (or in the case of Rocky Canada, certified by the Secretary of Rocky Canada) or formation, as applicable, together with copies of the By-Laws (or equivalent governing document) of each Borrower certified as accurate and complete by the Secretary or Assistant Secretary of each such Borrower;

 

(f)           Good Standing Certificates.  Agent shall have received good standing certificates for each domestic Borrower dated not more than thirty (30) days prior to the Closing Date, issued by the Secretary of State or other appropriate official of the jurisdiction of incorporation or formation, as applicable, of each such Borrower;

 

(g)           Legal Opinions.  Agent shall have received the executed legal opinions of the Borrowers’ U.S. and Canadian counsel in form and substance reasonably satisfactory to Agent which shall cover such matters incident to the transactions contemplated by this Agreement and the Other Documents, and each Borrower hereby authorizes and directs such counsel to deliver such opinions to Agent and Lenders;

 

  

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(h)           No Litigation.  (i) No litigation, investigation or proceeding before or by any arbitrator or Governmental Body shall be continuing or threatened against any Borrower or against the officers or directors of any Borrower (A) in connection with this Agreement, the Other Documents or any of the transactions contemplated thereby and which, in the reasonable opinion of Agent, is deemed material or (B) which could, in the reasonable opinion of Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature materially adverse
to any Borrower or the conduct of its business or inconsistent with the due consummation of the Transactions shall have been issued by any Governmental Body;

 

(i)           Financial Condition Certificates.  Agent shall have received an executed Financial Condition Certificate in the form of Exhibit 8.1(i).

 

(j)           Collateral Examination.  Agent shall have completed Collateral examinations and received appraisals, the results of which shall be satisfactory in form and substance to Lenders, of the Receivables, Inventory, Eligible Real Property, and Equipment of each Borrower and all books and records in connection therewith;

 

(k)           Fees.  Agent shall have received all fees payable to Agent and Lenders on or prior to the Closing Date hereunder, including pursuant to Article III;

 

(l)           Insurance.  Agent shall have received in form and substance satisfactory to Agent, certified copies of Borrowers’ casualty insurance policies, together with loss payable endorsements on Agent’s standard form of loss payee endorsement naming Agent as loss payee, and certified copies of Borrowers’ liability insurance policies, together with endorsements naming Agent as a co-insured or as an additional insured in the case of Canadian insurance policies;

 

(m)           Payment Instructions.  Agent shall have received written instructions from Borrowing Agent directing the application of proceeds of the initial Advances made pursuant to this Agreement;

 

(n)           Blocked Accounts.  Agent shall have received duly executed agreements establishing the Blocked Accounts or Collection Accounts with financial institutions acceptable to Agent for the collection or servicing of the Receivables and proceeds of the Collateral;

 

(o)           Consents.  Agent shall have received any and all Consents necessary to permit the effectuation of the transactions contemplated by this Agreement and the Other Documents; and, Agent shall have received such Consents and waivers of such third parties as might assert claims with respect to the Collateral;

 

(p)           No Adverse Material Change.  (i) since December 31, 2009 there shall not have occurred any event, condition or state of facts which could reasonably be expected to have a Material Adverse Effect and (ii) no representations made or information supplied to Agent or Lenders shall have been proven to be inaccurate or misleading in any material respect;

 

(q)           Collateral Access Agreements.  Agent shall have received Collateral Access Agreements satisfactory to Agent with respect to the Access Agreement Locations;

 

  

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(r)           Other Documents.  Agent shall have received the executed Other Documents, all in form and substance satisfactory to Agent;

 

(s)           Contract Review.  Agent shall have reviewed all Material Contracts of Borrowers including leases, union contracts, labor contracts, vendor supply contracts, license agreements and distributorship agreements and such contracts and agreements shall be satisfactory in all respects to Agent;

 

(t)           Borrowing Base.  Agent shall have received evidence from Borrowers that the aggregate amount of Eligible Receivables and Eligible Inventory is sufficient in value and amount to support Advances in the amount requested by Borrowers on the Closing Date;

 

(u)           Undrawn Availability.  After giving effect to the initial Advances hereunder, including for all fees and expenses related to the subject transactions, Borrowers shall have Undrawn Availability of at least $10,000,000; and

 

(v)           Compliance with Laws.  Agent shall be reasonably satisfied that each Borrower is in compliance with all pertinent federal, state, provincial, local or territorial regulations, including those with respect to the Federal Occupational Safety and Health Act, the Environmental Protection Act, ERISA and the Trading with the Enemy Act.

 

(w)           Other.  All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Transactions shall be satisfactory in form and substance to Agent and its counsel.

 

8.2.        Conditions to Each Advance.  The agreement of Lenders to make any Advance requested to be made on any date (including the initial Advance), is subject to the satisfaction of the following conditions precedent as of the date such Advance is made:

 

(a)           Representations and Warranties.  Each of the representations and warranties made by any Borrower in or pursuant to this Agreement, the Other Documents and any related agreements to which it is a party, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement, the Other Documents or any related agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date, except to the extent that any such
representation or warranty relates to a specified date, in which each such representation and warranty shall be true and correct in all material respects on and as of such specified date;

 

(b)           No Default.  No Event of Default or Default shall have occurred and be continuing on such date, or would exist after giving effect to the Advances requested to be made, on such date; provided, however that Agent, in its sole discretion, may (subject to the provisions in Section 16.2(b)) continue to make Advances notwithstanding the existence of an Event of Default or Default and that any Advances so made shall not be deemed a waiver of any such Event of Default or Default; and

 

  

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(c)           Maximum Advances.  In the case of any type of Advance requested to be made, after giving effect thereto, the aggregate amount of such type of Advance shall not exceed the maximum amount of such type of Advance permitted under this Agreement.

 

Each request for an Advance by any Borrower hereunder shall constitute a representation and warranty by each Borrower as of the date of such Advance that the conditions contained in this subsection shall have been satisfied.

 

IX          INFORMATION AS TO BORROWERS.

 

Each Borrower shall, or (except with respect to Section 9.11) shall cause Borrowing Agent on its behalf to, until satisfaction in full of the Obligations and the termination of this Agreement:

 

9.1.        Disclosure of Material Matters.  Immediately upon learning thereof, report to Agent all matters materially affecting the value, enforceability or collectability of any material portion of the Collateral, including any Borrower’s reclamation or repossession of, or the return to any Borrower of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.

 

9.2.        Schedules.  Deliver to Agent on or before the fifteenth (15th) day of each month as and for the prior month (a) Receivables ageings inclusive of reconciliations to the general ledger, (b) accounts payable schedules inclusive of reconciliations to the general ledger, (c) a report of sales, credits, and collections, (d) Inventory reports, and (e) a Borrowing Base Certificate in form and substance satisfactory to Agent (which shall be calculated as of the last day of the prior month and which shall not be binding
upon Agent or restrictive of Agent’s rights under this Agreement); provided that, the Borrowers may, but shall not be obligated to (except as set forth in the following sentence), deliver the foregoing more frequently than once per month.  Commencing upon Undrawn Availability plus Qualified Cash being less than $15,000,000 for a period in excess of five (5) consecutive days after the 45th day following the Closing Date, unless waived by Agent in its sole discretion or until Undrawn Availability plus Qualified Cash 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).  In addition, each Borrower will deliver to Agent at such intervals as Agent may require in its Permitted Discretion:  (i) confirmatory assignment schedules, (ii) copies of Customer’s invoices, (iii) evidence of shipment or delivery, (iv) reports on Priority Payables, and (v) such further schedules, documents and/or information regarding the Collateral as Agent may reasonably require including trial balances and test verifications.  Agent shall have the right to confirm and verify all Receivables by any manner and through any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interests hereunder.  The items to be provided under this Section are to be in form reasonably satisfactory to Agent and executed by Borrowing Agent and delivered to Agent from time to time solely for Agent’s convenience in maintaining records of the Collateral, and any Borrower’s failure to deliver any of such items to Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect to the Collateral.

 

  

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9.3.        Environmental Reports.  Furnish Agent, concurrently with the delivery of the financial statements referred to in Sections 9.7 and 9.9, with a Compliance Certificate stating, to his actual knowledge, that each Borrower, Guarantor and each of their respective Subsidiaries is in compliance in all material respects with all federal, state, provincial and local Environmental Laws.  To the extent any Borrower, Guarantor or any of their respective Subsidiaries is not in compliance with the foregoing laws, the certificate shall set forth with specificity all areas of non-compliance and
the proposed action it will implement in order to achieve full compliance.  In each case where potential liability or responsibility is reasonably likely to be in excess of $500,000, Borrowing Agent shall also promptly forward to Agent copies of any request for information, notification of potential liability, demand letter relating to potential responsibility with respect to the investigation or cleanup of Hazardous Substances at any site owned, operated or used by Borrower, Guarantor or any of their respective Subsidiaries to dispose of Hazardous Substances and shall continue to forward copies of material correspondence between it and the Authority regarding such claims to Agent until the claim is settled.  Borrowing Agent shall promptly forward to Agent copies of all documents and reports concerning a Hazardous Discharge at the Real Property that any Borrower is
required to file under any Environmental Laws.  Such information is to be provided solely to allow Agent to protect Agent’s security interest in and Lien on the Collateral.

 

9.4.        Litigation.  Promptly notify Agent in writing of any claim, litigation, suit or administrative proceeding affecting any Borrower, Guarantor or any of their respective Subsidiaries which involves an amount in excess of $500,000.

 

9.5.        Material Occurrences.  Promptly notify Agent in writing upon the occurrence of (a) any Event of Default or Default; (b) any event, development or circumstance whereby any financial statements or other reports furnished to Agent fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of any Borrower as of the date of such statements; (c) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code,
could subject any Borrower to a tax imposed by Section 4971 of the Code; (d) each and every default by any Borrower which might result in the acceleration of the maturity of any Indebtedness in the amount of $500,000 or more, including the names and addresses of the holders of such Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such Indebtedness; and (e) any other development in the business or affairs of any Borrower, Guarantor or any of their respective Subsidiaries which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action Borrowers propose to take with respect thereto.

 

9.6.        Government Receivables.  Furnish Agent with any material correspondence or amendments related to any contracts between Borrower and any Governmental Body.

 

9.7.        Annual Financial Statements.  Furnish Agent within ninety (90) days after the end of each fiscal year, financial statements of Parent and its Subsidiaries on a consolidated basis including, but not limited to, statements of income and stockholders’ equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers.  The reports shall be accompanied by a Compliance Certificate with a calculation of the Fixed Charge Coverage Ratio for the applicable fiscal year.

 

  

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9.8.        Reserved.

 

9.9.        Monthly Financial Statements.  Furnish Agent within thirty (30) days after the end of each month (other than the months of March, June and September, which shall be furnished within forty-five (45) days after the end of each such month and ninety (90) days after the end of December) for Parent and its Subsidiaries on a consolidated basis, an unaudited balance sheet and unaudited statements of income and cash flow reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared on a basis consistent with prior practices and
complete and correct in all material respects, subject to normal and recurring year-end adjustments.  The reports shall be accompanied by a Compliance Certificate, and each Compliance Certificate corresponding with a quarter-end shall include a calculation of the Fixed Charge Coverage Ratio for the most recent four (4) quarters.

 

9.10.      Other Reports.  Except to the extent the following are made available to the public generally and can be obtained by Agent without cost or expense on a timely basis, furnish Agent as soon as available, but in any event within ten (10) days after the issuance thereof, with copies of (i) such financial statements, reports and returns as each Borrower shall send to its stockholders, (ii) all press releases and all statements concerning material changes or developments in the business of any Borrower, Guarantor or their respective Subsidiaries made available by the Borrower, Guarantor and each of their
respective Subsidiaries to the public or any other creditor, and (iii) copies of all reports and registration statements filed with the SEC or any national or foreign securities exchange or the National Association of Securities Dealers, Inc.

 

9.11.      Additional Information.  Furnish Agent with such additional information as Agent shall reasonably request in order to enable Agent to determine whether the terms, covenants, provisions and conditions of this Agreement and the Note have been complied with by Borrowers including, without the necessity of any request by Agent, (a) copies of all environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of any Borrower’s opening of any new office or place of business or any Borrower’s closing of any existing office or place of business, and (c) promptly upon any
Borrower’s learning thereof, notice of any labor dispute to which any Borrower may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which any Borrower is a party or by which any Borrower is bound.

 

9.12.      Projected Operating Budget.  Furnish Agent, no later than thirty (30) days after the beginning of each Borrower’s fiscal year commencing with fiscal year 2011, for Parent and its Subsidiaries on a consolidated basis, a month by month projected income statement, cash flow and balance sheet for such fiscal year.

 

  

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9.13.      Variances From Operating Budget.  Borrowing Agent shall provide to Agent, upon request, a written analysis of specified material variances from the budget described in Section 9.12.

 

9.14.      Notice of Suits, Adverse Events.  Furnish Agent with prompt written notice of (i) any lapse or other termination of any Consent issued to any Borrower by any Governmental Body or any other Person that is reasonably likely to have a Material Adverse Effect, and (ii) any refusal by any Governmental Body or any other Person to renew or extend any such Consent.

 

9.15.      ERISA Notices and Requests.  Furnish Agent with written notice promptly and in any event within fifteen (15) days after any Borrower or any member of the Controlled Group thereof knows or has reason to know, of the following described events which individually or in the aggregate are reasonably likely to have a Material Adverse Effect: (i) (A) any Termination Event with respect to any Pension Benefit Plan or Canadian Pension Plan (if applicable) has occurred, or (B) an accumulated funding deficiency has been incurred or an application has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including installment payments) or an extension of any amortization period under Section 412 of the Code or the equivalent provision under any federal, state, provincial, local or foreign counterparts or equivalents thereof (other than any Canadian Employee Benefit Laws) with respect to a Pension Benefit Plan, a statement of an officer of Borrowing Agent setting forth the details of such occurrence and the action, if any, which Borrowers or such member of the Controlled Group proposes to take with respect thereto, (ii) receipt thereof by any Borrower or any member of the Controlled Group thereof from the PBGC, copies of each notice received by any Borrower or any member of the Controlled Group thereof of the PBGC’s intention to terminate any Pension Benefit Plan or to have a trustee appointed to administer any Pension Benefit Plan,
(iii) if requested by Agent, copies of each Schedule B (Actuarial Information) or the federal, state, provincial, local or foreign equivalent thereof to the annual report (Form 5500 Series) or the federal, state, local or foreign equivalent thereof with respect to each Canadian Pension Plan, Pension Benefit Plan and Multiemployer Plan, (iv) any required installment within the meaning of Section 412 of the Code or the equivalent provision under any federal, state, provincial, local or foreign counterparts or equivalents thereof has not been made when due with respect to a Pension Benefit Plan or Canadian Pension Plan, (v) receipt thereof by any Borrower or any member of the Controlled Group thereof from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by any Borrower or any member of the Controlled Group thereof concerning the imposition or amount of
withdrawal liability under Section 4202 of ERISA or the equivalent provision under any federal, state, provincial, local or foreign counterparts or equivalents thereof (other than any other than any Canadian Employee Benefit Laws) or indicating that such Multiemployer Plan may enter reorganization status under Section 4241 of ERISA or the equivalent provision under any federal, state, provincial, local or foreign counterparts or equivalents thereof (other than any other than any Canadian Employee Benefit Laws), and (vi) copies of each notice of a plant closing or mass layoff (as defined in WARN) to employees sent by any Borrower or any member of the Controlled Group thereof.  Borrowing Agent shall furnish Agent written notice if any Borrower is ever required to contribute to a Canadian Union Plan.

 

  

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9.16.      Additional Documents.  Execute and deliver to Agent, upon request, such documents and agreements as Agent may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement.

 

9.17.      Cash Reporting; Liquidity Calculation.

 

(a)           Furnish Agent, no later than the second (2nd) Business Day of each week, a schedule of Qualified Cash by account and Undrawn Availability, each as of the end of each Business Day during the prior week; provided however, notwithstanding such daily calculation of total Undrawn Availability, the trade payable component of Undrawn Availability shall only be updated and adjusted for the purpose of this Section on the fifteenth (15th) and thirtieth (30th) day of each calendar month (or the next
following Business Day if not a Business Day).

 

(b)           Furnish Agent, no later than the fifth (5th) Business Day of each fiscal quarter, a Liquidity Calculation for the prior fiscal quarter.

 

X           EVENTS OF DEFAULT.

 

The occurrence of any one or more of the following events shall constitute an “Event of Default”:

 

10.1.      Nonpayment.  (a) Failure to pay any principal or interest on the Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of this Agreement or by notice of intention to prepay, or by required prepayment, or (b) failure to pay any other liabilities or make any other payment, fee or charge provided for herein when due or in any Other Document within three (3) Business Days after the same shall become due, provided however that such three (3) Business Day cure period shall only be applicable in the event that Agent fails to charge such amounts to the Borrowers’
Account and such failure by Agent is not the result of any condition set forth in Section 8.2 being unsatisfied;

 

10.2.      Breach of Representation.  Any representation or warranty made or deemed made in this Agreement, any Other Document or any related agreement or in any certificate, document or financial or other statement furnished at any time in connection herewith or therewith shall prove to have been misleading in any material respect on the date when made or deemed to have been made;

 

10.3.      Financial Information.  Failure by any Borrower, Guarantor or their respective Subsidiaries to (a) furnish financial information, (i) required to be furnished on or before a certain date or within a specified period in accordance with this Agreement, which is not cured within two (2) Business Days from the earlier of notice of such failure from the Agent to the Borrowing Agent or the time the Chief Executive Officer or Chief Financial Officer of the Borrowing Agent first becomes aware of such failure, or (ii) when requested in writing which is unremedied for a period of five (5) Business Days after
such request, or (b) permit the inspection of its books or records in accordance with this Agreement, which is not cured within two (2) Business Days from the earlier of notice of such failure from the Agent to the Borrowing Agent or the time the Chief Executive Officer or Chief Financial Officer of the Borrowing Agent first becomes aware of such failure;

 

  

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10.4.      Judicial Actions.  Issuance by the United States of America or any department or instrumentality thereof or by any state or other governmental agency of a notice of Lien, levy, assessment, injunction or attachment (other than a Permitted Lien) in excess of $500,000 against any Collateral which is not stayed, discharged, or lifted within thirty (30) days;

 

10.5.      Noncompliance.  Except as otherwise provided for in Sections 10.1 and 10.3, failure or neglect of any Borrower, Guarantor, or any of their respective Subsidiaries to perform, keep or observe any term, provision, condition, covenant contained in this Agreement, any Other Document, or any other agreement, now or hereafter entered into between Borrower, Guarantor, or any of their respective Subsidiaries, and Agent or any Lender and the failure or inability of it to cure within fifteen (15) days after notice thereof from Agent; provided
that such notice and cure period will not apply to any such failure or neglect: (i) which Agent determines cannot be cured during such period, (ii) which has previously occurred two (2) times or more during the Term, (iii) which is with respect to any negative covenant in Article VII herein, (iv) which is with respect to any of Sections 2.5, 4.10, 4.11, 4.13, 4.14, 4.15(d), (h) or (j), or 6.5 herein, or (v) which is with respect to any Lender-Provided Hedge;

 

10.6.      Judgments.  Any judgment or judgments for the payment of money shall be rendered against any Borrower, Guarantor, or any of their respective Subsidiaries unless: (a) (i) such judgment or judgments are less than $1,500,000 in the aggregate, (ii) enforcement of each such judgment is stayed, (iii) each such judgment is being contested in good faith, and (iv) reserves satisfactory to Agent are established by Borrowers or each such judgment is covered by valid insurance satisfactory to Agent, or (b) such judgment or judgments are less than $1,500,000 in the aggregate and are satisfied within 14 days
after entry thereof;

 

10.7.      Bankruptcy.  Any Borrower, Guarantor, or any of their respective Subsidiaries shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state, provincial or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the
relief or reorganization of debtors, (vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any petition filed against it in any involuntary case under such bankruptcy laws,  or (vii) take any action for the purpose of effecting any of the foregoing;

 

10.8.      Inability to Pay.  Any Borrower, Guarantor, or any of their respective Subsidiaries shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business unless such ceased operations are assumed by another Borrower, Guarantor, or their respective Subsidiaries;

 

10.9.      [Reserved].

 

10.10.    Lien Priority.  Any Lien created hereunder or provided for hereby or under any Other Document for any reason ceases to be or is not a valid and perfected Lien having a first priority interest, subject to Permitted Encumbrances and except as otherwise permitted under this Agreement, in each instance other than as a direct result of the failure of Agent or any Lender to take any action within its control;

 

  

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10.11.    Cross Default.  A failure of any Borrower, Guarantor, or any of their respective Subsidiaries to pay when due any principal or interest on any Indebtedness (other than the Obligations) in the individual principal amount in excess of $750,000 or having an aggregate principal amount in excess of $1,500,000 under any agreement for borrowed money or default by any Borrower, Guarantor, or any of their respective Subsidiaries in any agreement evidencing any such Indebtedness, if such breach causes the holder of such Indebtedness to accelerate the maturity thereof or declare such Indebtedness due prior to its stated
maturity;

 

10.12.    Breach of Guaranty.  Termination or breach of any Guaranty or Guaranty Security Agreement executed and delivered to Agent in connection with the Obligations of any Borrower, or if any Guarantor attempts to terminate, challenges the validity of, or its liability under, any such Guaranty or Guaranty Security Agreement;

 

10.13.    Change of Control.  Any Change of Control shall occur;

 

10.14.    Invalidity.  Any material provision of this Agreement or of any material Other Document shall, for any reason, ceases to be valid and binding on any Borrower or Guarantor, or any Borrower or Guarantor shall so claim in writing to Agent or any Lender;

 

10.15.    Licenses.   (i) Any Governmental Body shall (A) revoke, terminate, suspend or adversely modify any license, permit, patent trademark or tradename of any Borrower, Guarantor, or any of their respective Subsidiaries, the continuation of which is material to the continuation of any of their businesses, or (B) commence proceedings to suspend, revoke, terminate or adversely modify any such license, permit, trademark, tradename or patent and such proceedings shall not be dismissed or discharged within sixty (60) days, or (C) schedule or conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of any Borrower’s, Guarantor’s, or any of their respective Subsidiaries’ business and the staff of such Governmental Body issues a report recommending the termination, revocation, suspension or material, adverse modification of such license, permit, trademark, tradename or patent, and such revocation, termination, suspension, proceeding or recommendation is reasonably likely to have a Material Adverse Effect; (ii) any agreement which is necessary or material to the operation of any Borrower’s, Guarantor’s, or any of their respective Subsidiaries’ business shall be revoked or terminated and not replaced by a substitute acceptable to Agent within thirty (30) days after the date of such revocation or termination, and such revocation or termination and non-replacement would reasonably be expected to have
a Material Adverse Effect;

 

10.16.    Seizures.  A portion of the Collateral with a value in excess of $1,000,000 shall be seized or taken by a Governmental Body, or any Borrower, Guarantor, or any of their respective Subsidiaries or the title and rights of any Borrower, Guarantor, or any of their respective Subsidiaries shall have become the subject matter of a claim, litigation, suit or other proceeding which Agent has determined in the exercise of its Permitted Discretion, upon final determination, is reasonably likely result in impairment or loss of the security provided by this Agreement or the Other Documents;

 

  

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10.17.    Operations.  The operations of any Borrower’s, Guarantor’s, or any of their respective Subsidiaries’ manufacturing facility are interrupted at any time for more than thirty (30) consecutive days, unless such Borrower, Guarantor or Subsidiary shall (i) be entitled to receive for such period of interruption, proceeds of business interruption insurance sufficient to assure that its per diem cash needs during such period is at least equal to its average per diem cash needs for the consecutive three (3) month period immediately preceding the initial date of interruption and (ii) receive such
proceeds in the amount described in clause (i) preceding not later than thirty (30) days following the initial date of any such interruption; provided, however, that notwithstanding the provisions of clauses (i) and (ii) of this Section, an Event of Default shall be deemed to have occurred if such Borrower, Guarantor or Subsidiary shall be receiving the proceeds of business interruption insurance for a period of six (6) months; or

 

XI          LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

 

11.1.      Rights and Remedies.

 

(a)           Upon the occurrence and during the continuance of (i) an Event of Default pursuant to Section 10.7, all Obligations shall be immediately due and payable and this Agreement and the obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at any time thereafter, at the option of Required Lenders, all Obligations shall be immediately due and payable and Lenders shall have the right to terminate this Agreement and to terminate the obligation of Lenders to make Advances.  Upon the occurrence and during the continuance of any Event of Default, Agent shall have the right to exercise
any and all rights and remedies provided for herein, under the Other Documents, under the Uniform Commercial Code and PPSA and at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure and/or to take possession of and sell any or all of the Collateral with or without judicial process.  In compliance with Applicable Law, Agent may enter any of any Borrower’s premises or other premises without legal process and without incurring liability to any Borrower therefor, and Agent may thereupon, or at any time thereafter, in its discretion without notice or demand, take the Collateral and remove the same to such place as Agent may deem advisable and Agent may require Borrowers to make the Collateral available to Agent at a convenient place.  With or without
having the Collateral at the time or place of sale, Agent may sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one or more sales, at such price or prices, and upon such terms, either for cash, credit or future delivery, as Agent may elect.  Except as to that part of the Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Agent shall give Borrowers reasonable notification of such sale or sales, it being agreed that in all events written notice mailed to Borrowing Agent at least ten (10) Business Days prior to such sale or sales is reasonable notification.  At any public sale Agent or any Lender may bid for and become the purchaser, and Agent, any Lender or any other purchaser at any such sale thereafter shall hold the Collateral sold absolutely
free from any claim or right of whatsoever kind, including any equity of redemption and all such claims, rights and equities are hereby expressly waived and released by each Borrower.  Each Borrower waives any right to require a marshalling of assets.  The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in the order set forth in Section 11.6.  Noncash proceeds will only be applied to the Obligations as they are converted into cash.  If any deficiency shall arise, Borrowers shall remain liable to Agent and Lenders therefor.

 

  

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(b)           Upon the occurrence and during the continuance of an Event of Default, in connection with the exercise of the foregoing remedies, including the sale of Inventory, Agent is granted a perpetual irrevocable, royalty free, nonexclusive license and Agent is granted permission to use all of each Borrower’s (i) trademarks, trademark applications, trade styles, trade names, patents, patent applications, copyrights, service marks, licenses, franchises and other proprietary rights which are used or useful in connection with Inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of such Inventory, and (ii)
Equipment for the purpose of completing the manufacture of unfinished goods.

 

(c)           Upon the occurrence and during the continuance of an Event of Default, to the extent that Applicable Law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, each Borrower acknowledges and agrees that it is not commercially unreasonable for the Agent (i) to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against Customers and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same business as any Borrower, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by the Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the
Collateral.  Each Borrower acknowledges that the purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 11.1(b).  Without limitation upon the foregoing, nothing contained in this Section11.1(b) shall be construed to grant any rights to any Borrower or to impose any duties on Agent that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this Section 11.1(b).

 

11.2.      Agent’s Discretion.  Agent shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies Agent may at any time pursue, relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of Agent’s or Lenders’ rights hereunder.

 

  

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11.3.      Setoff.  Subject to Section 14.12, in addition to any other rights which Agent or any Lender may have under Applicable Law, upon the occurrence and during the continuance of an Event of Default hereunder, Agent and such Lender shall have a right, immediately and without notice of any kind, to apply any Borrower’s property held by Agent and such Lender to reduce the Obligations.

 

11.4.      Appointment of Receiver.

 

(a)           Upon the occurrence and during the continuation of an Event of Default, Agent shall be entitled to the immediate appointment of a receiver for all or part of the Collateral, whether such receivership is incidental to a proposed sale of the Collateral or otherwise.  In such event, Agent may take proceedings in any court of competent jurisdiction for the appointment of a receiver of the Collateral or of any part thereof or may, to the extent permitted by Applicable Law, by instrument in writing appoint any Person to be a receiver of the Collateral or of any part thereof and may remove any receiver so appointed by Agent and appoint
another in that Person's stead.  Any such receiver appointed by instrument in writing shall, to the extent permitted by Applicable Law, have all of the rights, remedies, benefits and powers of Agent under this Agreement or under the PPSA or otherwise and, without limiting the generality of the foregoing, any such receiver (or Agent) shall have the power to, to the full extent permitted by Applicable Law:

 

(i)           take possession of the Collateral or any part thereof;

 

(ii)          carry on or concur in carrying on all or any part or parts of the business of the Borrowers relating to the Collateral;

 

(iii)         file such proofs of claim and other documents as may be necessary or advisable in order to have such receiver's claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Borrowers or Guarantors;

 

(iv)         borrow money required for the seizure, repossession, retaking, repair, insurance, maintenance, preservation, protection, collection, preparation for disposition, disposition or realization of the Collateral or any part thereof and for the enforcement of this Agreement or for the carrying on of the business of the Borrowers or Guarantors on the security of the Collateral in priority to the security interest created under this Agreement; and

 

(v)          sell, lease or otherwise dispose of, or concur in the sale, lease or other disposition of, the whole or any part of the Collateral at public auction, by public tender or by private sale, lease or other disposition, either for cash or upon credit, at such time and upon such terms and conditions as the receiver may determine.

 

Any such receiver shall for all purposes be deemed to be the agent of the Borrowers and Guarantors.  Agent may from time to time fix a commercially reasonable remuneration of such receiver. Agent shall not in any way be responsible for any misconduct or negligence of any such receiver. Each Borrower hereby consents to the appointment of any such a receiver without bond, to the full extent permitted by Applicable Law.

 

  

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(b)           Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, with respect to any Collateral located in Canada, Agent is hereby specifically authorized to seek the appointment of a receiver or a receiver-manager under the laws of Canada or any Province thereof (a “Canadian Receiver”) upon or during the continuation of an Event of Default, to take possession of all or any portion of the Collateral or to operate same and, to the maximum extent permitted by Applicable Law, may seek the appointment of such a
Canadian Receiver without the requirement of prior notice or a hearing.  Any such Canadian Receiver shall, so far as concerns responsibility for his/her acts, be deemed agent of Borrowers and Guarantors and not Agent or the Lenders. Agent shall not incur any liability to the Canadian Receiver, the Borrowers or Guarantor or otherwise and shall not in any way be responsible for any misconduct or negligence of any such Canadian Receiver. Subject to the provisions of the instrument appointing him/her, to the extent by Applicable Law, any such Canadian Receiver shall have power to take possession of Collateral, to preserve Collateral or its value, to carry on or concur in carrying on all or any part of the business of the Borrowers and Guarantors and to sell, lease, license or otherwise dispose of or concur in selling, leasing, licensing or otherwise disposing of Collateral.  To
facilitate the foregoing powers, any such Canadian Receiver may, to the exclusion of all others, including the Borrowers and Guarantors, to the extent permitted by Applicable Law, enter upon, use and occupy all premises owned or occupied by the Borrowers or Guarantors wherein Collateral may be situated, maintain Collateral upon such premises, borrow money on a secured or unsecured basis and use Collateral of the Borrowers and Guarantors directly in carrying on their business or as security for loans or advances to enable the Canadian Receiver to carry on the their business or otherwise, as such Canadian Receiver shall, in its discretion, determine.  Except as may be otherwise directed by Agent, all money received from time to time by such Canadian Receiver in carrying out his/her appointment shall be received in trust for and paid over to Agent.  Every such Canadian Receiver
may, in the discretion of Agent, be vested with all or any of the rights and powers of Agent and Lenders.  Agent may, either directly or through its nominees, exercise any or all powers and rights given to a Canadian Receiver by virtue of the foregoing provisions of this Section.

 

11.5.      Rights and Remedies not Exclusive.  The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any rights or remedy shall not preclude the exercise of any other right or remedies provided for herein or otherwise provided by law, all of which shall be cumulative and not alternative.

 

11.6.      Allocation of Payments After Event of Default.  Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent on account of the Obligations or any other amounts outstanding under any of the Other Documents or in respect of the Collateral may, at Agent’s discretion, be paid over or delivered as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Agent in connection with enforcing its rights and the rights of the Lenders under this Agreement and the Other Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of this Agreement;

 

  

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SECOND, to payment of any fees owed to the Agent;

 

THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of each of the Lenders to the extent owing to such Lender pursuant to the terms of this Agreement;

 

FOURTH, to the payment of all of the Obligations consisting of accrued fees and interest;

 

FIFTH, to the payment of the outstanding principal amount of the Obligations (including the payment or cash collateralization of any outstanding Letters of Credit);

 

SIXTH, to all other Obligations and other obligations which shall have become due and payable under the Other Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH” above; and

 

SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

 

In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive (so long as it is not a Defaulting Lender) an amount equal to its pro rata share (based on the proportion that the then outstanding Advances held by such Lender bears to the aggregate then outstanding Advances) of amounts available to be applied pursuant to clauses “FOURTH”, “FIFTH” and “SIXTH” above and Agent may convert any amounts to Dollars or Canadian Dollars as necessary to make such application; and (iii) to the extent that any amounts available for distribution
pursuant to clause “FIFTH” above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (A) first, to reimburse the Issuer from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses “FIFTH” and “SIXTH” above in the manner provided in this Section 11.6.

 

XII        WAIVERS AND JUDICIAL PROCEEDINGS.

 

12.1.      Waiver of Notice.  Each Borrower hereby waives notice of non-payment of any of the Receivables, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of loans or advances made, credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.

 

12.2.      Delay.  No delay or omission on Agent’s or any Lender’s part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default.

 

  

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12.3.      Jury Waiver.  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT, OR (B) IN ANY WAY CONNECTED WITH OR RELATED TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

XIII       EFFECTIVE DATE AND TERMINATION.

 

13.1.      Term.  This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of each Borrower, Agent and each Lender, shall become effective on the date hereof and shall continue in full force and effect until October 20, 2015 (the “Term”) unless sooner terminated as herein provided.  Borrowers may terminate this Agreement at any time upon ten (10) days’ prior written notice and payment in full of the Obligations.  Such notice shall be
irrevocable.  .

 

13.2.      Termination.

 

(a)          The termination of the Agreement shall not affect any Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having their inception prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights or interests created or Obligations have been fully and indefeasibly paid, disposed of, concluded or liquidated.  Until such event, the security interests, Liens and rights granted to Agent and Lenders hereunder and the financing statements filed hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers’ Account may from time to time be temporarily in a zero or credit position, until all of the Obligations of each Borrower have been indefeasibly paid and performed in full after the termination of this Agreement or each Borrower has furnished Agent and Lenders with an indemnification reasonably satisfactory to Agent and Lenders with respect thereto.  Accordingly, in such event, each Borrower waives any rights which it may have under the Uniform Commercial Code, the PPSA, or other Applicable Law, to demand the filing of termination statements (or the equivalent) with respect to the Collateral, and Agent shall not be required to send such termination statements (or the equivalent) to each Borrower, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with
its terms and all Obligations have been indefeasibly paid in full in immediately available funds.  All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations are indefeasibly paid and performed in full.

 

  

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(b)         Upon termination of this Agreement and full and indefeasible payment of the Obligations to Agent and Lender (other than any Obligations which expressly survive the termination of this Agreement) in accordance with Section 13.1(a), (i) all rights and remedies of each Borrower, Agent and each Lender hereunder shall cease, other than those which survive termination, and (ii) Agent and each Lender agrees to execute and deliver, as applicable, to Borrowing Agent or a designated agent (i) all property pledged and delivered to Agent or any Lender (including without limitation stock or other certificates, notes receivable, certificates of title, direct pay notices
to account debtors, change of address forms and other instruments, together with accompanying stock powers and allonges in the forms delivered to Agent or any Lender; (2) the original promissory notes executed in connection with the Obligations marked “CANCELLED”; (3) all guaranty agreements, indemnification agreements and other accommodation agreement executed by any guarantor, marked “CANCELLED”; (4) mortgage or deed of trust releases against any Real Property of any Borrower or Guarantor, releases of any liens or encumbrances filed against any Intellectual Property or property subject to any title laws and other like releases, and (5) UCC-3 termination statements with respect to the Uniform Commercial Code and PPSA filings made by Agent in respect of each Borrower or Guarantor, as applicable.

 

XIV       REGARDING AGENT.

 

14.1.      Appointment.  Each Lender hereby designates PNC to act as Agent for such Lender under this Agreement and the Other Documents.  Each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and the Other Documents and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto and Agent shall hold all Collateral, payments of principal and interest, fees (except the fees set
forth in the Fee Letter), charges and collections (without giving effect to any collection days) received pursuant to this Agreement, for the ratable benefit of Lenders.  Agent may perform any of its duties hereunder by or through its agents or employees.  As to any matters not expressly provided for by this Agreement (including collection of the Note) Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding; provided, however, that Agent shall not be required to take any action which exposes Agent to liability or which is contrary to this Agreement or the Other Documents or
Applicable Law unless Agent is furnished with an indemnification reasonably satisfactory to Agent with respect thereto.

 

14.2.      Nature of Duties.  Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the Other Documents.  Neither Agent nor any of its officers, directors, employees or agents shall be (i) liable for any action taken or omitted by them as such hereunder or in connection herewith, unless caused by their gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), or (ii) responsible in any manner for any recitals, statements, representations or warranties made by any Borrower
or any officer thereof contained in this Agreement, or in any of the Other Documents or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any of the Other Documents or for the value, validity, effectiveness, genuineness, due execution, enforceability or sufficiency of this Agreement, or any of the Other Documents or for any failure of any Borrower to perform its obligations hereunder.  Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any of the Other Documents, or to inspect the properties, books or records of any Borrower.  The duties of Agent as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement except as expressly set forth herein.

 

  

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14.3.      Lack of Reliance on Agent and Resignation.  Independently and without reliance upon Agent or any other Lender, each Lender has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Borrower and each Guarantor in connection with the making and the continuance of the Advances hereunder and the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of each Borrower and each Guarantor.  Agent shall have no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect thereto, whether coming into its possession before making of the Advances or at any time or times thereafter except as shall be provided by any Borrower pursuant to the terms hereof.  Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any agreement, document, certificate or a statement delivered in connection with or for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any Other Document, or of the financial condition of any Borrower or any Guarantor, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Note, the Other Documents or the financial condition of any
Borrower, or the existence of any Event of Default or any Default.

 

Agent may resign on sixty (60) days’ written notice to each of Lenders and Borrowing Agent and upon such resignation, the Required Lenders will promptly designate a successor Agent reasonably satisfactory to Borrowers.

 

Any such successor Agent shall succeed to the rights, powers and duties of Agent, and the term “Agent” shall mean such successor agent effective upon its appointment, and the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent.  After any Agent’s resignation as Agent, the provisions of this Article XIV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

 

14.4.      Certain Rights of Agent.  If Agent shall request instructions from Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any Other Document, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from the Required Lenders; and Agent shall not incur liability to any Person by reason of so refraining.  Without limiting the foregoing, Lenders shall not have any right of action whatsoever against Agent as a result of its acting or refraining from acting hereunder in
accordance with the instructions of the Required Lenders.

 

14.5.      Reliance.  Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, order or other document or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to this Agreement and the Other Documents and its duties hereunder, upon advice of counsel selected by it.  Agent may employ agents and attorneys-in-fact and shall not be liable for the
default or misconduct of any such agents or attorneys-in-fact selected by Agent with reasonable care.

 

  

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14.6.      Notice of Default.  Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder or under the Other Documents, unless Agent has received notice from a Lender or Borrowing Agent referring to this Agreement or the Other Documents, describing such Default or Event of Default and stating that such notice is a “notice of default”.  In the event that Agent receives such a notice, Agent shall give notice thereof to Lenders.  Agent shall take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of Lenders.

 

14.7.      Indemnification.  To the extent Agent is not reimbursed and indemnified by Borrowers, each Lender will reimburse and indemnify Agent in proportion to its respective portion of the Advances (or, if no Advances are outstanding, according to its Commitment Percentage), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in performing its duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent’s gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment).

 

14.8.      Agent in its Individual Capacity.  With respect to the obligation of Agent to lend under this Agreement, the Advances made by it shall have the same rights and powers hereunder as any other Lender and as if it were not performing the duties as Agent specified herein; and the term “Lender” or any similar term shall, unless the context clearly otherwise indicates, include Agent in its individual capacity as a Lender.  Agent may engage in business with any Borrower as if it were not performing the duties specified herein, and may accept fees and other consideration from any
Borrower for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

 

14.9.      Delivery of Documents.  To the extent Agent receives financial statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing Base Certificates from any Borrower pursuant to the terms of this Agreement which any Borrower is not obligated to deliver to each Lender, Agent will promptly furnish such documents and information to Lenders.

 

14.10.    Borrowers’ Undertaking to Agent.  Without prejudice to their respective obligations to Lenders under the other provisions of this Agreement, each Borrower hereby undertakes with Agent to pay to Agent from time to time on demand all amounts from time to time due and payable by it for the account of Agent or Lenders or any of them pursuant to this Agreement to the extent not already paid.  Any payment made pursuant to any such demand shall pro tanto satisfy the relevant Borrower’s obligations to make payments for the account of Lenders or the relevant one or more of them pursuant to this
Agreement.

 

  

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14.11.    No Reliance on Agent’s Customer Identification Program.  Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA PATRIOT Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP
Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any Borrower, its Affiliates or its agents, this Agreement, the Other Documents or the transactions hereunder or contemplated hereby: (1) any identity verification procedures, (2) any record-keeping, (3) comparisons with government lists, (4) customer notices or (5) other procedures required under the CIP Regulations or such other laws.

 

14.12.    Other Agreements.  Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to any Borrower or any deposit accounts of any Borrower now or hereafter maintained with such Lender.  Anything in this Agreement to the contrary notwithstanding, each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take any action to protect or enforce its rights arising out of this Agreement
or the Other Documents, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Other Documents shall be taken in concert and at the direction or with the consent of Agent or Required Lenders.

 

14.13.    Delegation.  The Agent may execute any of its duties under this Agreement and the Other Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.  The Agent reserves the right to execute any of its duties under this Agreement or any Other Document by or through agents, including a separate Canadian agent, to hold or realize on the Collateral or enforce this Agreement or any
Other Document.

 

XV         BORROWING AGENCY.

 

15.1.      Borrowing Agency Provisions.

 

(a)           Each Borrower hereby irrevocably designates Borrowing Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of such Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in accordance with the request of Borrowing Agent.

 

  

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(b)           The handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their request.  Neither Agent nor any Lender shall incur liability to Borrowers as a result thereof.  To induce Agent and Lenders to do so and in consideration thereof, each Borrower hereby indemnifies Agent and each Lender and holds Agent and each Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Agent or any Lender by any Person arising from or incurred by reason of
the handling of the financing arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or instruction from Borrowing Agent or any other action taken by Agent or any Lender with respect to this Section 15.1 except due to willful misconduct or gross (not mere) negligence by the indemnified party (as determined by a court of competent jurisdiction in a final and non-appealable judgment).

 

(c)           All Obligations shall be joint and several, and each Borrower shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearance granted to Agent or any Lender to any Borrower, failure of Agent or any Lender to give any Borrower notice of borrowing or any other notice, any failure of Agent or any Lender to pursue or preserve its rights against any Borrower, the release by Agent or any Lender of any Collateral now or thereafter acquired from any Borrower, and such agreement by each Borrower to
pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Agent or any Lender to the other Borrowers or any Collateral for such Borrower’s Obligations or the lack thereof.  Each Borrower waives all suretyship defenses.

 

15.2.      Waiver of Subrogation.  Each Borrower expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such Borrower may now or hereafter have against the other Borrowers or other Person directly or contingently liable for the Obligations hereunder, or against or with respect to the other Borrowers’ property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until termination of this Agreement and repayment in full of the
Obligations.

 

15.3.      Cross Guaranty.  Without limiting the joint and several nature of the Obligations, each Borrower hereby unconditionally guaranties the full and prompt payment and performance when due, whether by acceleration or otherwise, and at all times thereafter, of any and all present and future Obligations of each other Borrower.  This guaranty shall in all respects be a continuing, absolute and unconditional guaranty of payment and performance (and not of collection), and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of any Borrower).  Each
Borrower hereby absolutely, unconditionally and irrevocably waives and agrees not to assert or take advantage of any defense based upon an election of remedies by Agent or any Lender, including an election to proceed by non-judicial rather than judicial foreclosure, which destroys or impairs any right of subrogation or the right of a Borrower to proceed against any Person for reimbursement or both.

 

  

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15.4.      Subordination.

 

(a)           Each Borrower hereby covenants and agrees that, as provided herein, all indebtedness, intercompany charges and other sums owing and claims of any nature whatsoever owed (other than payments or remittances of employee withholding, wages, pension payments, tax payments, trust funds and similar items) to such Borrower by any other Borrower, Guarantor or any of their respective Subsidiaries (“Intercompany Obligations”), the payment of the principal of and interest thereon and any lien or security interest therefor are hereby expressly made subordinate and subject in right
of payment to this Agreement or the prior payment in full of:  (a) all Obligations now or hereafter incurred by any Borrower under this Agreement or any of the Other Documents, (b) interest thereon (including any such interest accruing subsequent to the filing by or against any Borrower of any proceeding brought under the Bankruptcy Code, whether or not such interest is allowed as a claim pursuant to the provisions of the Bankruptcy Code), and (c) all fees, expenses, indemnities and other amounts now or hereafter payable pursuant to or in connection with this Agreement and all Other Documents (collectively the “Senior Obligations”), and any lien on any property or asset securing the Senior Obligations.  No payment or prepayment of any Intercompany Obligations (whether of principal, interest
or otherwise) shall be made at any time prior to the payment in full, in cash, of the Senior Obligations, provided that the Borrowers may make payments (but not prepayments) of Intercompany Obligations in the Ordinary Course of Business to the extent that such payments are not otherwise prohibited by this Agreement and at the time of, and immediately after giving effect to, any such payment, no Event of Default exists and is continuing.  If any default occurs under the Intercompany Obligations, no Borrower will demand, accelerate, declare a default under, sue for, set off, accept, take or receive, directly or indirectly, in cash or other property or in any other manner, any payment of all or any part of the Intercompany Obligations without Agent’s prior written consent, which consent shall not be
unreasonably withheld or delayed.

 

(b)           Each Borrower agrees that any right of possession it has to any Real Property (pursuant to a written lease or otherwise) shall be subject and subordinate to the rights of Agent hereunder and under any Mortgage thereon.   Each Borrower which holds title to any of the Real Property hereby waives any Lien it holds on the Collateral of any other Borrower located at such Real Property and shall grant access to Agent to such Real Property and Collateral in accordance with this Agreement notwithstanding the terms of any lease or other occupancy agreement to the contrary.

 

15.5.      No Disposition.  No Borrower will sell, assign, pledge, encumber or otherwise dispose of any of the Intercompany Obligations owed to it unless permitted by the terms of this Agreement or Other Documents.

 

XVI        MISCELLANEOUS

 

16.1.      Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applied to contracts to be performed wholly within the State of Ohio.  Any judicial proceeding brought by or against any Borrower with respect to any of the Obligations, this Agreement, the Other Documents or any related agreement may be brought in any court of competent jurisdiction in the State of Ohio, United States of America, and, by execution and delivery of this Agreement, each Borrower accepts for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement.  Each Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  Each Borrower waives the right to remove any judicial proceeding brought against such Borrower in any state court to any federal court.  Any judicial proceeding by any Borrower against Agent or any Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the State of Ohio.

 

  

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16.2.      Entire Understanding.

 

(a)           This Agreement and the documents executed concurrently herewith contain the entire understanding between each Borrower, Agent and each Lender and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof.  Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by each Borrower’s, Agent’s and each Lender’s respective officers.  Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged.  Each Borrower acknowledges that it has been advised by counsel in connection with the execution of this Agreement and Other Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement.

 

(b)           The Required Lenders, Agent with the consent in writing of the Required Lenders, and Borrowers may, subject to the provisions of this Section 16.2 (b), from time to time enter into written supplemental agreements to this Agreement or the Other Documents executed by Borrowers, for the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in any manner the rights of Lenders, Agent or Borrowers thereunder or the conditions, provisions or terms thereof or waiving any Event of Default thereunder, but only to the extent specified in such written agreements; provided, however, that no such supplemental agreement shall, without the consent of all Lenders:

 

(i)           increase the Commitment Percentage, the maximum dollar commitment of any Lender or the Maximum Revolving Advance Amount.

 

(ii)          extend the maturity of any Note or the due date for any amount of interest, fees, or principal payable hereunder (other than mandatory prepayments), or decrease the rate of interest or reduce any fee payable by Borrowers to Lenders pursuant to this Agreement.

 

(iii)         alter the definition of the term Required Lenders or alter, amend or modify this Section 16.2.

 

(iv)        release any Collateral during any calendar year (other than in accordance with the provisions of this Agreement) having an aggregate value in excess of $250,000.

 

(v)         change the rights and duties of Agent.

 

  

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(vi)        permit any Revolving Advance to be made if after giving effect thereto the total of Revolving Advances outstanding hereunder would exceed the Formula Amount for more than sixty (60) consecutive Business Days or exceed one hundred and five percent (105%) of the Formula Amount.

 

(vii)       increase the Advance Rates above the Advance Rates in effect on the Closing Date.

 

(viii)      release any Borrower or Guarantor (other than in accordance with the provisions of this Agreement).

 

Any such supplemental agreement shall apply equally to each Lender and shall be binding upon Borrowers, Lenders and Agent and all future holders of the Obligations.  In the case of any waiver, Borrowers, Agent and Lenders shall be restored to their former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a specific Event of Default shall extend to any subsequent Event of Default (whether or not the subsequent Event of Default is the same as the Event of Default which was waived), or impair any right consequent thereon.

 

(c)           In the event that Agent requests the consent of a Lender pursuant to Section 16.2(b) and such consent is denied, then PNC may, at its option, require such Lender to assign its interest in the Advances to PNC or to another Lender or to any other Person designated by the Agent (the “Designated Lender”), for a price equal to (i) the then outstanding principal amount thereof plus (ii) accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid when collected from Borrowers.  In the event PNC elects to require any Lender to assign
its interest to PNC or to the Designated Lender, PNC will so notify such Lender in writing within forty five (45) days following such Lender’s denial, and such Lender will assign its interest to PNC or the Designated Lender no later than five (5) days following receipt of such notice pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the Designated Lender, as appropriate, and Agent.

 

(d)           Notwithstanding (a) the existence of a Default or an Event of Default, (b) that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied or (c) any other provision of this Agreement, Agent may at its discretion and without the consent of the Required Lenders, voluntarily permit the outstanding Revolving Advances at any time to exceed the Formula Amount by up to five percent (5%) of the Formula Amount for up to sixty (60) consecutive days (the “Out-of-Formula Loans”).  If Agent is willing in its sole and absolute
discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall be payable on demand and shall bear interest at the Default Rate for Revolving Advances consisting of Domestic Rate Loans; provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have changed the limits of Section 2.1(a).  For purposes of this paragraph, the discretion granted to Agent hereunder shall not preclude involuntary overadvances that may result from time to time due to the fact that the Formula Amount was unintentionally exceeded for any reason, including, but not limited to, Collateral previously deemed to be either “Eligible Receivables” or “Eligible Inventory”, as applicable, becomes ineligible, collections of Receivables applied to reduce
outstanding Revolving Advances are thereafter returned for insufficient funds or overadvances are made to protect or preserve the Collateral.  In the event Agent involuntarily permits the outstanding Revolving Advances to exceed the Formula Amount by more than five percent (5%), Agent shall use its efforts to have Borrowers decrease such excess in as expeditious a manner as is practicable under the circumstances and not inconsistent with the reason for such excess.  Revolving Advances made after Agent has determined the existence of involuntary overadvances shall be deemed to be involuntary overadvances and shall be decreased in accordance with the preceding sentence.

 

  

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(e)           In addition to (and not in substitution of) the discretionary Revolving Advances permitted above in this Section 16.2, the Agent is hereby authorized by Borrowers and the Lenders, from time to time in the Agent’s sole discretion, (A) after the occurrence and during the continuation of a Default or an Event of Default, or (B) at any time that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied, to make Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its reasonable business judgment, deems necessary or desirable (a) to preserve or protect the Collateral, or any
portion thereof, (b) to enhance the likelihood of, or maximize the amount of, repayment of the Advances and other Obligations, or (c) to pay any other amount chargeable to Borrowers pursuant to the terms of this Agreement; provided, that at any time after giving effect to any such Revolving Advances the outstanding Revolving Advances do not exceed the lesser of: (i) one hundred and five percent (105%) of the Formula Amount, and (ii) the Maximum Revolving Advance Amount.

 

16.3.      Successors and Assigns; Participations; New Lenders.

 

(a)           This Agreement shall be binding upon and inure to the benefit of Borrowers, Agent, each Lender, all future holders of the Obligations and their respective successors and permitted assigns, except that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Agent and each Lender.

 

(b)           Each Borrower acknowledges that in the regular course of commercial banking business one or more Lenders may at any time and from time to time sell participating interests in the Advances to other financial institutions (each such transferee or purchaser of a participating interest, a “Participant”).  Each Participant may exercise all rights of payment (including rights of set-off) with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Participant were the direct holder thereof provided that Borrowers shall not be required to pay to any Participant more than the amount which it would have been required to pay to Lender which granted an interest in its Advances or other Obligations payable hereunder to such Participant had such Lender retained such interest in the Advances hereunder or other Obligations payable hereunder and in no event shall Borrowers be required to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder to both such Lender and such Participant.  Each Borrower hereby grants to any Participant a continuing security interest in any deposits, moneys or other property held by such Participant as security for the Participant’s interest in the Advances.

 

  

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(c)           Any Lender, with the consent of Agent which shall not be unreasonably withheld or delayed, may sell, assign or transfer all or any part of its rights and obligations under or relating to Revolving Advances under this Agreement and the Other Documents to one or more additional banks or financial institutions and one or more additional banks or financial institutions may commit to make Advances hereunder (each a “Purchasing Lender”), in minimum amounts of not less than $5,000,000, pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and Agent and delivered to Agent for recording.  Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder with a Commitment Percentage as set forth therein, and (ii) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement, the Commitment Transfer Supplement creating a novation for that purpose.  Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and
the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents.  Each Borrower hereby consents to the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents.  Borrowers shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.

 

(d)           Any Lender, with the consent of Agent which shall not be unreasonably withheld or delayed, may directly or indirectly sell, assign or transfer all or any portion of its rights and obligations under or relating to Revolving Advances under this Agreement and the Other Documents to an entity, whether a corporation, partnership, trust, limited liability company or other entity that (i) is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and (ii) is administered, serviced or managed by the assigning Lender or an Affiliate of such Lender (a
“Purchasing CLO” and together with each Participant and Purchasing Lender, each a “Transferee” and collectively the “Transferees”), pursuant to a Commitment Transfer Supplement modified as appropriate to reflect the interest being assigned (“Modified Commitment Transfer Supplement”), executed by any intermediate purchaser, the Purchasing CLO, the transferor Lender, and Agent as appropriate and delivered to Agent for recording.  Upon such execution and delivery, from and after the transfer effective date determined pursuant to such Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder shall be a party hereto and, to the
extent provided in such Modified Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder and (ii) the transferor Lender thereunder shall, to the extent provided in such Modified Commitment Transfer Supplement, be released from its obligations under this Agreement, the Modified Commitment Transfer Supplement creating a novation for that purpose.  Such Modified Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing CLO.  Each Borrower hereby consents to the addition of such Purchasing CLO.  Borrowers shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.

 

  

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(e)           Agent shall maintain at its address a copy of each Commitment Transfer Supplement and Modified Commitment Transfer Supplement delivered to it and a register (the “Register”) for the recordation of the names and addresses of each Lender and the outstanding principal, accrued and unpaid interest and other fees due hereunder.  The entries in the Register shall be conclusive, in the absence of manifest error, and each Borrower, Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Advance recorded therein for the purposes of this Agreement.  The Register shall be available
for inspection by Borrowing Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice.  Agent shall receive a fee in the amount of $3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon the effective date of each transfer or assignment (other than to an intermediate purchaser) to such Purchasing Lender and/or Purchasing CLO.

 

(f)           Subject to the provisions set forth in Section 16.15, each Borrower authorizes each Lender to disclose to any Transferee and any prospective Transferee any and all financial information in such Lender’s possession concerning such Borrower which has been delivered to such Lender by or on behalf of such Borrower pursuant to this Agreement or in connection with such Lender’s credit evaluation of such Borrower.

 

(g)          Anything herein to the contrary notwithstanding, unless the Obligations are then due in full or a notice of termination of this Agreement has been issued, no Lender may assign or participate any of its interests hereunder to a competitor of any Borrower.  As used herein, the term “competitor” means a Person which derives greater than 50% of its revenues from the same or a similar line of business as any Borrower or any Affiliate of such Person.

 

(h)          Each Borrower shall be deemed to consent to the addition of a Transferee (and, if applicable, the resulting adjustment of the Revolving Percentages arising from the purchase by a Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents), to the extent such Transferee is Agent or a Lender, or an Affiliate of Agent or any Lender, or to the extent such addition is made during the continuance of any Default or Event of Default.  If no Default or Event of Default is continuing at the time which a Transferee is selected and such Transferee is not Agent or a Lender,
or an Affiliate of Agent or any Lender, the transferor Lender shall provide Borrowing Agent with notice of the identity of the proposed Transferee and a five (5) Business Day period to object the identity of the proposed Transferee on any reasonable grounds.  If Borrowing Agent asserts no reasonable written objection to the identity of the proposed Transferee during such period, Borrowers will be deemed to have consented to the addition of such Transferee.  U.S. Bank National Association is an approved Transferee and shall not be subject to the foregoing notice and objection period.

 

16.4.      Application of Payments.  Agent shall have the continuing and exclusive right to apply or reverse and re-apply any payment and any and all proceeds of Collateral to any portion of the Obligations.  To the extent that any Borrower makes a payment or Agent or any Lender receives any payment or proceeds of the Collateral for any Borrower’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable
cause, then, to such extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Agent or such Lender.

 

  

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16.5.      Indemnity.  Each Borrower shall indemnify Agent, each Lender and each of their respective officers, directors, Affiliates, attorneys, employees and agents from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) which may be imposed on, incurred by, or asserted against Agent or any Lender in any claim, litigation, proceeding or investigation instituted or conducted by any Governmental Body or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not Agent or any Lender is a party thereto, except to the extent that any of the foregoing arises out of the willful misconduct or gross negligence of the party being indemnified (as determined by a court of competent jurisdiction in a final and non-appealable judgment).  Without limiting the generality of the foregoing, this indemnity shall extend to any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including reasonable fees and disbursements of counsel) asserted against or incurred by any of the indemnitees described above in this Section 16.5 by any Person under any Environmental Laws or similar laws by reason of any
Borrower’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials, including Hazardous Substances and Hazardous Waste, or other Toxic Substances.  Additionally, if any taxes (excluding taxes imposed upon or measured solely by the net income of Agent and Lenders, but including any intangibles taxes, stamp tax, recording tax or franchise tax) shall be payable by Agent, Lenders or Borrowers on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the Other Documents, or the creation or repayment of any of the Obligations hereunder, by reason of any Applicable Law now or hereafter in effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for payment of) all such taxes, including interest and penalties thereon, and will indemnify and hold the
indemnitees described above in this Section 16.5 harmless from and against all liability in connection therewith.

 

16.6.      Notice.  Any notice or request hereunder may be given to Borrowing Agent or any Borrower or to Agent or any Lender at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section.  Any notice, request, demand, direction or other communication (for purposes of this Section 16.6 only, a “Notice”) to be given to or made upon any party hereto under any provision of this Loan Agreement shall be given or made
by telephone or in writing (which includes by means of electronic transmission (i.e., “e-mail”) or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a “Website Posting”) if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 16.6) in accordance with this Section 16.6.  Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on Section 16.6 or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section
16.6.  Any Notice shall be effective:

 

(a)           In the case of hand-delivery, when delivered;

 

  

109

  

 

(b)          If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested;

 

(c)          In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day);

 

(d)          In the case of a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;

 

(e)          In the case of electronic transmission, when actually received;

 

(f)           In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 16.6; and

 

(g)          If given by any other means (including by overnight courier), when actually received.

 

Any Lender giving a Notice to Borrowing Agent or any Borrower shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of its receipt of such Notice.

 

	 	
(A)

	
If to Agent or PNC at:

 

PNC Bank, National Association

201 East Fifth Street, 2nd Floor

Mail Stop: B1-BM01-02-1

Cincinnati, Ohio  45202-4135

	
  

	
Attention:

	
Jeffrey Swartz

	
  

	
Telephone:

	
(513) 651-8472

	
  

	
Facsimile:

	
(513) 651-7078

with a copy to:

 

PNC Bank, National Association

PNC Agency Services

PNC Firstside Center

500 First Avenue, 4th Floor

Pittsburgh, Pennsylvania 15219

	
  

	
Attention:

	
Lisa Pierce

	
  

	
Telephone:

	
(412) 762-6442

	
  

	
Facsimile:

	
(412) 762-8672

 

  

110

  

 

with an additional copy to:

 

Frost Brown Todd LLC

201 East Fifth Street, Suite 2200

Cincinnati, Ohio   45202

	
  

	
Attention:

	
Michael J. O’Grady

	
  

	
Telephone:

	
(513) 651-6482

	
  

	
Facsimile:

	
(513) 651-6981

 

	
  

	
(B)

	
If to a Lender other than Agent, as specified on the signature pages hereof, with a copy to Agent;

 

	 	
(C)

	
If to Borrowing Agent or any Borrower:

 

Rocky Brands, Inc.

39 East Canal Street

Nelsonville, Ohio 45764

	
  

	
Attention:

	
James E. McDonald

	
  

	
Telephone:

	
(740) 753-9100, ext. 2543

	
  

	
Facsimile:

	
(740) 753-5555

with a copy to:

Porter, Wright, Morris & Arthur LLP

41 South High Street

Columbus, Ohio 43215

	
  

	
Attention:

	
Timothy E. Grady

	
  

	
Telephone:

	
(614) 227-2105

	 	
Facsimile: 

	
(614) 227-2100

16.7.      Survival.  The obligations of Borrowers under Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7, shall survive termination of this Agreement and the Other Documents and payment in full of the Obligations.

 

16.8.      Severability.  If any part of this Agreement is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.

 

  

111

  

 

16.9.      Expenses.  All reasonable costs and expenses including reasonable attorneys’ fees (including the allocated costs of in house counsel) and disbursements incurred by Agent on its behalf or on behalf of Lenders, or by any Lender on its own behalf: (a) in all efforts made to enforce payment of any Obligation or effect collection of any Collateral, or (b) in connection with the entering into, modification, amendment, administration and enforcement of this Agreement or any consents or waivers hereunder and all related agreements, documents and instruments, or (c) in instituting, maintaining,
preserving, enforcing and foreclosing on Agent’s security interest in or Lien on any of the Collateral, or maintaining, preserving or enforcing any of Agent’s or any Lender’s rights hereunder and under all related agreements, documents and instruments, whether through judicial proceedings or otherwise, or (d) in defending or prosecuting any actions or proceedings arising out of or relating to Agent’s or any Lender’s transactions with any Borrower, Guarantor, or any of their respective Subsidiaries, or (e) in connection with any advice given to Agent or any Lender with respect to its rights and obligations under this Agreement and all related agreements, documents and instruments, may be charged to Borrowers’ Account and shall be part of the Obligations.  Notwithstanding the foregoing, no Borrower shall be responsible for any legal fee of
Agent’s U.S. counsel incurred to initially establish this Agreement and the Other Documents which exceeds $50,000 in the aggregate.  Such limitation shall not apply to out-of-pocket expenses of U.S. counsel or legal fees or expenses of counsel located outside of the U.S. In addition, Agent may cause appraisals of the Real Property, Inventory and Equipment of Borrowers to be conducted from time to time at Borrowers’ sole cost.  Agent’s right to conduct an Inventory appraisal shall be limited to one (1) such appraisal during any fiscal year.  Inventory appraisals conducted in connection with the establishment of this Agreement, in connection with a Permitted Acquisition, or during the continuance of an Event of Default shall be charged to Borrowers and not be subject to the foregoing limitation.

 

16.10.    Injunctive Relief.  Each Borrower recognizes that, in the event any Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, or threatens to fail to perform, observe or discharge such obligations or liabilities, any remedy at law may prove to be inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate remedy.

 

16.11.    Consequential Damages.  Neither Agent nor any Lender, nor any agent or attorney for any of them, shall be liable to any Borrower or any Guarantor (or any Affiliate of any such Person) for indirect, punitive, exemplary or consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations or as a result of any transaction contemplated under this Agreement or any Other Document.

 

16.12.    Captions.  The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this Agreement.

 

16.13.    Counterparts; Facsimile Signatures.  This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts 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.

 

16.14.    Construction.  The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto.

 

  

112

  

 

16.15.    Confidentiality; Sharing Information.  Agent, each Lender and each Transferee shall hold all non-public information obtained by Agent, such Lender or such Transferee pursuant to the requirements of this Agreement in accordance with Agent’s, such Lender’s and such Transferee’s customary procedures for handling confidential information of this nature; provided, however, Agent, each Lender and each Transferee may disclose such confidential information (a) to its examiners, Affiliates, outside auditors, counsel and other
professional advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as required or requested by any Governmental Body or representative thereof or pursuant to legal process; provided, further that (i) unless specifically prohibited by Applicable Law, Agent, each Lender and each Transferee shall use its reasonable best efforts prior to disclosure thereof, to notify the applicable Borrower of the applicable request for disclosure of such non-public information (A) by a Governmental Body or representative thereof (other than any such request in connection with an examination of the financial condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant to legal process and (ii) in no event shall Agent, any Lender or any Transferee be obligated to return any materials furnished by any
Borrower other than those documents and instruments in possession of Agent or any Lender in order to perfect its Lien on the Collateral once the Obligations have been paid in full and this Agreement has been terminated.  Each Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to such Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes each Lender to share any information delivered to such Lender by such Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provisions of this Section 16.15 as if it were a Lender hereunder.  Such authorization shall survive the repayment of the other Obligations and the termination of this Agreement.

 

16.16.    Publicity.  Each Borrower and each Lender hereby authorizes Agent, with the prior approval of Borrowing Agent, to make appropriate announcements of the financial arrangement entered into among Borrowers, Agent and Lenders, including announcements which are commonly known as tombstones, in such publications and to such selected parties as Agent shall in its sole and absolute discretion deem appropriate.

 

16.17.    Certifications From Banks and Participants; US PATRIOT Act.  Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States of America or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA PATRIOT Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank)
shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such Lender is not a “shell” and certifying to other matters as required by Section 313 of the USA PATRIOT Act and the applicable regulations: (1) within 10 days after the Closing Date, and (2) as such other times as are required under the USA PATRIOT Act.

 

16.18.    Language.  The parties have requested that this Agreement and the Other Documents be drawn up in the English language.  Les parties ont requis que cette convention ainsi que tous les documents qui y sont envisagés ou qui s'y rapportent soient rédigés en langue anglaise.

 

  

113

  

 

16.19.    Judgment Currency.  If for the purpose of obtaining judgment in any court it is necessary to convert an amount due hereunder in the currency in which it is due (the "Original Currency") into another currency (the "Second Currency"), the rate of exchange applied shall be that at which, in accordance with normal banking procedures, Agent could purchase in the foreign exchange market, the Original Currency with the Second Currency on the date two (2) Business Days preceding that on
which judgment is given. Each Borrower agrees that its obligation in respect of any Original Currency due from it hereunder shall, notwithstanding any judgment or payment in such other currency, be discharged only to the extent that, on the Business Day following the date Agent receives payment of any sum so adjudged to be due hereunder in the Second Currency, Agent may, in accordance with normal banking procedures, purchase, in the foreign exchange market, the Original Currency with the amount of the Second Currency so paid; and if the amount of the Original Currency so purchased or could have been so purchased is less than the amount originally due in the Original Currency, each Borrower agrees as a separate obligation and notwithstanding any such payment or judgment to indemnify Agent and the Lenders against such loss.

 

[Signature Pages Follow]

 

  

114

  

 

Each of the parties has signed this Revolving Credit, Guaranty, and Security Agreement as of the day and year first above written.

 

	  	
Borrowers:

	 	 
	  	
Rocky Brands, Inc.,

	  	
Lifestyle Footwear, Inc.,

	  	
Rocky Brands Wholesale LLC,

	  	
Lehigh Outfitters, LLC,

	  	
Rocky Brands International, LLC,

	  	
Rocky Canada, Inc.

	  	  	  
	  	
By:

	
/s/ James E. McDonald

	  	  	
  James E. McDonald

	  	  	
  Executive Vice President and Chief

  Financial Officer of each Borrower

 

  

115

  

 

Signature Page to Revolving Credit, Guaranty, and Security Agreement

 

	  	
PNC Bank, National Association

	  	
as Agent and Lender

	  	  	  
	  	
By:

	
/s/ Gerald R. Kirpes

	  	  	
Gerald R. Kirpes

	  	  	
Senior Vice President

	 	 
	  	
Address:

	  	  
	  	
PNC Bank, National Association

	  	
201 East Fifth Street, 2nd Floor

	  	
Mail Stop: B1-BM01-02-1

	  	
Cincinnati, Ohio  45202-4135

	  	
Attention:

	
Jeffrey Swartz

	  	
Telephone:

	
(513) 651-8472

	  	
Facsimile:

	
(513) 651-7078

	 	 	 
	 	
Commitment Percentage:  100%

 

  

116

  

EXHIBIT 1.2

PNC Business Credit Revolving Credit, Term Loan and Security Agreement

Borrowing Base Certificate

 

 

	
Borrowers: Rocky Brands, Inc.

	  	  	
Certificate #

	  
	
                   Lehigh Outfitters, LLC

	  	  	
Period Ended

	
__/__/__

	
                   Lifestyle Footwear, Inc.

	  	  	  	  
	
                   Rocky Brands Wholesale, LLC

	  	  	  	  
	
                   Rocky Brands International, LLC

	  	  	  	  
	
                   Rocky Canada, Inc.

	  	  	  	  
	 	 
	
To induce PNC Bank, N. A. ("Agent") to make a loan advance pursuant to the Revolving Credit, Guaranty and Security Agreement

	  
	
dated as of October 20, 2010, as well as amendments between the undersigned and Lender, we hereby certify as of the above date, the following:

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	
From

	
To

	  	  	  
	
Accounts Receivable

	
1

	
Previous Certificate AR Balance

	
__/__/__

	  	  	
 $                     -

	  
	  	
2

	
Gross Sales Since Last Certificate

	
__/__/__

	
__/__/__

	
+

	
 $                     -

	  
	  	
3

	
Collections Since Last Certificate

	
__/__/__

	
__/__/__

	
-

	
 $                     -

	  
	  	
4

	
Credits Since Last Certificate

	
__/__/__

	
__/__/__

	
-

	
 $                     -

	  
	  	
5

	
Other Adjustments

	
__/__/__

	
__/__/__

	
+/-

	
 $                     -

	  
	  	
6

	
Total AR Now Being Certified to Bank

	  	  	  	
 $                     -

	  
	  	
7

	
Ineligible AR Per Attached

	  	
__/__/__

	
-

	
 $                     -

	  
	  	
7.5

	
Government receivables included in ineligible

	  	  	
 $                     -

	  
	  	
8

	
Net Eligible AR

	  	  	  	
 $                     -

	  
	  	
9

	
AR Availability

	
__%

	  	  	  	
 $                     -

	  	  	  	  	  	  	  	  	  
	  	
c

	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
Inventory

	
10

	
Gross Inventory As Of

	  	
__/__/__

	  	
 $                     -

	  
	  	
11

	
Ineligible Inventory

	  	
__/__/__

	
-

	
 $                     -

	  
	  	
12

	
Net Eligible Inventory

	  	  	  	
 $                     -

	  
	  	
13

	
Inventory Availability:

	
Various Adv Rates - See Inventory Report detail attached

	  	  	
 $                     -

	  	
14

	
Inventory  Sub Limit

	  	  	  	
 $                     -

	  
	  	
15

	
Suppressed Inventory Availability

	  	  	  	  	
 $                     -

	  	
16

	
Adjusted Inventory Availability

	  	  	  	  	
 $                     -

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	
17

	
Gross Combined  Availability

	  	  	  	  	
 $                     -

	  	
18

	
Availability Block

	  	  	  	  	
 $                     -

	  	
19

	
Adjusted Availability Before Line Limit

	  	  	  	  	
 $                     -

	  	
20

	
Revolver Limit

	  	  	  	
 $                     -

	  
	  	
21

	
Supressed Line Availability

	  	  	  	  	
 $                     -

	  	
22

	
Net Loan Value

	  	  	  	  	
 $                     -

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
Loans & Advances

	
23

	
Revolver Loan Balance Per Previous Certificate

	  	  	  	
 $                     -

	  	
24

	
Net AR Collections Since Last Certificate

	  	  	
-

	  	
 $                     -

	  	
25

	
Non-AR Collections Since Last Certificate

	  	  	
-

	  	
 $                     -

	  	
26

	
Advance Requested

	  	  	
+

	  	
 $                     -

	  	
27

	
Misc. Loan Adjustment

	  	  	
+/-

	  	
 $                     -

	  	
28

	
New Loan Balance

	  	  	  	  	
 $                     -

	  	
29

	
Reserves for Letters of Credit, BA's & Other

	  	
+

	  	
 $                     -

	  	
30

	
Rent Reserves

	  	  	  	  	
 $                     -

	  	
31

	
Royalty Reserve

	  	  	
+

	  	
 $                     -

	  	
32

	
Revolver Loans & Reserves

	  	  	  	  	
 $                     -

	  	
33

	
Loan Availability

	  	  	  	  	
 $                     -

	  	
34

	
Remaining Revolver Availability

	  	  	  	
 $                     -

	  
	  	  	  	  	  	  	  	  	  
	
The undersigned hereby certifies that the above representations are true and correct and subject to all conditions of the Loan and Security Agreement.

	
We also represent that to the best of our knowledge, there does not exist a condition which may precipitate a default under the terms of

	  
	
 the Loan and Security Agreement or any amendment thereto.

	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	
Authorized Signature, Title

	  	  	  	
Date

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	
Name of Authorized Signer

	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	
 For Bank Use Only

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  
	  	  	  	  	
Date of Advance

	  	  	
Amount

 

  

 

  

 

Exhibit 2.1(a)

REVOLVING CREDIT NOTE

	
$70,000,000

	
Dated as of: October 20, 2010   

This Revolving Credit Note is executed and delivered under and pursuant to the terms of that certain Revolving Credit, Guaranty, and Security Agreement dated as of the date hereof (as amended, restated, supplemented or modified from time to time, the “Credit Agreement”) by and among 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 federal laws of Canada (“Rocky Canada”) (Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International, and Rocky Canada, collectively, the “Borrowers” and individually a “Borrower”), the financial institutions which are now or which hereafter become a party thereto (collectively, the “Lenders” and individually a “Lender”) and PNC Bank, National Association (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).  Capitalized terms not otherwise defined herein shall have the meanings provided in the Credit Agreement.

FOR VALUE RECEIVED, each Borrower hereby promises to pay to the order of PNC, at the office of Agent located at PNC Bank Center, Two Tower Center, 8th Floor, East Brunswick, New Jersey 08816 or at such other place as Agent may from time to time designate to Borrower in writing:

(i)           the principal sum of SEVENTY MILLION Dollars ($70,000,000) or, if different, from such amount, the unpaid principal balance of PNC’s Commitment Percentage of the Revolving Advances as may be due and owing under the Credit Agreement, payable in accordance with the provisions of the Credit Agreement, subject to acceleration upon the occurrence of an Event of Default under the Credit Agreement or earlier termination of the Credit Agreement pursuant to the terms thereof; and

(ii)          interest on the principal amount of this Note from time to time outstanding until such principal amount is paid in full at the applicable Revolving Interest Rate in accordance with the provisions of the Credit Agreement.  In no event, however, shall interest exceed the maximum interest rate permitted by law.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, interest shall be payable at the Default Rate in accordance with the Credit Agreement.

This Note is one of the Revolving Credit Notes referred to in the Credit Agreement and is secured, inter alia, by the liens granted pursuant to the Credit Agreement and the Other Documents, is entitled to the benefits of the Credit Agreement and the Other Documents and is subject to all of the agreements, terms and conditions therein contained.

 

  

 

  

This Note is subject to mandatory prepayment and may be voluntarily prepaid, in whole or in part, on the terms and conditions set forth in the Credit Agreement.

If an Event of Default under Section 10.7 of the Credit Agreement shall occur, then this Note shall immediately become due and payable, without notice, together with reasonable attorneys’ fees if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof.  If any other Event of Default shall occur under the Credit Agreement or any of the Loan Documents, which is not cured within any applicable grace period, then this Note may, as provided in the Credit Agreement, be declared to be immediately due and payable, without notice, together with reasonable attorneys’ fees, if the collection hereof is placed in the
hands of an attorney to obtain or enforce payment hereof.

This Note shall be construed and enforced in accordance with the laws of the State of Ohio.

Each Borrower expressly waives any presentment, demand, protest, notice of protest, or notice of any kind except as expressly provided in the Credit Agreement.

SIGNATURE PAGE FOLLOWS

  

2

  

 

SIGNATURE PAGE TO REVOLVING CREDIT NOTE

	  	
Rocky Brands, Inc.

	  	
Lifestyle Footwear, Inc.

	  	
Rocky Brands Wholesale LLC

	  	
Lehigh Outfitters, LLC

	  	
Rocky Brands International, LLC

	  	
Rocky Canada, Inc.

	  	  
	  	
By:

	  
	  	  	
James E. McDonald

	  	  	
Executive Vice President and

	  	  	
Chief Financial Officer of each Borrower

 

  

3

  

 

Exhibit 4.15(j)

 

SECURITY AGREEMENT AND ASSIGNMENT OF GOVERNMENT

CONTRACT UNDER ASSIGNMENT OF CLAIMS ACT OF 1940 AS AMENDED

 

FOR A VALUABLE CONSIDERATION Rocky Brands, Inc., a corporation organized under the laws of the State of Ohio (the “Assignor”) hereby assigns to PNC Bank, National Association, as agent for the Lenders under the Revolving Credit, Guaranty, and Security Agreement by and among Assignor, and the Borrowers and Lenders thereunder, dated as of October 20, 2010 (as amended, restated or modified from time to time, the “Credit Agreement”) whose address is 201
East Fifth Street, 2nd Floor, Mail Stop: B1-BM01-02-1, Cincinnati, Ohio  45202-4135, Attention: Jeffrey Swartz, on behalf of itself, and its successors and assigns (collectively referred to herein as the “Assignee”), as assignee, all of the Collateral described below, to secure the payment and performance of (collectively, the “Obligations”): any and all loans, advances, debts, liabilities, obligations, covenants and duties owing by any Borrower to Lenders or Assignee or to any other direct or indirect subsidiary or affiliate of Assignee or any Lender of any kind or nature, present or future (including any interest or other amounts accruing thereon
after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower, whether or not a claim for post-filing or post-petition interest or other amounts is allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document, (including the Credit Agreement and the Other Documents) whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, under any interest or currency swap, future, option or other similar agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of the
Assignee’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, any and all of any Borrower’s Indebtedness and/or liabilities under the Credit Agreement, the Other Documents or under any other agreement between Assignee or Lenders and any Borrower and any amendments, extensions, renewals or increases and all costs and expenses of
Assignee and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower to Assignee or Lenders to perform acts or refrain from taking any action.

Capitalized terms used in this Assignment and not defined herein shall have the meanings set forth in the Credit Agreement.  This Assignment is an “Other Document” as such term is defined in the Credit Agreement.

 

  

4

  

 

As used in this Assignment, the term “Collateral” means all moneys and claims for money due or to become due to the Assignor from the United States of America (the “Government”), under or arising out of the contract between the Assignor and the Government, dated July 2, 2009, and designated as General Services Administration Blanket Purchase Agreement, BPA No.: GS-07F-BROCB, together with any amendments and supplements thereto (the “Contract”).  The Assignee has or may hereafter, at its
option, from time to time enter into various loan, credit or banking transactions with the Assignor for various sums to finance the Assignor’s performance of the Contract.

 

The Assignor specifically authorizes and directs the Government to make all payments due under the Contract directly to the Assignee and irrevocably appoints the Assignee as it attorney-in-fact to demand, receive, receipt and give acquittance for such amounts which may be or become due or payable or remain unpaid at any time to the Assignor by the Government under and pursuant to the Contract, to endorse any checks, drafts or other orders for the payment of money payable to the Assignor, and, in its discretion, to file any claims or take any action or proceeding, either in its own name or in the name of the Assignor or otherwise, which the Assignee may deem to be
necessary or advisable.  It is expressly understood and agreed, however, that the Assignee shall not be required or obligated in any manner to make any demand or to make any inquiry as to the nature or the sufficiency of any payment received by it or to present or file any claims or take any other action to collect or enforce the payment or any amounts which may have been assigned to it or to which it may be entitled.

 

As and from the date of this Assignment, Assignor hereby agrees that it shall:  (a) take all  reasonable steps to provide for payment by the Government of all amounts payable under the Contract directly to Assignee, including, without limitation:  (i) executing and delivering the Notice of Assignment to the applicable Government contracting officer; and (ii) returning a fully-executed Notice of Assignment to Assignee; (b) take all reasonable steps to perform, observe and permit the exercise and enforcement of the rights of Assignee pursuant to this Assignment; (c) notify Assignee promptly in writing of any breach of this Assignment or the Contract or of non-compliance with any term,
condition or covenant contained in this Assignment or the Contract or any other instrument, document or agreement executed in connection herewith; (d) promptly cure or cause to be cured, any defects in the execution and/or delivery of this Assignment or any of the other agreements, instruments or documents executed pursuant hereto or any defects in the validity or enforceability of this Assignment or any other instrument or agreement in connection herewith, and at its own expense, execute and deliver or cause to be executed or delivered, all such instruments, agreements and other documents as Assignee may reasonably require; and (e) to the extent any amount payable under the Contract is paid by the Government to Assignor, hold such amount in trust for Assignee and immediately pay such amount to Assignee or as Assignee may direct.  Until such time as such amount is provided to
Assignee, it shall not be co-mingled with funds of Assignor.

 

  

5

  

 

The Assignor represents and warrants to the Assignee that there is no provision of the Contract which states that the Contract or Assignor’s interest therein is not assignable, and that it has not transferred or assigned the Contract or any right or interest in it and has acquired the release of any encumbrances on the Contract or right or interest in it, and the Assignor agrees that at any time and from time to time, upon the Assignee’s written request, the Assignor will execute and deliver such instruments and documents and do such other acts and things as the Assignee may request in order to further effect the purpose of this
Assignment.  The Assignor covenants and agrees with the Assignee that it will perform all of the terms of the Contract.

 

This Assignment has been delivered and accepted at and will be deemed to have been made in Ohio and will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of Ohio, without regard to conflicts of law principles.  Assignor hereby irrevocably agrees and submits to the exclusive jurisdiction of any state or federal court located within Ohio, or, at the option of Assignee in its sole discretion, of any state or federal court(s) located within any other county, state or jurisdiction in which Assignee at any time or from time to time chooses in its sole discretion to bring an action or otherwise exercise a right or remedy, and Assignor
waives any objection based on forum non conveniens and any objection to venue of any such action or proceeding.

 

Executed as of the 20th day of October, 2010.

 

	
Witnesses:

	  	
Assignor:

	  	  	  
	  	  	
Rocky Brands, Inc.

	  	  	  
	  	  	  
	  	  	
By:

	  
	  	  	
James E. McDonald

	  	  	
Executive Vice President and

	  	  	
Chief Financial Officer

  

6

  

 

	
STATE OF OHIO

	
                 )

                                         

                                                 ss.

 

	
COUNTY OF ___________

	
)

 

On this ___ day of October, 2010, acknowledged before me by James E. McDonald, the duly authorized Executive Vice President and Chief Financial Officer of Rocky Brands, Inc., an Ohio corporation, who executed the foregoing instrument on behalf of said corporation.

 

	  	  	  
	 	 	
Notary Public

 

  

7

  

 

NOTICE OF ASSIGNMENT

 

	
To:

	  	  
	  	  	
Date:

	  
	  	  	  
	  	  	  
	  	  	  

 

	
  

	
Re:

	
BPA No.: GS-07F-BROCB

 

Made by the United States of America

 

	  
	
Department

	  
	  
	
Division

	  
	
with

	
Rocky Brands, Inc.

	
(Name of Contractor

	  
	
39 East Canal Street

	  
	
Nelsonville, Ohio  45764

	
(Address of Contractor)

 

	  
	  
	  
	
dated

	  

  

8

  

 

PLEASE TAKE NOTICE that the moneys due or to become due under the contract described above have been assigned to the undersigned pursuant to the provisions of the Assignment of Claims Act of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15.

 

A true copy of the instrument of assignment is attached to this notice.

 

All payments due or to become due under such contract should be made to the assignee.

 

Please return to the undersigned one enclosed copy of this notice with appropriate notations showing the date and hour of receipt and duly signed by the person acknowledging receipt on behalf of the addressee.

 

	  	
Very truly yours,

	  	  
	  	
PNC Bank, National Association, as Agent

	  	  
	  	
By:

	  

	 	 	 
	  	
Its:

	  

	 	 	 
	  	
(Name Printed)

	  

 

  

9

  

 

Receipt is hereby acknowledged of this notice and a copy of the instrument of assignment.

 

These were received at _____________ a.m./p.m. on ___________________.

 

	  	  
	  	  
	
(Signature)

	  
	
On behalf of   

	  
	  	  
	  	  

 

  

10

  

 

Exhibit 8.1(i)

 

FINANCIAL CONDITION CERTIFICATE

 

The undersigned hereby certifies on behalf of Rocky Brands, Inc., a corporation organized under the laws of the State of Ohio, Lehigh Outfitters, LLC, a Delaware limited liability company, Lifestyle Footwear, Inc., a Delaware corporation, Rocky Brands Wholesale LLC, a Delaware limited liability company, Rocky Brands International, LLC, an Ohio limited liability company, and Rocky Canada,
Inc., a corporation formed under the federal laws of Canada, in my capacity as an officer of each of the foregoing (each, a “Borrower” and collectively, the “Borrowers”), and not in my individual capacity, to PNC Bank, National Association, as agent for Lenders (the “Agent”) under the Revolving Credit, Guaranty, and Security Agreement among Agent, and the Borrowers and Lenders thereunder dated as of the date hereof (as amended, restated or modified from time to time, the “Credit Agreement”) that:

 

1.            I am the duly elected, qualified and acting authorized officer of each Borrower.

 

2.            I am familiar with the business and financial affairs of the Borrowers, including, without limiting the generality of the foregoing, the matters hereinafter described.

 

3.            This Certificate is made and delivered to Agent for the purpose of inducing Lenders to advance monies and extend credit and other financial accommodations to the Borrowers pursuant to the Credit Agreement and the other loan documents (together with the Credit Agreement, the “Loan Documents”). All capitalized terms used herein which are not defined shall have the meanings given to them in the Credit Agreement.

 

4.            I have reviewed the following and am familiar with the process pursuant to which they were generated:

 

Consolidated balance sheets of the Borrowers and such other Persons described therein as of December 31, 2009, for the period ended on such date (the “Financial Statements”), accompanied by reports thereon containing opinions without qualification by independent public accountants.

 

  

11

  

 

5.            The Financial Statements fairly present in all material respects the assets, liabilities, and net worth of the Borrowers as of the date of the Financial Statements.

 

6.            Immediately following the execution of the Loan Documents, the Borrowers are Solvent.

 

Dated as of October 20, 2010.

 

	  	
By:

	  
	  	  	
James E. McDonald

	 	 	 
	  	  	
Executive Vice President and Chief Financial Officer of each Borrower

 

  

12

  

 

Exhibit 16.3

COMMITMENT TRANSFER SUPPLEMENT, dated as of _____________, 20__, among PNC Bank, National Association (the “Transferor Lender”), __________ (“Purchasing Lender”), and PNC Bank, National Association, as agent for the Lenders under the Revolving Credit, Guaranty, and Security Agreement described below (in such capacity, the “Agent”).

WITNESSETH

WHEREAS, this Commitment Transfer Supplement is being executed and delivered in accordance with Section 16.3 of that certain Revolving Credit, Guaranty, and Security Agreement dated as of October 20, 2010 among by and among 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 federal laws of Canada (“Rocky Canada”) (Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International, and Rocky Canada, collectively, the “Borrowers” and individually a “Borrower”), the financial institutions which are now or which hereafter become a party thereto (collectively, the “Lenders” and individually a “Lender”) and PNC Bank, National Association (“PNC”), as Agent (as same has been or may be amended, supplemented or otherwise modified in accordance with the terms thereof, the “Credit Agreement”);

WHEREAS, Purchasing Lender wishes to become a Lender party to the Credit Agreement; and

WHEREAS, the Transferor Lender is selling and assigning to Purchasing Lender rights, obligations and commitments under the Credit Agreement;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.           All capitalized terms used herein that are not defined shall have the meanings given to them in the Credit Agreement.

2.           Upon receipt by the Agent of four counterparts of this Commitment Transfer Supplement, to each of which is attached a fully completed Schedule I, and each of which has been executed by the Transferor Lender and Agent, Agent will transmit to Transferor Lender and Purchasing Lender a Transfer Effective Notice, substantially in the form of Schedule II to this Commitment Transfer Supplement (a “Transfer Effective Notice”).  Such Transfer Effective
Notice shall set forth, inter alia, the date on which the transfer effected by this Commitment Transfer Supplement shall become effective (the “Transfer Effective Date”), which date unless otherwise noted therein, shall not be earlier than the first Business Day following the date such Transfer Effective Notice is received.  From and after the Transfer Effective Date, Purchasing Lender shall be a Lender party to the Credit Agreement for all purposes thereof.

 

  

13

  

3.           At or before 12:00 Noon (Eastern time) on the Transfer Effective Date Purchasing Lender shall pay to Transferor Lender, in immediately available funds, an amount equal to the purchase price, as agreed between Transferor Lender and such Purchasing Lender (the “Purchase Price”), of the portion of the Advances being purchased by such Purchasing Lender (such Purchasing Lender’s “Purchased Percentage”) of the outstanding Advances and other amounts owing to the Transferor Lender under the Credit Agreement, and the Note(s).  Effective upon receipt by Transferor
Lender of the Purchase Price from a Purchasing Lender, Transferor Lender hereby irrevocably sells, assigns and transfers to such Purchasing Lender, without recourse, representation or warranty, and Purchasing Lender hereby irrevocably purchases, takes and assumes from Transferor Lender, such Purchasing Lender’s Purchased Percentage of the Advances and other amounts owing to the Transferor Lender under the Credit Agreement and the Note(s) together with all instruments, documents and collateral security pertaining thereto.

4.           Transferor Lender has made arrangements with Purchasing Lender with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by Transferor Lender to such Purchasing Lender of any fees heretofore received by Transferor Lender pursuant to the Credit Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to be paid, and the date or dates of payment, by such Purchasing Lender to Transferor Lender of fees or interest received by such Purchasing Lender pursuant to the Credit Agreement from and after the Transfer Effective Date.

5.           (a)           All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of Transferor Lender pursuant to the Credit Agreement and the Note(s) shall, instead, be payable to or for the account of Transferor Lender and Purchasing Lender, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement.

(b)           All interest, fees and other amounts that would otherwise accrue for the account of Transferor Lender from and after the Transfer Effective Date pursuant to the Credit Agreement and the Note(s) shall, instead, accrue for the account of, and be payable to, Transferor Lender and Purchasing Lender, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement.  In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by any Purchasing Lender,
Transferor Lender and Purchasing Lender will make appropriate arrangements for payment by Transferor Lender to such Purchasing Lender of such amount upon receipt thereof from Borrowers.

6.           Concurrently with the execution and delivery hereof, Transferor Lender will provide to Purchasing Lender conformed copies of the Credit Agreement and all related documents delivered to Transferor Lender.

7.           Each of the parties to this Commitment Transfer Supplement agrees that at any time, and from time to time, upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Commitment Transfer Supplement.

 

  

14

  

8.           By executing and delivering this Commitment Transfer Supplement, Transferor Lender and Purchasing Lender confirm to and agree with each other, Agent and Lenders as follows:  (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any security interests, liens or adverse claim, Transferor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by Borrowers in or in connection with the Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the Note(s) or any other instrument or document furnished pursuant thereto;  (ii) Transferor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or the performance or observance by Borrowers of any of their Obligations under the Credit Agreement, the Note(s) or any other instrument or document furnished pursuant hereto;  (iii)  Purchasing Lender confirms that it has received a copy of the Credit Agreement, together with copies of such financial statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment Transfer Supplement; (iv) Purchasing Lender will, independently and without reliance upon
Agent,  Transferor Lender or any other Lenders and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement;  (v)  Purchasing Lender appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the terms thereof;  (vi) Purchasing Lender agrees that it will perform all of its respective obligations as set forth in the Credit Agreement to be performed by each as a Lender; and (vii) Purchasing Lender represents and warrants to Transferor Lender, Lenders, Agent, and Borrowers that it is either (x) entitled to the benefits of an  income tax treaty with the United States of America that provides for an exemption from the
United States withholding tax on interest and other payments made by Borrowers under the Credit Agreement and Other Documents or (y) is engaged in trade or business within the United States of America.

9.           Schedule I hereto sets forth the revised Commitment Percentages of Transferor Lender and the Commitment Percentage of Purchasing Lender as well as administrative information with respect to Purchasing Lender.

10.         This Commitment Transfer Supplement shall be governed by, and construed in accordance with, the laws of the State of Ohio.

[SIGNATURES TO FOLLOW ON SEPARATE PAGE]

 

  

15

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer Supplement to be executed by their respective duly authorized officers on the date set forth above.

	  	
PNC BANK, NATIONAL ASSOCIATION

	  	
as Transferor Lender

	  	  
	  	
By:

	  
	  	
Print Name:

	  
	  	
Title:

	  
	  	  
	 	  
	  	
as Purchasing Lender

	  	  
	  	
By:

	  
	  	
Name:

	  
	  	
Title:

	  
	  	  
	  	
PNC BANK, NATIONAL ASSOCIATION

	  	
as Agent

	  	  
	  	
By:

	  
	  	
Print Name:

	  
	  	
Title:

	  

Signature Page to Commitment Transfer Supplement

 

  

 

  

SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT

LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS

	
PNC Bank, National Association

	
Revised Commitment Amount

 

Revised Commitment Percentage

	
$

 

%

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	
_______________

	
 

Commitment Amount

 

Revolving Percentage

	
 

$

 

%

	
 

Addresses for Notices for

 

_______________

_______________

_______________

Attention: _______

Telephone:

Telecopier:

 

cc:  Borrowing Agent

	  	  

  

2

  

 

SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT

[Form of Transfer Effective Notice]

To:                                          , as Transferor Lender and                                                                                    , as Purchasing Lender:

The undersigned, as Agent under the Revolving Credit, Guaranty, and Security Agreement dated as of October 20, 2010 among 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 federal laws of Canada (“Rocky Canada”) (Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International, and Rocky Canada, collectively, the “Borrowers” and individually a “Borrower”), the financial institutions which are now or which hereafter become a party thereto (collectively, the “Lenders” and individually a “Lender”) and PNC Bank, National Association (“PNC”), as Agent (as same has been or may be amended, supplemented or otherwise modified in accordance with the terms thereof, the “Credit Agreement”), acknowledges receipt of four (4) executed counterparts of a completed Commitment Transfer Supplement in the form attached hereto.  [Note:  Attach copy of Commitment Transfer
Supplement.]  Terms defined in such Commitment Transfer Supplement are used herein as therein defined.

Pursuant to such Commitment Transfer Supplement, you are advised that the Transfer Effective Date will be [Insert date of Transfer Effective Notice].

	  	
PNC BANK, NATIONAL ASSOCIATION,

	  	
as Agent

	  	  
	  	
By:

	  
	  	
Print Name:

	  
	  	
Title:

	  

ACCEPTED FOR RECORDATION IN REGISTER:

cc:  Borrowing Agent

  

1

  

 

Transfer Effective Notice

To:  PNC Bank, National Association, as Transferor Lender and ______________, as Purchasing Lender:

The undersigned, as Agent under the Revolving Credit, Guaranty, and Security Agreement dated as of October 20, 2010 among 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 federal laws of Canada (“Rocky Canada”) (Parent, Lehigh, Lifestyle, Rocky Wholesale, Rocky International, and Rocky Canada, collectively, the “Borrowers” and individually a “Borrower”), the financial institutions which are now or which hereafter become a party thereto (collectively, the “Lenders” and individually a “Lender”) and PNC Bank, National Association (“PNC”), as Agent (as same has been or may be amended, supplemented or otherwise modified in accordance with the terms thereof, the “Credit Agreement”), acknowledges receipt of four (4) executed counterparts of a completed Commitment Transfer Supplement in the form attached hereto.

Pursuant to such Commitment Transfer Supplement, you are advised that the Transfer Effective Date will be ____________.

	  	
PNC BANK, NATIONAL ASSOCIATION,

	  	
as Agent

	  	  
	  	
By:

	  
	  	
Print Name:

	  
	  	
Title:

	  

 

ACCEPTED FOR RECORDATION IN REGISTER:

 

  

2

  

 

SCHEDULES TO REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT

 

Dated as of October 20, 2010

 

Introduction:

 

For purposes of this introduction, the term “Schedules” shall include the following:

 

	
SCHEDULE 1.2(a)

	
-

	
Permitted Encumbrances

	  	  	  
	
SCHEDULE 4.5

	
-

	
Real Property, Equipment, Books and Records, and Inventory Locations

	  	  	  
	
SCHEDULE 4.11

	
-

	
Insurance

	  	  	  
	
SCHEDULE 4.15 (c)

	
-

	
Chief Executive Offices and Location of Books and Records

	  	  	  
	
SCHEDULE 4.15 (h)

	
-

	
Deposit and Investment Accounts

	  	  	  
	
SCHEDULE 4.15 (j)

	
-

	
Government Contracts

	  	  	  
	
SCHEDULE 5.1

	
-

	
Consents

	  	  	  
	
SCHEDULE 5.2(a)

	
-

	
States of Qualification and Good Standing

	  	  	  
	
SCHEDULE 5.2 (b)

	
-

	
Equity Interests; Subsidiaries

	  	  	  
	
SCHEDULE 5.4

	
-

	
Federal Tax Identification Number

	  	  	  
	
SCHEDULE 5.5(a)

	
-

	
Financial Projections

	  	  	  
	
SCHEDULE 5.6

	
-

	
Prior Names

	  	  	  
	
SCHEDULE 5.7

	
-

	
OSHA and Environmental Compliance

	  	  	  
	
SCHEDULE 5.8(d)

	
-

	
ERISA Plans

	  	  	  
	
SCHEDULE 5.9

	
-

	
Intellectual Property, Source Code Escrow Agreements

	  	  	  
	
SCHEDULE 5.10

	
-

	
Licenses and Permits

	  	  	  
	
SCHEDULE 5.12

	
-

	
Material Contracts

	  	  	  
	
SCHEDULE 5.14

	
-

	
Labor Disputes

  

3

  

 

	
SCHEDULE 7.3

	
-

	
Guarantees

	  	  	  
	
SCHEDULE 7.8

	
-

	
Indebtedness

 

Unless otherwise defined in these Schedules, all capitalized terms used herein shall have the meanings ascribed to them in the Revolving Credit, Guaranty and Security Agreement dated October 20, 2010 (the “Agreement”) by, between and among Rocky Brands, Inc., Lifestyle Footwear, Inc., Rocky Brands Wholesale LLC, Lehigh Outfitters, LLC, Rocky Brands International, LLC, and Rocky Canada, Inc. (collectively, the “Borrowers”), the Guarantors (as defined in the Agreement), the Lenders (as defined in the Agreement), and PNC Bank, National Association, in its capacity as agent for the Lenders (hereinafter referred to in such capacity as the
“Agent”).

 

Matters reflected in these Schedules are not necessarily limited to matters required by the Agreement to be reflected in the Schedules. Such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature. In no event shall the listing of such matters in these Schedules be deemed or interpreted to broaden or otherwise amplify the Borrowers’ representations, warranties, covenants or agreements contained in the Agreement.

 

The headings contained in these Schedules are for reference purposes only and shall not affect in any way the meaning or interpretation of the Agreement or these Schedules.  A disclosure with respect to any one matter contained herein shall be deemed a disclosure with respect to all other matters.

 

  

4

  

 

Schedule 1.2(a)

 

Permitted Encumbrances

 

	
A.

	
All Loan Parties

Liens on real estate in which a Loan Party is lessee

	
B.

	
Rocky Brands, Inc.

 

	
Secured Party

	
Collateral

	
GE Capital Business Asset Funding Corporation

	
Real Estate, fixtures and other property in connection with real properties in Athens County and Hocking County, Ohio, including without limitation that collateral further described in Financing Statement number AP0207801 filed with the Ohio Secretary of State, Financing Statement number 200000000069/200000000508 filed with the Hocking County, Ohio Recorder, Financing Statement numbers 20000000000-1/20000000000-2 and 20000000000-3 /20000000000-8 filed with the Athens County, Recorder, and in certain Open-End Mortgages, Security Agreements, Assignments of Rents and Leases and Fixture Filings in Hocking and Athens Counties.

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Ohio UCC File No. OH00085290266 (to be released pursuant to payoff letter)

	
Laminar Direct Capital L.P., as Agent

	
All business assets pursuant to Ohio UCC File No. OH00115607115 (to be released pursuant to payoff letter)

	
Worthern Industries

	
Leased glue machines

	
W.L. Gore

	
Leased centrifugal testers ES & FS, seam sealers, boot dryers

	
Xerox Capital Services LLC

	
DC242 (2); WCP265; W5150 (3); W5135 (2), W5665 (2), W5655 (3)

	
Dell Financial Services, L.P.

	
Computer equipment and peripherals financed pursuant to a certain revolving credit account, insurance and other proceeds

	
Androscoggin Savings Bank and Pamco Machine Company, Inc.

	
Toe laster and proceeds

  

 

  

 

	
Pitney Bowes Credit Corporation

	
Leased equipment further described in Financing Statement number 1995001177 filed in Broome County, NY

	
Bank of America

	
Cash Collateral to secure Bank of America letters of credit in favor of Gelco Corporation and Pacific Employers Insurance Company

	
Crown Credit

	
Leased equipment (forklifts and batteries) pursuant to Ohio UCC File No. OH00135740666

	
USM

	
High Speed Stitcher, Heel Laster

	
Bank of America

	
Lien on Cash Collateral Account

 

	
C.

	
Lifestyle Footwear, Inc.

 

	
Secured Party

	
Collateral

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Delaware UCC File No. 5003316 8

(to be released pursuant to payoff letter)

	
Laminar Direct Capital L.P., as Agent

	
All business assets pursuant to Delaware UCC File No. 2007 1977528 (to be released pursuant to payoff letter)

 

	
D.

	
Rocky Brands Wholesale LLC

 

	
Secured Party

	
Collateral

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Delaware UCC File No. 5003304 4

(to be released pursuant to payoff letter)

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Delaware UCC File No. 5003310 1

(to be released pursuant to payoff letter)

  

 

  

 

	
Secured Party

	
Collateral

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Delaware UCC File No. 5003313 5

(to be released pursuant to payoff letter)

	
Laminar Direct Capital L.P., as Agent

	
All business assets pursuant to Delaware UCC File No. 2007 1978096 (to be released pursuant to payoff letter)

 

	
E.

	
Lehigh Outfitters, LLC

 

	
Secured Party

	
Collateral

	
Navistar Leasing Company Hardco Leasing Company, Inc.

	
Various leased motor vehicles

	
Key Equipment Finance

	
Various leased motor vehicles (In process of purchasing these vehicles)

	
Xerox

	
W5632, W5665, W5150

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Delaware UCC File No. 5003297 0

(to be released pursuant to payoff letter)

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Delaware UCC File No. 5003302 8

(to be released pursuant to payoff letter)

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Delaware UCC File No. 5003305 1

(to be released pursuant to payoff letter)

	
Laminar Direct Capital L.P., as Agent

	
All business assets pursuant to Delaware UCC File No. 2007 1978104 (to be released pursuant to payoff letter)

  

 

  

 

	 	
F. 

	
Rocky Brands International, LLC

 

	
Secured Party

	
Collateral

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Ohio UCC File No. OH00130636872 (to be released pursuant to payoff letter)

	
GMAC Business Credit LLC, as Agent

	
All business assets pursuant to Ohio UCC File No. OH00130668152 (to be released pursuant to payoff letter)

	
Laminar Direct Capital LLC, as Agent

	
All business assets pursuant to Ohio UCC File No. OH00130798319 (to be released pursuant to payoff letter)

 

	 	
G. 

	
Rocky Canada, Inc.

 

	
 

Secured Party

	
 

Collateral

	
DeLage Landen Financial Services, Inc.

	
Leased equipment

  

 

  

 

Schedule 4.5

 

Real Property, Equipment, Books and Records, and Inventory Locations

 

	
A.

	
Rocky Brands, Inc.

 

	
  

	
1.

	
Owned Real Property

 

39 East Canal Street

Nelsonville, OH  45764

(Chief Executive Office of Rocky Brands, Inc., Rocky Brands Wholesale LLC, Lehigh Outfitters, LLC and Rocky Brands International, LLC)

 

29 Fayette St.

Nelsonville, OH 45764

 

	
  

	
2.

	
Leased Real Property – None

 

	
B. 

	
Lifestyle Footwear, Inc.

 

	
  

	
1.

	
Owned Real Property – None

 

	
  

	
2.

	
Leased Real Property

 

Road 125 KM 3.8 BO Pueblo Industrial Park

Moca, PR  00676-0728

Landlord: Puerto Rico Industrial Development Company

Juan Ramos Aponte, PRIDCO Business Development Officer

P.O. Box 362350, San Juan, PR 00936-2350

Chief Executive Office

 

  

 

  

 

	
C. 

	
Rocky Brands Wholesale LLC

 

	 	
1. 

	
Owned Real Property

 

37601 Rocky Boots Way

Logan, OH  43138

(aka Rt. 33 & Rt. 595, Haydenville, OH)

 

	 	
2. 

	
Leased Real Property

 

Denver Merchandise Mart

451 East 58th Street

Denver, CO  80216

 

	 	
3. 

	
Other Locations

 

FST Logistics (3rd party location)

5400 Renner Road

Columbus, OH 43228

 

  

 

  

 

Various inventory consignment locations with Raven Rock

Its principal office located at South Park Office Complex,

7610 McEwen Rd., Dayton, Ohio 45459

 

	 	
D. 

	
Lehigh Outfitters, LLC

 

	 	
1.

	
Owned Real Property

 

42-45 East Canal Street

Nelsonville, OH 45764

 

901 Franklin Street E

Endicott, NY 13761

(vacant lot)

 

	 	
2. 

	
Leased Real Property

 

7250 Bandini Blvd., Unit 102

Commerce, CA  90040

 

3890 Kipling Street,

Wheat Ridge, CO  80033

 

1130 North Nimitz Highway, Suite A-122

Honolulu, HI  96817

 

  

 

  

 

2415 Monroe Road

DePere, WI  54115

Landlord:  Olson Management

1201 Ohare Blvd., DePere, WI  54115

 

Three Progress Avenue

Nashua, NH 03062

 

3240 Peach Orchard Rd., Suite 6

Augusta, GA  30906

 

703 E. Ordnance Road, Suite 610

Baltimore, MD  21226

 

131 Harbison Blvd.

Columbia, SC  29212

Landlord:  Insite Columbia, L.L.C.

1603 West Sixteenth Street, Oak Brook, IL  60523, Attn:  Ginny Lunsford

 

2837 W. McDowell Road

Phoenix, AZ  85009

 

9001 Spencer Hwy. Suite J

LaPorte, TX 77571

Landlord: Deer Park Station Limited Partnership

Cencor Realty Services, Property Manager, 1800 Bering Drive, Suite 550, Houston, TX  77057, Attn:  Alisha Santos

 

  

 

  

 

2899 Business Park Drive

Building B

Memphis, TN 38118

 

63 Washington Ave

North Haven, CT 06473

 

4450 Steubenville Pike

Pittsburgh, PA  15205

 

	 	
3. 

	
Other Locations

 

FST Logistics (3rd party location)

5400 Renner Road

Columbus, OH 43228

 

	 	
E. 

	
Rocky Canada, Inc.

 

	 	
1. 

	
Owned Real Property - None

 

	 	
2. 

	
Leased Real Property

 

50 Northland Rd., Unit 3

Waterloo, ON N2V 1N2 Canada

 

  

 

  

 

Landlord:  Fercan Developments Inc.

193 King St East #200, Toronto, Ontario  M5A 1J5, Canada;

Attn:  Dean Verzin

Chief Executive Office

 

	 	
F. 

	
Lehigh Outfitters, LLC Storage (Shuttle) Locations:

 

Rhino Self Storage, Unit 398

5405 South Desert Blvd., El Paso, TX  79932

 

Westland Self Storage, Unit 366

4724 S. Creyts Rd., Lansing, MI  48917

 

TRIAD Moving & Storage, Unit F

1227 South Park Drive,

Kernersville, NC  27284

 

U-Store It Storage, Unit M42

920 W. Chatham Street, Cary, NC  27511

 

U-Haul Center, Unit RM #1467

9136 Wilkinson Blvd., Charlotte, NC  28214

 

7th Street Storage, Units 1606/5335

2060 W. 7th Street, St. Paul, MN  55116

 

  

 

  

 

Uncle Bob’s Self Storage Unit #100

22195 Timberlake Road, Lynchburg, VA  24502

 

Lackland Self Storage, Unit #40

777 Mantua Grove Rd.,

West Deptford, NJ  08066

 

Public Storage Unit #5009

4801 South Semoran Ave., Orlando, FL  32822

 

Devon Self Storage, Unit CD49

5330 Jefferson Highway, Harahan, LA  70123

 

Extra Space Storage, Unit 818

7400 West Mcnab Road, North Lauderdale, FL  33068

 

TTS Park Associates Storage, Unit B16

8602 Temple Terrace Hwy., Tampa, FL  33637

 

Public Storage, Unit #3008

20909 Western Avenue, Chicago Heights, IL  60411

 

Public Storage, Unit #5023

20909 Western Avenue, Chicago Heights, IL  60411

 

  

 

  

 

Alabama Storage, Unit #59

1588 Carson Road North, Birmingham, AL  35071

 

Alabama Storage, Unit #99

1588 Carson Road North, Birmingham, AL  35071

 

Advantage Self Storage, Unit 18

2938 Walden Avenue, Depew, NY  14043

 

Storage Zone Self Storage, Unit D20

2939 Chenoweth Road, Akron, OH  44312

 

Airport Mini Storage, Unit 219

4961 Old Grayton Road, Cleveland, OH  44135

 

Aamerican Self Storage, Unit G12

725 Metker, Irving, TX  75062

 

Storage One, Unit 1042

2101 Rock Springs Drive, Las Vegas, NV  89128

 

Storage One, Unit 1043

2101 Rock Springs Drive, Las Vegas, NV  89128

 

Airport Mini Storage, Unit #238

4811 69th Avenue, Millan, IL  61264

 

  

 

  

 

U-Haul Center of Woodside, Unit #2220

2645 Brooklyn Queens Expressway West

Woodside, NY  11377

 

U-Haul Center of Woodside, Unit #2224

2645 Brooklyn Queens Expressway West

Woodside, NY  11377

 

Storage Plus Self Storage, Unit J13- J16

820 East 5400 South, Murray, UT  84118

 

Extra Space Storage, Unit B546

2000 Dolittle Drive, San Leandro, CA  94577

 

Security Public Storage, Unit #224

1401 Woodland Avenue, Modesto, CA  95331

 

AA Northland Stor-All, Unit #420

5150 NW Waukomis Drive, Kansas City, MO  64151

 

Home Improvement Gallery

52 Freemans Bridge Road, Scotia, NY  12302

 

U Store IT Storage, Unit N020

8713 Unicorn Dr., Knoxville, TN  37923

 

  

 

  

 

Safeland Storage

1310 39th Avenue S.E., Puyallup, WA  98374

 

America Stores-IT

774 Malden Road, Mattydale, NY  13211

 

1st American Storage NW, Unit #708

1850 Ephrimiham, Fort Worth, TX  76164

 

General Storage, Unit #C58

1371 S. Zach Hinton Parkway

McDonough, GA 30253

 

Extra Space Storage, Unit 636

4257 Buford Drive, Buford, GA 30518

 

Extra Space Storage, Unit #102

6708 Preston Hwy

Louisville, KY 40219

 

G.           Lehigh Outfitters, LLC Commissary Locations (stores in employer/customer places of business):

 

AK Steel, Store 5381

AK Steel, 4000 US 23 N, Ashland, KY  41101

 

  

 

  

 

AK Steel, Store 5398

1801 Crawford Street

Middletown, OH  45043

 

Alcoa, Store 5388

1100 E. Hunt Road, Bldg. 864

Alcoa, TN  37701

 

Puget Sound Naval Shipyard, Store 5392

1400 Farragut Ave. Bremerton, WA  98314

 

Invista, Camden, Store 5300

US Route 1, H Street, Camden, SC  29020

 

IBM Endicott, Store 5382

c/o Robert Pewterbaugh

1701 North St., Bldg. 42, Floor 1, Endicott, NY  13760

 

IBM Rochester, Store 5355

3605 Hwy 52 North

Rochester, MN  55901

 

Texas Instruments, Store 5389

Lehigh SS Commissary

13536 N. Central Expy, Dallas, TX  75243

 

Texas Instruments, Store 5395

13121 TI BLVD, Dallas, TX  75243

 

GE Wilmington, Store 5360

3901 Castle Hayne Rd., Wilmington, NC  28401

 

  

 

  

 

Schedule 4.11

 

Insurance

 

See Annex 4.11.

 

  

 

  

 

Schedule 4.15(c)

 

Chief Executive Offices and Location of Books and Records

 

Rocky Brands, Inc.

Rocky Brands Wholesale LLC

Lehigh Outfitters, LLC

Rocky Brands International, LLC

 

Chief Executive Office and Location of Books and Records:

39 East Canal Street

Nelsonville, OH 45764

 

Lifestyle Footwear, Inc.

Chief Executive Office:

Road 125 KM 3.8 BO

Pueblo Industrial Park

Moca, PR  00676-0728

 

Location of Books and Records:

39 East Canal Street

Nelsonville, OH 45764

 

  

 

  

 

Rocky Canada, Inc.

    

Chief Executive Office:

50 Northland Rd., Unit 3

Waterloo, ON N2V 1N2

Canada

 

Location of Books and Records:

39 East Canal Street

Nelsonville, OH 45764

  

 

  

 

 

Schedule 4.15(h)

 

Deposit and Investment Accounts

 

	
Comerica Bank

	  
	
P.O. Box 75000

	  
	
Detroit, MI  48275-8149

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Operation Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Controlled Disbursement Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Cash Collateral Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands Retail LLC/Rocky Brands Wholesale LLC

	
Type of Account:

	
Comerica Controlled Disbursement Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
Comerica Merchant Account

	
Account Number:

	  

  

 

  

 

	
First National Bank

	  
	
11 Public Square

	  
	
Nelsonville, OH  45764

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
FNB Operating Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
FNB Credit Card Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Rocky Brands, Inc. Payroll

	
Type of Account:

	
FNB Payroll Account

	
Account Number:

	  
	  	  
	
Bank of America

	  
	
Name on Account:

	
Rocky Brands, Inc.

	
Type of Account:

	
(Security for Letters of Credit)

	  	  
	
Banco Popular

	  
	
P.O. Box 362708

	  
	
San Juan, Puerto Rico  00936-2708

	  

  

 

  

 

	
Name on Account:

	
Lifestyle Footwear Inc.

	
Type of Account:

	
General Account

	
Account Number:

	  
	  	  
	
Name on Account:

	
Lifestyle Footwear Inc.

	
Type of Account:

	
Payroll Account

	
Account Number:

	  
	  	  
	
Comerica Bank Canada (RBC)

	  
	
315 Front St W-3rd Flr

	  
	
Toronto, Ontario, Canada  M5V 3A4

	  
	  	  
	
Name on Account:

	
Rocky Canada, Inc.

	
Type of Account:

	
Operating/Lockbox

	
Account Number:

	  
	  	  
	
Mellon Bank

	  
	
Mellon Client Service Center

	  
	
Room 154-1320

	  
	
500 Ross Street

	  
	
Pittsburgh, PA  15262-0001

	  
	  	  
	
Name on Account:

	
Rocky Brands Retail LLC

	
Type of Account:

	
Lockbox

	
Account Number:

	  

  

 

  

 

Lehigh Outfitters, LLC (formerly Rocky Brands Retail LLC; Lehigh Safety Shoe Co. LLC) shoe center bank accounts:

 

	 	
(a)

	
Bank of Hawaii Account #s

	 	 

	 	
(b)

	
Citizens Bank Account #s

	 	 

	 	
(c)

	
Citywide Bank Account #

	 	 

	 	
(d)

	
First Citizens Bank Account #s

	 	 

	 	
(e)

	
Nicolet National Bank #

	 	 

	 	
(f)

	
Regions Bank #s

	 	 

	 	
(g)

	
M&T Bank #

	 	 

	 	
(h)

	
Wachovia Bank #

	 	 

	 	
(i)

	
Wells Fargo Account #s

	 	 

	 	
(j)

	
JP MorganChase Bank Account #s

	 	 

	 	
(k)

	
The Lyons National Bank Account #

	 	 

	 	
(l)

	
Bank of America #s

	 	 

	 	
(m)

	
PNC Bank #

 

  

 

  

 

Schedule 4.15(j)

 

Government Contracts

 

General Services Administration (GSA) Blanket Purchase Agreement with Rocky Brands, Inc., BPA No. GS-07F-BROCB dated July 2, 2009 for Insulated Combat Boots

 

  

 

  

 

Schedule 5.1

 

Consents

None

 

  

 

  

 

Schedule 5.2(a)

 

States of Qualification and Good Standing

  

A.           Rocky Brands, Inc., an Ohio corporation

OH, VA

 

B.           Lifestyle Footwear, Inc., a Delaware corporation

DE, Puerto Rico

 

C.           Rocky Brands Wholesale LLC, a Delaware limited liability company

DE, AZ, GA, IA, LA, NY, OH, SC, TN, UT and WV

 

D.           Lehigh Outfitters, LLC, a Delaware limited liability company

	
  

	
DE, AL, AZ, AR, CA, CO, CT, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WI, WV, WY, Puerto Rico

 

E.           Rocky Brands International, LLC, an Ohio limited liability company

OH

F.           Rocky Canada, Inc., an Ontario corporation

Ontario

 

  

 

  

 

Schedule 5.2(b)

 

Equity Interests; Subsidiaries

 

1.  Subsidiaries of Rocky Brands, Inc., an Ohio Corporation, Charter Number 821674:

	
Name of

Subsidiary/Jurisdiction of

Organization/Charter Number

	 	
Amount

of Equity Interest

	 	
Percentage

of Equity Interest

	 
	 	 	 	 	 	 	 
	
Lifestyle Footwear, Inc., a Delaware corporation, Charter Number 2109896

	 	
2,000 shares of common stock

	 	 	100	%
	 	 	 	 	 	 	 
	
Rocky Brands Wholesale LLC, a Delaware limited liability company, Charter Number 3182983

	 	
100 Class A Common Units

	 	 	100	%
	 	 	 	 	 	 	 
	
Lehigh Outfitters, LLC, a Delaware limited liability company, Charter Number 3182836

	 	
100 Class A Common Units

	 	 	100	%
	 	 	 	 	 	 	 
	
Rocky Brands International, LLC, an Ohio limited liability company, Charter Number 1776364

	 	
Ownership interests are not certificated

	 	 	100	%
	 	 	 	 	 	 	 
	
Five Star Enterprises Ltd., a Cayman Islands corporation, Charter Number 26239

	 	
5,000 common shares

	 	 	100	%
	 	 	 	 	 	 	 
	
Rocky Canada, Inc., an Ontario corporation, Ontario Corporation No. 1580946

	 	
100 common shares

	 	 	100	%
	 	 	 	 	 	 	 
	
EJ Asia Limited, a Hong Kong corporation

(Inactive, in process of dissolution)

	 	
9,999 ordinary shares

	 	 	99.99	%

 

  

 

  

 

2.  The above Subsidiaries of Rocky Brands, Inc. do not have any Subsidiaries.

	
3.

	
Various promissory installment notes from time to time from customers that are experiencing financial difficulties.

 

  

 

  

 

Schedule 5.4

 

Federal Tax Identification Number

 

A.           Rocky Brands, Inc.:  31-1364046

B.           Lifestyle Footwear, Inc.:  66-0448782

C.           Rocky Brands Wholesale LLC:  22-3709787

D.           Lehigh Outfitters, LLC fka Rocky Brands Retail LLC:  22-3709780

E.           Rocky Brands International, LLC:  26-2704869

F.           Rocky Canada, Inc.: 88284 6603 RC0001

 

  

 

  

 

Schedule 5.5(a)

 

Financial Projections

[See attached]

 

  

 

  

 

Schedule 5.6

 

Prior Names

 

	
CURRENT NAME

 

	 	
PREVIOUS NAMES

After December 31, 2006

	  	 	  
	
Rocky Brands, Inc.

	 	
None

	  	 	  
	
Lifestyle Footwear, Inc.

	 	
None

	  	 	  
	
Rocky Brands Wholesale LLC

	 	
None

	  	 	  
	
Lehigh Outfitters, LLC

	 	
Rocky Brands Retail LLC

	  	 	  
	
Rocky Brands International, LLC

	 	
None

	  	 	  
	
Rocky Canada, Inc.

	 	
None

 

  

 

  

 

Schedule 5.7

 

OSHA and Environmental Compliance

None

  

 

  

 

Schedule 5.8(d)

 

ERISA Plans

 

1. Noncontributory Defined Benefit Pension Plan

2. 401(k) Savings Plan

3.  Rocky Brands, Inc. Retirement Plan

 

  

 

  

 

Schedule 5.9

 

Intellectual Property, Source Code Escrow Agreements

 

See Annex 5.9.

 

  

 

  

 

Schedule 5.10

 

Licenses and Permits

 

	
  

	
(a)

	
Trademark License Agreement between Chromalloy Men’s Apparel Group, Inc (now known as After Six Inc.) and EJ Footwear Corp. dated October 7, 1997, as amended from time to time, including without limitation, a certain Amendment to License Agreement effective June 30, 2010 by After Six LLC and Rocky Brands Wholesale LLC

 

	
  

	
(b)

	
Trademark License Agreement between W. L. Gore & Associates, Inc., W. L. Gore & Associates GmbH, and Rocky Shoes & Boots, Inc. dated July 11, 2001

 

	
  

	
(c)

	
Trademark License among W.L. Gore & Associates, Inc., W.L. Gore & Associates GmbH, Japan Gore-Tex, Inc. and Georgia Boot LLC dated May 20, 2002

 

	
   

	
(d)

	
License Agreement between Williamson-Dickie Manufacturing Company and Georgia Boot LLC dated January 2004, as amended

 

	
  

	
(e)

	
Distribution Agreement (Occupational and Safety Footwear) between Gear Six Technologies LLC and Rocky Brands, Inc. dated June 13, 2006, as amended by (i) a First Amendment to Distribution Agreement dated April 18, 2007 (MICHELIN), and (ii) a Second Amendment to Distribution Agreement  (Occupational and Safety Footwear) dated November 20, 2008

 

	
  

	
(f)

	
Agreement between Rocky Brands, Inc. and FLOW Formal Alliance LLC dated September 1, 2007

 

	
  

	
(g)

	
License Agreement Copyright and Trademark between Haas Outdoors, Inc. and Rocky Brands, Inc. dated May 29, 2009 (Mossy Oak)

 

  

 

  

 

Schedule 5.12

 

Material Contracts

 

None

 

  

 

  

 

Schedule 5.14

 

Labor Disputes

 

None

 

  

 

  

 

Schedule 7.3

 

Guarantees

 

None

 

  

 

  

 

Schedule 7.8

 

Indebtedness

	 	
1.

	
Rocky Brands, Inc. obligations to General Electric Capital Business Asset Funding Corporation:

	 	
a.

	
$1,050,000 promissory note dated December 30, 1999

	 	 	 

	 	
b.

	
$3,750,000 promissory note dated January 28, 2000

 

	 	
2.

	
Letters of Credit

	
  

	
a.

	
Irrevocable Standby Letter of Credit.  Issuer:  Bank of America; Beneficiary: Pacific Employers Insurance Company; Workers Comp; Approximately $800,000; expired on  January 27, 2007,  subject to extension.  Current balance is $50,000.

 

	
  

	
b.

	
Irrevocable Standby Letter of Credit.  Issuer:  Bank of America; Beneficiary: GELCO Corp. D/B/A GE Fleet; Approximately $590,000; expired on March 31, 2009,  subject to extension.  Current balance is $475,000.

 

	 	
3.

	
Capital Lease Obligations

None

	 	
4.

	
Dell Financial Services, L.P. revolving credit account for equipment purchases

	 	
5.

	
Androscoggin Savings Bank and Pamco Machine

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