<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number:
JUNE 30, 1998 0-21026
------------- -------
ROCKY SHOES & BOOTS, INC.
-------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-1364046
---- ----------
(State of Incorporation) (IRS Employer Identification Number)
39 E. CANAL STREET
NELSONVILLE, OHIO 45764
-----------------------
(Address of principal executive offices)
(740) 753-1951
--------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former Fiscal year if
changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
----- ------
5,465,415 common shares, no par value, outstanding at August 5, 1998.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1998 Dec. 31,1997
(Unaudited)
----------- ------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 1,367,642 $ 8,556,883
Trade Receivables 21,419,037 17,789,329
Other Receivables 922,741 475,593
Inventories 44,615,892 32,894,236
Deferred Taxes 1,474,799 1,474,799
Other Current Assets 1,926,908 850,018
------------ -----------
Total Current Assets 71,727,019 62,040,858
Fixed Assets - Net 18,811,036 17,608,454
Other Assets 1,340,897 1,305,526
------------ -----------
Total Assets $ 91,878,952 $80,954,838
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable $ 2,422,748 $ 2,414,936
Current Maturities - Long Term Debt 1,082,879 1,173,840
Accrued Liabilities 2,366,460 2,464,511
------------ -----------
Total Current Liabilities 5,872,087 6,053,287
Long-Term Debt-less current maturities 22,798,863 13,406,962
Deferred Liabilities 2,428,791 2,298,059
------------ -----------
Total Liabilities 31,099,741 21,758,308
Shareholders' Equity:
Preferred Stock, Series A, no par value;
1997 -90,000 shares issued and 82,857
shares outstanding 5,400
Common Stock, no par value;10,000,000 shares
authorized; issued 1998-5,462,165 shares;
1997-5,476,620 shares and outstanding
1998-5,462,165 shares; 1997-5,359,668 shares 41,567,361 42,604,658
Common Stock held in Treasury, at cost (1,226,059)
Retained Earnings 19,211,850 17,812,531
------------ -----------
Total Shareholders' Equity 60,779,211 59,196,530
------------ -----------
Total Liabilities and Shareholders' Equity $ 91,878,952 $80,954,838
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
2
<PAGE> 3
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 21,487,803 $ 22,006,185 $ 34,444,733 $ 34,268,258
Cost of Goods Sold 15,588,467 15,724,912 25,047,865 24,710,110
------------ ------------ ------------ ------------
Gross Margin 5,899,336 6,281,273 9,396,868 9,558,148
Selling, General and Administrative
Expenses 4,161,856 4,141,606 7,233,463 6,718,144
------------ ------------ ------------ ------------
Income From Operations 1,737,480 2,139,667 2,163,405 2,840,004
Other Income (Expense):
Interest Expense (331,044) (641,031) (523,536) (1,106,298)
Other - net 114,850 (23,566) 277,024 (9,135)
------------ ------------ ------------ ------------
Total other - net (216,194) (664,597) (246,512) (1,115,433)
------------ ------------ ------------ ------------
Income Before Income Taxes 1,521,286 1,475,070 1,916,893 1,724,571
Income Taxes 413,654 457,980 517,574 518,502
------------ ------------ ------------ ------------
Net Income $ 1,107,632 $ 1,017,090 $ 1,399,319 $ 1,206,069
============ ============ ============ ============
Net Income Per Share
Basic $ .20 $ .27 $ .26 $ .33
------------ ------------ ------------ ------------
Diluted $ .20 $ .26 $ .25 $ 31
------------ ------------ ------------ ------------
Weighted Average Number of Common
Shares Outstanding
Basic 5,450,414 3,719,014 5,432,112 3,703,024
============ ============ ============ ============
Diluted 5,602,723 3,960,388 5,606,901 3,928,331
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE> 4
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
1998 1997
---- ----
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income $1,399,319 $ 1,206,069
Adjustments to Reconcile Net Income
To Net Cash Used In
Operating Activities:
Depreciation and Amortization 2,033,080 1,362,973
Deferred compensation & pension - net 130,732 55,473
Change in Assets and Liabilities:
Receivables (4,076,856) (8,023,455)
Inventories (11,721,656) (15,326,057)
Other current assets (1,076,890) (429,787)
Other Assets (45,023) (34,583)
Accounts payable (50,375) 9,452,128
Accrued and Other Liabilities (98,051) (383,341)
----------- -----------
Net Cash Used In Operating Activities (13,505,720) (12,120,580)
----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of Fixed Assets (3,167,823) (1,453,902)
----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from Long Term Debt 24,205,000 20,392,250
Payments on Long Term Debt (14,904,060) (7,089,322)
Proceeds from exercise of stock options
including related income tax effect 183,362 724,044
----------- -----------
Net Cash Provided By
Financing Activities 9,484,302 14,026,972
----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (7,189,241) 452,490
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 8,556,883 349,637
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,367,642 $ 802,127
----------- -----------
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
ROCKY SHOES & BOOTS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL REPORTING
In the opinion of management, the unaudited condensed consolidated
financial statements include all normal recurring adjustments the
Company considers necessary for a fair presentation of such financial
statements in accordance with generally accepted accounting principles.
2. INVENTORIES
Inventories are comprised of the following:
June 30, 1998 Dec. 31, 1997
Raw materials $ 9,287,621 $ 6,210,161
Work-in Process 4,533,150 3,348,275
Manufactured finished goods 28,278,105 21,140,951
Factory outlet finished goods 2,517,016 2,194,849
----------- -----------
Total $44,615,892 $32,894,236
=========== ===========
3. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and Federal, state and local income taxes was as
follows:
Six Months Ended
June 30,
1998 1997
---- ----
Interest $ 573,478 $1,067,151
========== ==========
Federal, state and local
income taxes $1,009,570 $1,184,300
========== ==========
Accounts payable at June 30, 1998 and December 31, 1997 included a
total of $191,204 and $133,017, respectively, relating to the purchase
of fixed assets.
5
<PAGE> 6
4. LONG-TERM DEBT
In May 1998 the Company entered into an amendment to its Revolving
Credit Loan Agreement due in 2003, which allows the Company to increase its
borrowings under a revolving line of credit to a maximum amount that ranges from
$25,000,000 to $42,000,000. Interest on the revolving line of credit facility is
payable monthly as a factor of, at the Company's option, the bank's prime rate
or LIBOR.
The Company also entered into an interest rate swap agreement with its
lender. The agreement effectively fixes the interest rate at 6.07% on
$15,000,000 in principal amount of floating rate debt provided under the loan
agreement with the bank. The interest swap expires on June 1, 2005 and is based
on one-month LIBOR. The interest rate swap is accounted for using settlement
accounting.
5. PER SHARE INFORMATION
A reconciliation of the shares used in the basic and diluted income per
share computation for the three months and six months ended June 30, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic-Weighted average
shares outstanding 5,450,414 3,719,014 5,432,112 3,703,024
Diluted securities:
Preferred Stock 0 83,626 14,730 88,242
Stock options 152,309 157,748 160,059 137,065
------- ------- ------- -------
Diluted-weighted
average shares outstanding 5,602,723 3,960,388 5,606,901 3,928,331
========= ========= ========= =========
</TABLE>
6. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130 and SFAS No. 131. SFAS No. 130 "Reporting Comprehensive Income" is not
applicable due to the absence of other items of comprehensive income. SFAS No.
131 "Disclosures About Segments of an Enterprise and Related Information" will
require adoption in December, 1998. SFAS No. 131 requires companies to report
financial and descriptive information about its reportable operating segments.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Company has not yet
determined what, if any, impact the adoption of this Statement will have on its
financial statements.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and other Postretirement Benefits" which will require adoption in
December 1998. SFAS No. 132 revises employers' disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans. The statement standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures. Restatement of disclosures for
earlier periods is required. The Company has not yet determined what effect the
adoption of this Statement will have on its financial statements.
6
<PAGE> 7
In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities" which
will require adoption by the first quarter of 2000. SFAS No. 133 requires that
derivatives be reported on the balance sheet at fair value. Changes in fair
value are recognized in net income or, for derivatives which are hedging market
risk related to future cash flows, in the accumulated other comprehensive income
section of shareholders' equity. The cumulative effect of adoption is reflected
in net income and accumulated other comprehensive income, as appropriate. The
Company has not yet determined the effect or timing of implementation of this
Statement.
7
<PAGE> 8
PART 1 - FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information derived
from the Company's Consolidated Financial Statements, expressed as a percentage
of net sales. The discussion that follows the table should be read in
conjunction with the Consolidated Financial Statements of the Company.
PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
Three months Six months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 72.5% 71.5% 72.7% 72.1%
------- ------- ----- -------
Gross Margin 27.5% 28.5% 27.3% 27.9%
Selling, General and
Administrative Expenses 19.4% 18.8% 21.0% 19.6%
------- ------- ------- -------
Income from Operations 8.1% 9.7% 6.3% 8.3%
======= ======= ======= =======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net Sales
Net sales for the quarter ended June 30, 1998 decreased $518,382, or 2.4%, to
$21,487,803 from $22,006,185 for the same period last year. Increased sales of
occupational and work shoe footwear were more than offset by lower shipments of
footwear uppers for a private label customer. Rugged outdoor footwear shipments
were relatively flat in the second quarter of 1998 versus a year ago due to
higher levels of customer carryover inventory from the mild weather last winter.
Sales prices were approximately 2% higher than the same period last year.
8
<PAGE> 9
Gross Margin
Gross margin decreased $381,937, or 6.1% to $5,899,336 from $6,281,273 for the
same period in 1997. As a percentage of net sales, gross margin was 27.5% for
the second quarter versus 28.5% the prior year. The decrease in gross margin was
primarily attributable to certain manufacturing facilities being operated at
lower levels during the three months ended June 30, 1998 in order to proactively
manage inventory, especially for insulated outdoor boots. The factories
increased production by the end of the second quarter in response to new orders
for the upcoming fall season.
Selling, General and Administrative Expenses
Selling, general and administrative (S,G&A) expenses rose $20,250, or 0.5%, to
$4,161,856 for the three months ended June 30, 1998, compared with $4,141,606 in
1997. The decline in net sales for the second quarter of 1998 was the primary
factor which contributed to an increase in S,G&A expenses to 19.4% of net sales
for the second quarter from 18.8% the prior year.
Interest Expense
Interest expense for the second quarter decreased $309,987, or 48.4%, to
$331,044 from $641,031 for the same period last year. The decline in interest
expense was due to lower outstanding balances and more favorable interest rates
on the amounts outstanding under the Company's credit facilities.
Income Taxes
Income taxes decreased $44,326, or 9.7%, to $413,654 for the three months ended
June 30, 1998, versus $457,980 for the same period a year ago. The Company's
effective tax rate declined to 27.2% for the second quarter from 31.0% in 1997.
The relatively low effective tax rate resulted from favorable tax treatment
afforded income earned by the Company's subsidiary in Puerto Rico and local tax
abatements available to the Company's subsidiary in Puerto Rico.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997.
Net Sales
Net sales for the first half of 1998 rose $176,475, or 0.5%, to $34,444,733
compared with $34,268,258 last year. The increase was primarily attributable to
higher sales of occupational work boots, which was partially offset by decreased
shipments of shoe uppers to a private label customer. Shipments of rugged
outdoor footwear, especially insulated boots, were relatively flat versus a year
ago.
Gross Margin
Gross margin for the six months ended June 30, 1998 was $9,396,868, a decline of
$161,280 or 1.7% from the same period in 1997. As a percentage of net sales,
gross margin was 27.3% for the first half
9
<PAGE> 10
of 1998 versus 27.9% a year ago. The decrease in gross margin was primarily a
result of lower production in the Company's manufacturing facilities in order to
bring inventories of insulated rugged outdoor boots in line with demand. As a
result, fixed overhead costs adversely impacted gross margin for the first six
months of 1998 compared with 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $515,319, or 7.7%, for
the six months ended June 30, 1998 versus the same period last year. As a
percentage of net sales, S,G&A expenses rose to 21.0% for the first half of 1998
from 19.6% a year ago. The 1998 year-to-date increase is due to higher salaries
and fringe benefits compared with the prior year, which has a greater impact in
the first quarter of this year. S,G&A expenses as a percentage of sales are
expected to be more in line with historical levels during the second half of
1998 when management believes net sales will be substantially higher than the
first half of 1998.
Interest Expense
Interest expense for the first six months of 1998 declined $582,762 or 52.7%, to
$523,536 from $1,106,298 for the same period last year. The decrease is due to
lower outstanding balances and lower rates on the Company's indebtedness. The
Company utilized the net proceeds from a $26.9 million follow-on offering in the
fourth quarter of 1997 to pay down outstanding debt.
Income Taxes
Income taxes decreased $928 or 0.2% to $517,574 for the six months ended June
30, 1998 versus $518,502 for 1997. The Company's effective tax rate was 27.0%
for the first half of 1998 compared with 30.1% for the same period last year.
The relatively low effective tax rate is due to favorable tax treatment afforded
income earned by the Company's subsidiary in Puerto Rico.
LIQUIDITY AND CAPITAL RESOURCES
The Company has primarily funded its working capital requirements and capital
expenditures through borrowings under its line of credit and other indebtedness,
and in fiscal 1997, through issuance of additional shares of common stock.
Working capital is primarily used to support changes in accounts receivable and
inventory as a result of the Company's seasonal business cycle and business
expansion. These requirements are generally lowest in the months of January
through March of each year and highest during the months of May through October
of each year. In addition, the Company requires financing to support additions
to machinery, equipment and facilities as well as the introduction of footwear
styles.
At June 30, 1998, the Company had working capital of $65,854,932 versus
$55,987,571, at December 31, 1997. During the fourth quarter of 1997, the
Company received $26.9 million net proceeds from a follow-on common stock
offering and the exercise of the underwriters' over-allotment option in
connection therewith. The proceeds were used to reduce outstanding debt and
10
<PAGE> 11
increase working capital.
The Company renegotiated its credit facilities during the second quarter of 1998
which reduced its cost of borrowed funds. The credit facility permits maximum
borrowing of $25,000,000 for the period from January 28, through and including
May 15, of each year and of $42,000,000 from May 16, through and including
January 27, of the following year. The credit facility expires May 31, 2003.
Changes in the line of credit during the year reflect the Company's seasonal
requirements for working capital. As of June 30, 1998, the Company had borrowed
$20,500,000 against its available line of credit.
Capital expenditures for 1998 are expected to be approximately $4,500,000 for
machinery and equipment to support increased production and for lasts, dies and
patterns for new footwear styles, and construction of a new distribution
facility. The Company believes it will be able to finance such additions and
meet operating expenditure requirements in 1998 through available cash on hand,
additional long-term borrowing and operating cash flows.
INFORMATION SYSTEMS AND THE YEAR 2000
As is the case with most other companies using computers in their operations,
the Company is in the process of addressing the Year 2000 problem. The company
is currently engaged in a comprehensive project to upgrade its information,
technology, manufacturing and facilities computer software to programs that will
consistently and properly recognize the Year 2000. Most of the Company's systems
include new packaged software recently purchased from large vendors who have
represented that these systems are already Year 2000 compliant.
The Company will utilize both internal and external resources to reprogram or
replace and text all of its software for Year 2000 compliance, and the Company
expects to complete the project in early 1999. The estimated cost for this
project could range as high as $300,000, including the cost of new systems which
will be capitalized. This cost is being funded through operating cash flows.
Failure by the Company and/or vendors and customers to complete Year 2000
compliance work in a timely manner could have a material adverse effect on
certain of the Company's operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995.
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, which are intended to be covered by the safe
harbors created thereby. Those statements include, but may not be limited to,
all statements regarding the intent, belief and expectations of the Company and
its management. Investors are cautioned that such statements involve risks and
uncertainties, including, but not limited to, changes in consumer demand,
seasonality, impact of weather, competition, reliance on suppliers, changing
retailing trends, reliance on foreign manufacturing, changes in tax rates,
limited protection of proprietary technology, and other risks, uncertainties and
factors described in the Company's most recent Annual Report on Form 10-K and
other filings from
11
<PAGE> 12
time to time with the Securities and Exchange Commission. There can be no
assurance that the forward-looking statements included herein will prove to be
accurate, and the inclusion of such statements herein should not be regarded as
a representation by the Company, its management or any other person that the
objectives and plans of the Company will be achieved. All forward looking
statements made herein are based on information presently available to the
management of the Company. The Company undertakes no obligation to publicly
update or revise any forward-looking statements.
12
<PAGE> 13
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Shareholders on May 19, 1998 for
the purpose of electing Class II Directors of the Company to serve until the
2000 Annual Meeting of Shareholders or until their successors are elected and
qualified, to approve and adopt amendments to the Company's 1995 Stock Option
Plan, and to ratify the appointment of Deloitte & Touche LLP to serve as the
Company's independent public accountants for the fiscal year ending December 31,
1998.
All of the Management's nominees for directors as listed in the Proxy
Statement were elected with the following vote:
<TABLE>
<CAPTION>
NUMBER OF SHARES VOTED
----------------------------------------------------------------
FOR AGAINST ABSTAIN
------------------- ------------------ -----------------
<S> <C> <C> <C>
Leonard L. Brown 4,124,829 434,760 0
---------------- ------------------ -----------------
David Fraedrich 4,124,829 434,760 0
---------------- ------------------ -----------------
Barbara Brooks Fuller 4,124,829 434,760 0
---------------- ------------------ -----------------
Curtis A. Loveland 4,123,839 435,750 0
---------------- ------------------ -----------------
</TABLE>
The adoption of amendments to the Company's 1995 Stock Option Plan was
approved by the following vote:
<TABLE>
<CAPTION>
NUMBER OF SHARES VOTED
- ----------------------------------------------------------------------------------------------
FOR AGAINST ABSTAINED TOTAL
- --------------------- --------------------- --------------------- -----------------
<S> <C> <C> <C>
1,939,594 1,767,953 21,830 3,729,377
----------------- ------------------ ----------------- -----------------
</TABLE>
13
<PAGE> 14
The appointment of Deloitte & Touche LLP as independent accountants was
approved by the following vote:
<TABLE>
<CAPTION>
NUMBER OF SHARES VOTED
- ----------------------------------------------------------------------------------------------
FOR AGAINST ABSTAINED TOTAL
- --------------------- --------------------- --------------------- -----------------
<S> <C> <C> <C>
4,550,079 1,110 8,400 4,559,589
----------------- ------------------ ----------------- -----------------
</TABLE>
Item 5. Other Information.
Any shareholder proposal submitted outside the processes of Rule 14a-8
under the Securities Exchange Act of 1934, as amended, for presentation to the
Company's 1999 Annual Meeting of Shareholders will be considered untimely filed
for purposes of Rule 14a-4 and 14a-5 if notice thereof is not received by the
Company by February 24, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The exhibits to this report begin at page ___.
(b) Reports on Form 8-K.
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROCKY SHOES & BOOTS, INC.
Date: August 14, 1998 By: /s/ DAVID FRAEDRICH
---------------------------------------------
David Fraedrich, Executive Vice President,
Treasurer and Chief Financial Officer
(Duly Authorized Officer and Principal Financial
and Accounting Officer)
15
<PAGE> 16
ROCKY SHOES & BOOTS, INC.
AND SUBSIDIARIES
FORM 10-Q
EXHIBIT INDEX
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
10.1 Lease Agreement, dated May 1, 1998, between Rocky Shoes &
Boots, Inc. and William Brooks Real Estate Company regarding
Nelsonville factory.
10.2 Second Amendment to Revolving Credit Loan Agreement dated
May 29, 1998, among Rocky Shoes & Boots, Inc.; Five Star
Enterprises Ltd.; Lifestyle Footwear, Inc.; Bank One, NA; The
Huntington National Bank; and Bank One, NA, as Agent.
10.3 Second Amended and Restated Master Business Loan Note, dated
May 29, 1998, among Rocky Shoes & Boots, Inc.; Five Star
Enterprises Ltd.; Lifestyle Footwear, Inc.; and payable to Bank
One, NA.
10.4 Second Amended and Restated Master Business Loan Note, dated
May 29, 1998, among Rocky Shoes & Boots, Inc.; Five Star
Enterprises Ltd.; Lifestyle Footwear, Inc.; and payable to The
Huntington National Bank.
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.2
SECOND AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
This Second Amendment to Revolving Credit Loan Agreement (the
"Amendment"), effective as of May 29, 1998, is made and entered into by and
among Rocky Shoes & Boots, Inc., an Ohio corporation ("Rocky Inc."), Five Star
Enterprises Ltd., a Cayman Islands corporation ("Five Star"), Lifestyle
Footwear, Inc., a Delaware corporation ("Lifestyle") (the foregoing parties
being referred to herein individually as a "Borrower" and collectively as the
"Borrowers"), Bank One, NA (formerly known as Bank One, Columbus, NA), a
national banking association ("Bank One"), The Huntington National Bank, a
national banking association ("HNB")(Bank One and HNB shall be referred to
herein individually as a "Bank" and collectively as the "Banks"), and Bank One,
NA (formerly known as Bank One, Columbus, NA), as Agent, acting in the manner
and to the extent described in Article IX of the Agreement referred to herein
(in such capacity, the "Agent").
BACKGROUND INFORMATION
A. The Borrowers, Bank One, HNB and the Agent entered into a certain
Revolving Credit Loan Agreement, dated as of January 28, 1997, as amended by a
Term Loan Agreement and First Amendment to Revolving Credit Loan Agreement,
dated effective as of April 18, 1997 (such agreement, as so amended, the
"Agreement"), pursuant to which Bank One and HNB agreed to provide revolving
credit loans to the Borrowers, upon and subject to the terms and conditions as
set forth in the Agreement.
B. The Borrowers have requested, among other things, that (i) an
additional interest rate option be available, and (ii) certain fees be reduced.
C. The Banks are willing to consent to (i) the additional interest rate
option, and (ii) the reduction of certain fees, upon and subject to the terms
and conditions as hereinafter set forth.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing, the provision of the
agreements and covenants hereinafter contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Banks, the Agent and the Borrowers hereby agree as follows (capitalized terms
not defined herein shall have the meanings set forth in the Agreement):
Section 1. Amendment of the Agreement.
(a) The following definitions set forth in Section 1.1 of the
Agreement shall be amended in their entireties to provide as follows:
"Aggregate Commitment" shall mean the collective, but several,
Commitments of the Banks to make Revolving Credit Loans to the
Borrowers and issue, provide and fund Commercial L/Cs and Standby L/Cs
on behalf of the Borrowers up to the following maximum aggregate
amounts, subject to the terms and conditions of this Agreement:
<PAGE> 2
(i) from January 28 through and including May 15 of each year,
the maximum aggregate amount of $25,000,000; and
(ii) from May 16 of each year through and including January 27
of the next year, the maximum aggregate amount of $42,000,000.
"Applicable Margin" shall have the meaning set forth in
Section 3.1(b)(i).
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday or any
day that shall be in the City of Columbus, Ohio or New York, New York,
a legal holiday or a day on which banking institutions are authorized
by law or a Governmental Authority to close, and (ii) with respect to
all determinations and notices in connection with, and payments of
principal and interest on, LIBOR Rate Loans, any day that is a Business
Day described in clause (i) above and that is also a day for trading by
and between banks in Dollar deposits in the London interbank market.
"Commitment" shall mean:
(a) with respect to Bank One, the commitment of Bank One to make
Revolving Credit Loans to the Borrowers and issue, provide and fund Commercial
L/Cs and Standby UCs on behalf of the Borrowers up to the following maximum
aggregate amounts, subject to the terms and conditions of this Agreement:
(i) from January 28 through and including May 15 of each year,
the maximum aggregate amount of $15,000,000; and
(ii) from May 16 of each year through and including January 27
of the next year, the maximum aggregate amount of $25,200,000;
(b) with respect to HNB, the commitment of HNB to make Revolving
Credit Loans to the Borrowers and to purchase participations from Bank One with
respect to Commercial L/Cs and Standby L/Cs on behalf of the Borrowers up to the
following maximum aggregate amounts, subject to the terms and conditions of this
Agreement:
(i) from January 28 through and including May 15 of each year,
the maximum aggregate amount of $10,000,000; and
(ii) from May 16 of each year through and including January 27
of the next year, the maximum aggregate amount of $16,800,000;
"Commitment Period" shall mean the period of time from the
date hereof through and including May 31, 2003,
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<PAGE> 3
(b) The following additional definitions shall be added to Section
1.1 of the Agreement in alphabetical order:
"Capitalized Lease" of the Borrowers shall mean any lease
which, in accordance with GAAP, is or should be capitalized on the
financial statements of the Borrowers.
"Consolidated Depreciation and Amortization" of the Borrowers
shall mean, for any period, the total amount of all charges for
depreciation and amortization included or required to be included,
pursuant to GAAP, in a consolidated statement of income of the
Borrowers for such period.
"Consolidated EBITDA" shall mean, for any period, the
Borrowers' Consolidated Earnings after all charges and reserves
(excluding, however, extraordinary items of gain or loss) but before
deduction of (i) Consolidated Interest Expense, (ii) income taxes paid,
and (iii) Consolidated Depreciation and Amortization, all as determined
in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" of the Borrowers
shall mean the ratio of (i) the sum of Consolidated EBITDA plus
Consolidated Lease Expense, to (ii) the sum of Consolidated Interest
Expense plus Consolidated Lease Expense of the Borrowers, as determined
at the end of each Fiscal Quarter of the Borrowers' Fiscal Year, based
on such financial data for the previous four (4) Fiscal Quarters.
"Consolidated Funded Debt" of the Borrowers shall mean, at any
time, that part of the total Indebtedness of the Borrowers which
consists of interest bearing funded debt of the Borrower, including
Capitalized Leases.
"Consolidated Interest Expense" of the Borrowers shall mean,
for any period, total interest expense, both expensed and capitalized
(including, without limitation, that portion of any Capitalized Lease
obligation attributable to interest expense in conformity with GAAP,
amortization of debt discount, all capitalized interest, the interest
portion of any deferred payment obligations, all commissions, discounts
and other fees and charges owed with respect to letter of credit and
bankers acceptance financing, the net costs and net payments under any
interest rate hedging, cap or similar agreement or arrangement,
prepayment charges, agency fees, administrative fees, commitment fees
and capitalized transaction costs allocated to interest expense) paid,
payable or accrued during such period, without duplication for any
period, with respect to all outstanding Indebtedness of the Borrowers,
whether captioned as interest or otherwise, included or required to be
included, pursuant to GAAP, in a consolidated statement of income of
the Borrowers for such period.
"Consolidated Lease Expense" of the Borrowers shall mean, for
any period, all payment obligations of the Borrowers during such period
under agreements for the lease, hire or use of any real or personal
property, including Capitalized Leases and obligations in the
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<PAGE> 4
nature of operating leases (including the interest expense, if any,
associated therewith), without duplication for any period, as
determined on a consolidated basis for the Borrowers in accordance with
GAAP.
"Interest Payment Date" shall mean the first day of each
month, commencing on February 1, 1997, and continuing on the first day
of each month thereafter, and on the Termination Date.
"Interest Period" shall mean, with respect to any LIBOR Rate
Loan:
(a) initially, the period commencing on the Revolving Credit
Borrowing Date or the Interest Rate Conversion Date, as the case may be, with
respect to such LIBOR Rate Loan and ending one month, two months or three months
thereafter, as selected by the Borrowers pursuant to Section 2.5 or Section
2.11; and
(b) thereafter (if continued as a LIBOR Rate Loan in accordance
with this Agreement), each such period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Rate Loan and ending one
month, two months or three months thereafter, as selected by the Borrowers
pursuant to Section 2.11;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(i) any Interest Period which would otherwise end on a day
that is not a Business Day shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day;
(ii) no Interest Period shall extend beyond the Termination
Date;
(iii) 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 end on the
last Business Day of a calendar month.
"Interest Rate" shall mean the rate of interest in effect at
any time with respect to a Revolving Credit Loan, whether at the Prime
Rate or based on the LIBOR Rate.
"Interest Rate Conversion Date" shall have the meaning set
forth in Section 2.11(b)(i).
"LIBOR Rate" shall mean with respect to each Interest Period,
the offered rate for Dollar deposits of not less than $1,000,000.00 as
of 11:00 A.M. City of London, England time two (2) Business Days prior
to the first date of each Interest Period as shown on the display
designated as "British Bankers Assoc. Interest Settlement Rates" on the
Telerate
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<PAGE> 5
System ("Telerate"), Page 3750 or Page 3740, or such other page or
pages as may replace such pages on Telerate for the purpose of
displaying such rate; provided, however, that if such rate is not
available on Telerate then such offered rate shall be otherwise
independently determined by the Agent from an alternate, substantially
similar independent source available to Agent or shall be calculated by
the Agent by a substantially similar methodology as that theretofore
used to determine such offered rate in Telerate.
"LIBOR Rate Loan" shall mean, at any time, any outstanding
Revolving Credit Loan that bears interest based on the LIBOR Rate,
"Notice of Interest Rate Conversion" shall have the meaning
set forth in Section 2.4(b)(i).
"Prime Rate Loan" shall mean, at any time, any outstanding
Loan that bears interest at the Prime Rate.
"Rate Determination Date"shall have the meaning set forth in
Section 3.1(b)(ii).
(c) The definitions of "Annual Review Date" "Borrowing Base",
"Borrowing Base Certificate", "Cash Flow Coverage", "Consolidated Current
Assets", "Consolidated Current Liabilities", "Consolidated Liabilities" and
"Current Ratio" set forth in Section 1.1 of the Agreement
shall be deleted in their entireties.
(d) Section 2.1 (a) of the Agreement shall be amended in its
entirety to provide as follows:
(a) Subject to the terms and conditions of this Agreement,
each Bank severally agrees to make Revolving Credit Loans to the
Borrowers from time to time during the Commitment Period; provided
that, immediately after each such Revolving Credit Loan is made, the
aggregate principal amount of Revolving Credit Loans by such Bank shall
not exceed the amount of its Commitment (as such Commitment may be
reduced from time to time in accordance with the terms of this
Agreement), either as to Dollar amount or its Revolving Credit Loan
Commitment Percentage. Each borrowing for (i) a Prime Rate Loan may be
in any Dollar amount, and (ii) a LIBOR Rate Loan shall be in an
aggregate principal amount of at least $500,000, or larger multiples of
$500,000, and shall be made by the Banks in accordance with each Bank's
respective Revolving Credit Loan Commitment Percentage. During the
Commitment Period and as long as no Event of Default exists, the
Borrowers may use the Aggregate Commitment by borrowing, repaying the
Revolving Credit Loans, in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.
(e) Section 2.1(c) of the Agreement shall be amended in its entirety to
provide as follows:
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<PAGE> 6
(c) Notwithstanding any provision hereof to the contrary, the
total amount of outstanding Revolving Credit Loans under the Aggregate
Commitment, when taken together with the total aggregate Dollar amount
available to be drawn under outstanding Commercial L/Cs and Standby
UCs, shall at no time exceed the Aggregate Commitment.
(f) Section 2.4 of the Agreement shall be amended in its entirety
to provide as follows:
Section 2.4 Notes: Termination Date.
(a) The Revolving Credit Loans made by the Banks to the
Borrowers pursuant hereto shall be evidenced by the Notes, payable to
the order of the respective Bank and evidencing the obligation of the
Borrowers to pay the aggregate unpaid principal amount of the Revolving
Credit Loans made by such Bank, with interest thereon as prescribed in
Article III. Each Bank is hereby authorized to record electronically or
otherwise the date and amount of each Revolving Credit Loan
disbursement made by such Bank, the date and amount of each payment or
repayment of principal thereof, the type of such borrowing (whether a
LIBOR Rate Loan or a Prime Rate Loan), and such other information as it
deems necessary or appropriate and any such recordation shall
constitute prima facie evidence of the accuracy of the information so
recorded; provided, however, the failure of such Bank to make any such
recordation(s) shall not affect the obligation of the Borrowers to
repay outstanding principal, interest or any other amount due hereunder
or under such Note in accordance with the terms hereof and thereof.
(b) Each Note shall mature on the Termination Date. The
Borrowers' right to obtain Revolving Credit Loans and have Commercial
UCs and Standby UCs issued on their behalf under this Agreement shall
terminate as of the Termination Date.
(g) Section 2.5(a) of the Agreement shall be amended in its
entirety to provide as follows:
(a) When the Borrowers desire to borrow under the Aggregate
Commitment, the Borrowers shall certify compliance with the conditions
precedent set forth in Article VI, and further shall give the Agent
prior written, telephonic or telegraphic notice (which notice shall be
irrevocable) (a "Notice of Borrowing") of their intention to borrow not
later than (x) 1:00 p.m. Columbus, Ohio time, at least two (2) Business
Days prior to the proposed date of the borrowing, which date shall be a
Business Day (a "Revolving Credit Borrowing Date"), if all or any part
of the requested Revolving Credit Loans are to be initially LIBOR Rate
Loans, or (y) 1:00 p.m., Columbus, Ohio time on the Revolving Credit
Borrowing Date, if all of the requested Revolving Credit Loans are to
be initially Prime Rate Loans, Each such Notice of Borrowing shall
specify (i) the amount to be borrowed (which amount shall not exceed
the Available Commitment and otherwise conform to the requirements
hereof), (ii) the requested Revolving Credit Borrowing Date, (iii)
whether the borrowing is to be of LIBOR Rate Loans, Prime Rate Loans or
a combination thereof, and (iv) if the borrowing is to be entirely
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<PAGE> 7
or partly of LIBOR Rate Loans, the amount and the Interest Period with
respect to each LIBOR Rate Loan.
(h) New Sections 2.5(d) and (e) shall be added to the Agreement
and shall provide as follows:
(d) In the event that a Notice of Borrowing fails to specify
whether the Revolving Credit Loans are to be LIBOR Rate Loans or Prime
Rate Loans, or a combination thereof, such Revolving Credit Loans shall
be made as Prime Rate Loans.
(e) There may be no more than five (5) different Interest
Periods for LIBOR Rate Loans outstanding at the same time (for which
purpose Interest Periods described in the definition of the term
"Interest Period" shall be deemed to be different Interest Periods even
if they are coterminous).
(i) Effective as of July 1, 1998, Section 2.8(a) of the Agreement
shall be amended in its entirety to provide as follows:
(a) Aggregate Commitment. During the Commitment Period, the
Borrowers shall pay to the Agent for the benefit of each Bank a
commitment fee on the daily average unused amount of the Aggregate
Commitment at the rate(s) per annum set forth below (calculated on the
basis of a 360-day year for the actual number of days elapsed);
provided, however, that the aggregate Dollar amount available to be
drawn under outstanding Commercial UCs and Standby UCs shall not be
included as usage in determining this commitment fee. Such commitment
fee shall accrue on the unused amount of the Aggregate Commitment
beginning on the date hereof and shall continue to accrue thereafter
through the Termination Date, The accrued commitment fee shall be
payable quarterly in arrears beginning on September 30, 1998, upon
written notice to the Borrowers by the Agent setting forth such accrued
commitment fee.
Ratio of Consolidated Commitment Fee
Funded Debt to Consolidated EBITDA --------------
----------------------------------
less than 2:1 0.15%
greater than 2:1 but less than 2.5:1 0.18%
greater than 2.51 but less than 3:1 0.20%
greater than 3:1 0.22%
Any change in the applicable commitment fee shall be made on each Rate
Determination Date in the same manner used for determining the
Applicable Margin.
(j) Section 2.10 of the Agreement shall be amended in its entirety
to provide as follows:
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<PAGE> 8
Section 2.10 Illegality and Impossibility.
(a) In the event that any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect and
whether or not presently applicable to either Bank, or any
interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or
compliance by either Bank with any request or directive of such
authority (whether or not having the force of law), including without
limitation exchange controls, shall make it unlawful or impossible for
either Bank to:
(i) maintain any loan or transaction under
this Agreement, the Borrowers shall, upon receipt of notice
thereof from such Bank, immediately repay in full the then
outstanding principal amount of all Revolving Credit Loans
made by such Bank so affected, together with all accrued
interest thereon to the date of payment; or
(ii) make, maintain or fund its LIBOR Rate
Loans, such Bank shall forthwith give notice thereof to the
Agent and the Borrowers, whereupon until such Bank notifies
the Agent and the Borrowers that the circumstances giving rise
to such suspension no longer-exist, the obligation of the
Banks to make or continue LIBOR Rate Loans, or to convert
outstanding Prime Rate Loans to LIBOR Rate Loans, shall be
suspended. If such notice is given, each LIBOR Rate Loan of
the Banks then outstanding shall be converted to a Prime Rate
Loan immediately.
(b) This Section 2.10 is for the benefit of the Banks and
is not intended to increase the yield to the Banks above the rates of
interests provided for in this Agreement. This Section 2.10 shall apply
only as long as such illegality exists. The Banks shall use reasonable,
lawful efforts to avoid the impact of such law, treaty, rule or
regulation.
(k) A new Section 2.11 shall be added to the Agreement and shall
provide as follows:
Section 2.11 Conversion and Continuation Options.
(a) Each Revolving Credit Loan shall bear interest at the
initial Interest Rate selected by the Borrowers for such Revolving
Credit Loan until (i) the Interest Rate is converted to another
Interest Rate in accordance with Section 2.10 or this Section 2.11, or
(ii) the Borrowers elect to convert such Interest Rate to a different
Interest Rate in accordance with the terms of this Agreement.
(b) The Borrowers may elect from time to time to convert
the Interest Rate with respect to outstanding Revolving Credit Loans
from one Interest Rate to the other Interest Rate as follows:
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<PAGE> 9
(i) The Borrowers may elect from time to time to
convert outstanding Revolving Credit Loans from LIBOR Rate
Loans to Prime Rate Loans by giving the Agent prior written,
telephonic or telegraphic notice of such election (which
notice shall be irrevocable) (a "Notice of Interest Rate
Conversion") of their intention to so convert outstanding
Revolving Credit Loans not later than 1:00 p.m. Columbus, Ohio
time, at least two (2) Business Days prior to the proposed
conversion date, which date shall be a Business Day (an
"Interest Rate Conversion Date"); provided, however, that any
such conversion of LIBOR Rate Loans may only be made on the
last day of an Interest Period with respect thereto, Each such
Notice of Interest Rate Conversion shall specify (i) the
Revolving Credit Loans to be so converted, and (ii) the
requested Interest Rate Conversion Date.
(ii) The Borrowers may elect from time to time. to
convert outstanding Revolving Credit Loans from Prime Rate
Loans to LIBOR Rate Loans by giving the Agent a Notice of
Interest Rate Conversion not later than 1:00 p.m. Columbus,
Ohio time, at least two (2) Business Days prior to the
proposed Interest Rate Conversion Date. Each such Notice of
Interest Rate Conversion shall specify (i) the Revolving
Credit Loans to be so converted, (ii) the requested Interest
Rate Conversion Date, and (iii) the respective amounts of each
LIBOR Rate Loan and the Interest Period with respect thereto.
(c) All or any part of outstanding LIBOR Rate Loans and
Prime Rate Loans may be converted as provided herein, provided that (x)
no Revolving Credit Loan may be converted into a LIBOR Rate Loan when
any Default or Event of Default has occurred and is continuing
hereunder, (y) no Revolving Credit Loan may be converted into, or
continued as, a LIBOR Rate Loan after the date that is one month prior
to the Termination Date, and (z) such conversion otherwise complies
with the applicable provisions of the proposed Interest Period and this
Agreement.
(d) All Prime Rate Loans shall continue to bear interest
at the Prime Rate unless and until the Interest Rate with respect to
such Prime Rate Loans is converted to LIBOR Rate Loans in accordance
with the terms of this Agreement.
(e) The Borrowers may elect from time to time to continue
any LIBOR Rate Loan as such upon the expiration of the then current
Interest Period with respect thereto by giving the Agent prior written,
telephonic or telegraphic notice not later than 1:00 p.m. Columbus,
Ohio time, at least two (2) Business Days prior to expiration of the
then current Interest Period; provided that no LIBOR Rate Loan may be
continued as such (x) when any Default or Event of Default has occurred
and is continuing, (y) after the date that is one month prior to the
Termination Date, and (z) unless such continuation otherwise complies
with the applicable provisions of the proposed Interest Period and this
Agreement. Each such notice shall specify (i) the Revolving Credit
Loans to be so continued, (ii) the expiration of the then current
Interest Period, and (iii) the Interest Period with respect thereto. If
the
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<PAGE> 10
Borrowers shall fail to give notice as described in this subsection
with respect to the continuation of a LIBOR Rate Loan, or if such
continuation is not permitted pursuant to the terms of this Agreement,
such LIBOR Rate Loan shall be automatically converted to a Prime Rate
Loan on the last day of such then expiring Interest Period.
(1) Section 3.1 of the Agreement shall be amended in its
entirety to provide as follows:
Section 3.1 Interest.
(a) Each Prime Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such
Prime Rate Loan is made and continuing while outstanding and unpaid, at
a rate equal to the Prime Rate. Such interest shall be payable on each
applicable Interest Payment Date. The Prime Rate shall be adjusted
automatically and as of the effective date of any change in the Prime
Rate. Interest on Prime Rate Loans shall be calculated on the basis of
the actual number of days elapsed in a year of 360 days, until
maturity, whether by demand, acceleration or otherwise.
(b)(i) "Applicable Margin" shall be as follows:
Ratio of Consolidated Applicable Margin
Funded Debt to Consolidated EBITDA -----------------
----------------------------------
less than 2:1 100 basis points
greater than 2:1 but less than 2.5:1 125 basis points
greater than 2.5:1 but less than 3:1 150 basis points
greater than 3:1 160 basis points
(ii) The Applicable Margin shall be determined as of
the first day of each Fiscal Quarter (each a "Rate
Determination Date") based upon the calculation of the ratio
of Consolidated Funded Debt to Consolidated EBITDA of the
Borrowers as of the end of the second Fiscal Quarter next
preceding a Rate Determination Date, and such calculation
shall be set forth in the certificate of the officer of the
Borrowers required to be delivered to the Banks pursuant to
Section 7.1 (b) (i). Such Applicable Margin shall remain in
effect from such Rate Determination Date until the next Rate
Determination Date, provided that:
(A) in the case of an Applicable Margin
determined from such certificate of such officer for the
fourth and final Fiscal Quarter of every Fiscal Year, in the
event that the annual financial statements for such Fiscal
Year subsequently provided to the Banks indicate that the
Applicable Margin originally determined to be effective on the
second Rate Determination Date immediately following the end
of such Fiscal Quarter was inappropriate in light of such
annual financial statements,
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<PAGE> 11
then the Applicable Margin shall be adjusted retroactively to
such Rate Determination Date to reflect the proper Applicable
Margin; and
(B) if on any Rate Determination Date the
Borrowers shall have failed to have delivered to the Bank such
certificate of such officer required be delivered pursuant to
Section 7.1(b)(i) with respect to such second preceding Fiscal
Quarter, then for the period beginning on such Rate
Determination Date and ending on the earlier of (x) the date
on which the Borrowers shall deliver to the Bank the
delinquent certificate or (y) the date on which the Borrowers
shall deliver to the Banks such certificate of such officer
required to be delivered pursuant to Section 7.1(b)(i) with
respect to the Fiscal Year which includes such Fiscal Quarter,
the Applicable Margin shall be determined as if the ratio of
Consolidated Funded Debt to Consolidated EBITDA of the
Borrowers was less than 3:1. Any change in the Applicable
Margin on any Rate Determination Date shall immediately result
in a corresponding change to the Interest Rate applicable to
each LIBOR Rate Loan outstanding on such Rate Determination
Date.
(iii) Each LIBOR Rate Loan shall bear interest on
the outstanding principal amount thereof, for each day from
the date such LIBOR Rate Loan is made and continuing while
outstanding and unpaid, at a rate per annum equal to the sum
of (i) the LIBOR Rate, plus (ii) the Applicable Margin. Such
interest shall be payable on each applicable Interest Payment
Date, Interest on LIBOR Rate Loans shall be calculated on the
basis of the actual number of days elapsed in a year of 360
days, until maturity, whether by demand, acceleration or
otherwise.
(c) Upon the occurrence of an Event of Default hereunder
or under either Note, and during the continuance of such, the Interest
Rate per annum shall be 300 basis points above the highest Interest
Rate then in effect for any Revolving Credit Loan.
(d) The Agent shall determine the Interest Rate
applicable to the Revolving Credit Loans hereunder. The Agent shall
give prompt notice to the Borrowers and the Banks by telex, cable or
telecopy of each interest rate so determined, and its determination
shall be conclusive in the absence of manifest error.
(m) Section 3.3 of the Agreement shall be amended in its
entirety to provide as follows:
Section 3.3 Prepayments and Funding Losses.
(a) Optional Prepayments. Subject in the case of any
LIBOR Rate Loan to subsection (c) below, at their option and upon prior
written, telephonic or telegraphic notice to the Agent not later than
1:00 p.m., Columbus, Ohio time on a Business Day which is at least two
(2) Business Days prior to the proposed date of prepayment (which also
must be
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<PAGE> 12
a Business Day), the Borrowers may prepay the Revolving Credit Loans in
whole at any time or in part from time to time, without premium or
penalty. In their notice of prepayment, the Borrowers shall specify the
date of prepayment, the amount of the prepayment and the Revolving
Credit Loan(s) to be prepaid. Each such optional prepayment shall be
applied to prepay ratably the Revolving Credit Loans of the Banks. Upon
receipt of notice of prepayment pursuant to this subsection, the Agent
shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrowers.
(b) Mandatory Prepayment. Subject in the case of any LIBOR
Rate Loan to subsection (c) below, the Borrower shall repay the
Revolving Credit Loans or provide cash to the Agent with respect to
outstanding and undrawn Commercial L/Cs and/or Standby L/Cs on each
such date as and to the extent the outstanding balance of all Revolving
Credit Loans plus the Dollar amount available to be drawn under
outstanding Commercial L/Cs and/or Standby L/Cs exceeds the Aggregate
Commitment. Each such mandatory prepayment shall be applied to prepay
ratably the Revolving Credit Loans of the Banks. Upon receipt of any
prepayment pursuant to this subsection, the Agent shall promptly notify
each Bank of such Bank's ratable share of such prepayment.
(c) Prepayment Losses. If the Borrowers make any such
prepayment of a LIBOR Rate Loan other than on the last day of an
Interest Period with respect to such LIBOR Rate Loan, the Borrowers
shall pay all accrued interest on the principal amount prepaid with
such prepayment and, on demand, shall reimburse the Banks and the Agent
and hold the Banks and the Agent harmless from all losses and expenses
incurred by the Banks and the Agent as a result of such prepayment,
including, without limitation, any losses and expenses arising from the
liquidation or reemployment of deposits acquired to fund or maintain
the principal amount prepaid. Such reimbursement shall be calculated as
though the Banks funded the principal amount prepaid through the
purchase of Dollar deposits in the London, England interbank market
having a maturity corresponding to such Interest Period and bearing an
interest rate based on the LIBOR Rate of such Interest Period, whether
in fact that is the case or not. The Banks' and the Agent 's
determination of the amount of such reimbursement shall be conclusive
in the absence of manifest error.
(d) Funding Losses. If any LIBOR Rate Loan is converted to a
Prime Rate Loan pursuant to this Agreement on any day other than the
last day of any Interest Period applicable thereto, or if the Borrowers
fail to borrow, prepay, convert or continue any LIBOR Rate Loan after
notice has been given to the Agent in accordance with this Agreement,
the Borrowers shall reimburse each Bank within 15 days after demand for
any resulting loss or expense incurred by it, including, without
limitation, any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the
period after any such payment or conversion, provided that such Bank
shall have delivered to the Borrowers a certificate as to the amount of
such loss or expense, which certificate shall be conclusive in the
absence of manifest error.
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<PAGE> 13
(n) Subpart (y) of Section 7.1(b)(i) of the Agreement
shall be amended in its entirety to provide as follows:
[ ... ] (y) showing in detail the calculations supporting
such statement in respect of Sections 7.2 (l) (i), (ii), (iii) and
(iv),[ ... ]
(o) The word "and" shall be added at the end of Section
7.1 (b)(iii) and the first Section 7.1 (b)(iv) of the Agreement shall be deleted
in its entirety.
(p) A new Section 7.1(o) shall be added to the Agreement
and shall provide as follows:
(o) Operating Accounts. Maintain its primary operating
accounts with Bank One.
(q) Section 7.2(l) of the Agreement shall be amended in
its entirety to provide as follows:
(l) Financial Covenants.
(i) Consolidated Tangible Net-Worth. Permit
Consolidated Tangible Net Worth to be less than $56,000,000,
which amount shall increase annually on the last day of each
Fiscal Year by 50% of Consolidated Earnings for such Fiscal
Year (but not decreased by any losses), commencing with the
Fiscal Year ending December 31, 1998.
(ii) Consolidated Fixed Charge Coverage Ratio.
Permit the Consolidated Fixed Charge Coverage Ratio to be less
than 2.0:1.0.
(iii) Consolidated Funded Debt to Consolidated
EBITDA Ratio. Permit the ratio of Consolidated Funded Debt to
Consolidated EBITDA to exceed 3.5 to 1.0.
(iv) Capital Expenditures. Permit Capital
Expenditures to exceed $5,000,000 in any Fiscal Year.
(r) Exhibit D to the Agreement relating to the form of
the "Borrowing Base Certificate" shall be deleted in its entirety.
Section 2. Amended and Restated Notes. To reflect the changes to
the Agreement and the terms of the Revolving Credit Loans set forth in Section 1
above, the Notes will be amended and restated to make corresponding changes
therein, which Notes shall be substantially in form of Exhibit A and Exhibit B
attached hereto.
- 13 -
<PAGE> 14
Section 3. Conditions to Banks' Obligations. The obligations of the
Banks to enter into this Amendment and be bound by the terms hereof are subject
to the satisfaction of the following conditions precedent:
(a) Delivery of Documents. Contemporaneously with or before
the execution of this Amendment by the Banks, the Agent shall have received the
following, each in form and substance satisfactory to the Banks and their
counsel:
(i) Amended and Restated Promissory Notes. The Second
Amended and Restated Master Business Loan Notes in the form of
Exhibits A and B attached hereto, duly executed by the
Borrowers;
(ii) Certified Resolutions. Certified copies of (i)
the corporate resolutions of each Borrower authorizing the
execution and delivery of this Amendment and all documents and
instruments referred to herein and the transactions
contemplated hereby and thereby;
(iii) Secretary's Certificate. Signed copy of (i) a
certificate of the Secretary or Assistant Secretary of each
Borrower, which shall certify the names of the officers of
such Borrower authorized to sign this Amendment and the other
documents or certificates of such Borrower to be executed and
delivered pursuant hereto; and
(iv) Other Requirements. Such other certificates,
documents and other items as the Banks, in their reasonable
discretion, deem necessary or desirable.
(b) Representations and Warranties. The representations and
warranties made by the Borrowers in this Amendment shall be true and correct in
all material respects as of the date hereof.
Section 4. Truth of Representations and Warranties; No Defaults. The
Borrowers hereby represent and warrant that the following shall be true and
correct as of the date of this Amendment:
(a) The representations and warranties of the Borrower
contained in Article V of the Agreement are true and correct on and as of the
date of this Amendment as if made on and as of such date unless stated to relate
to a specific earlier date;
(b) No event or condition exists which constitutes a Default
or an Event of Default;
(c) All financial information heretofore provided to the Banks
and the Agent is true, accurate and complete in all material respects; and
- 14 -
<PAGE> 15
(d) Neither this Amendment nor any other document, certificate
or written statement furnished to the Banks or to the Agent by or on behalf of
the Borrowers in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading.
Section 5. Reaffirmation of Liability. The Borrowers hereby reaffirm
their respective liability to the Banks and the Agent under the Agreement and
all other agreements and instruments executed by the Borrowers for the benefit
of the Banks and the Agent in connection with the Agreement (the "Bank
Documents"). In addition, the Borrowers agree that the Banks and the Agent have
performed all of their respective obligations under the Agreement and the Bank
Documents and that neither Bank nor the Agent is currently in default under any
obligation any of them have or ever did have to the Borrowers under the
Agreement, the Bank Documents or any other agreement.
Section 6. Effectiveness of Agreement. All of the terms, covenants
and conditions of, and the obligations of the Borrowers under, the Agreement and
the Bank Documents shall remain in full force and effect as amended hereby.
Section 7. Preservation of Existing Security Interests. Each mortgage,
security interest, pledge, assignment, lien or other conveyance or encumbrance
of any right, title, or interest in any Collateral or other property of any kind
delivered to the Banks and/or the Agent at any time by the Borrowers or any
Person in connection with the Agreement or the Bank Documents or to secure the
performance of the obligation of the Borrowers under the Agreement and the Bank
Documents shall remain in full force and effect following the execution of this
Amendment.
Section 8. Reservation of Rights; Effective Insolvency Proceeding.
Nothing herein shall be construed to release, waive, relinquish, discharge, or
in any other manner modify or affect the ability of any party hereto to contest
the discharge or dischargeability in bankruptcy of the obligation of any Person
or entity in connection with the Agreement and the Bank Documents.
Section 9. Governing Law. This Amendment is being delivered, and is
intended to be performed in, the State of Ohio and shall be construed and
enforced in accordance with, and governed by, the laws of the State of Ohio.
Section 10. Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability,
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction
Section 11. Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
- 15 -
<PAGE> 16
Section 12. Headings. The headings of the sections of this Amendment
are for convenience only and shall not affect the construction or interpretation
of this Amendment.
Section 13. Interpretation. This Amendment is to be deemed to have been
prepared jointly by the parties hereto, and any uncertainty or ambiguity
existing herein shall not be interpreted against any party but shall be
interpreted according to the rules for the interpretation of arm's length
agreements.
Section 14. WAIVER OF JURY TRIAL. THE BANKS, THE AGENT AND EACH
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AMENDMENT, THE AGREEMENT, THE NOTES, THE OTHER FACILITY DOCUMENTS, OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE
AGENT'S OR THE BANKS' ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF
JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY FACILITY DOCUMENT, NEITHER THE
BANKS, THE AGENT NOR ANY BORROWER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR
OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED, THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE
BANKS, THE AGENT OR THE BORROWERS EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL
OF THEM.
Section 15. Waiver of Subrogation. Each Borrower expressly waives any
and all rights of subrogation, contribution, reimbursement, indemnity,
exoneration, implied contract, recourse to security or any other claim
(including any claim, as that term is defined in the federal Bankruptcy Code,
and any amendments) which such Borrower may now have or later acquire against
any other Borrower, any other entity directly or contingently liable for the
obligations of the Borrowers under this Amendment, the Agreement and the other
Facility Documents or against the Collateral, arising from the existence or
performance of such Borrower's obligations under this Amendment, the Agreement
and the other Facility Documents.
Section 16. Confession of Judgment. Each Borrower irrevocably
authorizes any attorney-at-law, including any attorney-at-law employed or
retained by the Banks or the Agent, to appear for the Borrower in any court of
record in Franklin County, Ohio (which the Borrower acknowledges to be the place
where the Agreement and this Amendment was made) or any other state or
jurisdiction wherein the Borrower may then reside, to (i) waive the issuing and
service of process, (ii) confess judgment against the Borrower in favor of the
holder of this Agreement, as amended by this Amendment, for all amounts then due
thereunder, together with costs of suit, (iii) release all
- 16 -
<PAGE> 17
errors, and (iv) waive all rights of appeal. Each Borrower consents to the
jurisdiction and venue of that court. Each Borrower waives any conflict of
interest that any attorney-at-law employed or retained by the Banks or the Agent
may have in confessing judgment under the Agreement -as amended by this
Amendment and consents to payment of a legal fee to any attorney-at-law
confessing judgment thereunder. After judgment is entered against one or more of
the Borrowers, the power conferred may be exercised as to one or more of the
other Borrowers.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
BORROWERS:
Rocky Shoes & Boots, Inc.,
an Ohio corporation
By: /s/ DAVID FRAEDRICH
-----------------------------
Title: Exec. V.P.
--------------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Five Star Enterprises Ltd., Lifestyle Footwear, Inc.,
a Cayman Islands corporation a Delaware corporation
By: /s/ DAVID FRAEDRICH By: /s/ DAVID FRAEDRICH
--------------------------- --------------------------
Title: Exec. V.P. Title: Exec. V.P.
------------------------ -----------------------
- 17 -
<PAGE> 18
BANKS:
Bank One NA
(formerly known as Bank One, Columbus, NA),
a national banking association
By: /s/ THOMAS E. REDMOND
---------------------------
Title: Vice President
------------------------
The Huntington National Bank,
a national banking association
By: /s/ GEOFFREY E. MOWERY
---------------------------
Title: Vice President
------------------------
AGENT:
Bank One, NA, as Agent
(formerly known as Bank One, Columbus, NA),
a national banking association
By: /s/ THOMAS E. REDMOND
---------------------------
Title: Vice President
------------------------
- 18 -
<PAGE> 19
EXHIBIT A
Bank One Second Amended and Restated Note
- 19 -
<PAGE> 20
SECOND AMENDED AND RESTATED MASTER BUSINESS LOAN NOTE
Due: May 31, 2003 $25,200,000
No.__________________________ Date: May 29, 1998
Promise to Pay: On or before May 31, 2003 (or such later date as may be provided
in the Loan Agreement (defined below)), for value received, the undersigned,
Rocky Shoes & Boots, Inc., an Ohio corporation, Five Star Enterprises Ltd., a
Cayman Islands corporation , and Lifestyle Footwear, Inc., a Delaware
corporation (collectively referred to as the "Borrower"), promise to pay,
jointly and severally, to Bank One, NA (formerly known as Bank One, Columbus,
NA), a national banking association (the "Bank"), or order, at the office of the
Agent (defined below) located at 100 East Broad Street, Columbus, Ohio
43271-0170, or at such other address as the Agent may give notice of to the
Borrower, the sum of $25,200,000 or such lesser sum as is indicated on the
Bank's records, plus interest on the unpaid principal balance from time to time
outstanding hereunder until paid in full at the rate(s) of interest determined
in accordance with Loan Agreement referred to herein,
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
Interest will be computed on the unpaid principal balance from the date of each
borrowing until paid.
Such principal and interest shall be due and payable on the dates set forth in
the Loan Agreement.
The Borrower may only prepay this Note in accordance with the terms of the Loan
Agreement.
The Bank shall have the right to assess a late payment processing fee in the
amount of the greater of $50.00 or 5% of the scheduled payment in the event of a
default in payment that remains uncured for a period of five (5) days.
Master Note: The Bank has authorized a committed credit facility to the Borrower
in a principal amount not to exceed the face amount of this Note. The credit
facility is in the form of loans made from time to time by the Bank to the
Borrower. This Note evidences the Borrower's obligation to repay those loans.
The aggregate principal amount of debt evidenced by this Note shall be the
amount reflected from time to time in the records of the Bank, but shall not
exceed the face amount of this Note. This Note amends and restates in its
entirety the Amended and Restated Master Business Loan Note, dated April 18,
1997, in the original principal amount of $25,200,000 executed by the Borrower
and payable to the order of the Bank, which in turn had amended and restated in
its entirety the Master Business Loan Note, dated January 28, 1997, in the
original principal amount of $21,000,000, executed by the Borrower and payable
to the order of the Bank, and is the "Bank One Note" identified in the Loan
Agreement. This Note evidences the continuing indebtedness under the Loan
Agreement and such Bank One Note and is not to be construed as a satisfaction or
refinancing of such indebtedness.
<PAGE> 21
Credit Agreement: This Note evidences a certain debt under the terms of a
Revolving Credit Loan Agreement between the Bank, the Borrower, The Huntington
National Bank and Bank One, NA (formerly known as Bank One, Columbus, NA), as
Agent (the "Agent"), dated as of January 28, 1997, as amended by a (i) Term Loan
Agreement and First Amendment to Revolving Credit Loan Agreement, dated as of
April 18, 1997, and (ii) Second Amendment to Revolving Credit Loan Agreement,
dated as of May 29, 1998 (such agreement, as so amended and as the same may be
further amended, modified, supplemented, restated or replaced from time to time,
the "Loan Agreement"). Reference is made to the Loan Agreement for additional
provisions relating to the debt evidenced by this Note.
Security: To secure the payment of this Note and other present and future
liabilities of the Borrower to the Bank, the Borrower has pledged and granted to
the Agent, for the ratable benefit of the Bank and The Huntington National Bank,
among other things, a continuing security interest in certain assets of the
Borrower pursuant to a Continuing Security Agreement dated as of January 28,
1997, as the same may be amended, modified, supplemented, restated or replaced
from time to time. The Bank shall have the right at any time to apply its own
debt or liability to the Borrower or to any other party liable on this Note in
whole or partial payment of this Note or other present or future liabilities,
without any requirement for mutual maturity.
Related Documents: The terms of any other documents executed as part of the loan
evidenced by this Note are incorporated herein by reference.
Representations by Borrower: Each Borrower represents that it is a corporation
duly organized and existing under the laws of its jurisdiction of formation, and
that the execution and delivery of this Note and the performance of the
obligations it imposes are within its corporate powers, have been duly
authorized by all necessary action of its directors and do not contravene the
terms of its articles (certificate) of incorporation and code of regulations
(by-laws). Each Borrower represents that the execution and delivery of this Note
and the performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, do not require the consent or
approval of any governmental authority or any third party, and that this Note is
a valid and binding agreement, enforceable according to its terms, except as
enforcement of such terms may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or similar laws affecting
creditors' rights generally, provided, however, that each Borrower represents
and warrants that no such limitations currently exist as of the date of this
Note, or (ii) equitable principles which may limit the availability of the
remedy of specific performance or other equitable remedies. Each Borrower also
represents that this Note evidences a business loan exempt from the Federal
Truth In Lending Act (15 USC Section 1601, et seq.), and the Board of Governors
of the Federal Reserve System's Regulation Z (12 CFR Section 226, et seq.).
- 2 -
<PAGE> 22
Additional Terms and Conditions
Events of Default: If any of the following events (each an "Event of Default")
occurs:
1 . Any Borrower fails to pay when due any amount payable under this
Note, and such failure continues for more than five (5) days after such payment
became due,
2. Any Borrower (a) fails to observe or perform any other term of this
Note, and such failure to observe or perform continues for more than fifteen
(15) days after such failure shall first become known to any officer of any
Borrower, provided, however, that such fifteen (15) day cure period shall not
apply to (i) any such failure which in the Bank's good faith opinion is
incapable of cure; and (ii) any such failure which has previously occurred; (b)
makes any materially incorrect or misleading representation, warranty, or
certificate to the Agent or the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement or other information
delivered to the Agent or the Bank; or (d) defaults under the terms of any
agreement or instrument relating to any debt for borrowed money (other than the
debt evidenced by this Note) such that the creditor declares the debt due before
its maturity;
3. Any other default occurs under the terms of any loan agreement,
mortgage, security agreement, or any other document, including the Loan
Agreement, executed as part of the loan evidenced by this Note or any other
obligation or indebtedness of any Borrower owed to the Bank at any time, and
such default continues for more than fifteen (15) days after such default shall
first become known to any officer of any Borrower, provided, however that such
fifteen (15) day cure period shall not apply to (a) any default which in the
Bank's good faith opinion is incapable of cure; (b) any default which has
previously occurred; (c) any failure to maintain and keep in effect any
insurance required under the Loan Agreement; or (d) any failure to provide to
the Bank the financial statements, documents and information required to be
provided pursuant to Sections 7.1 (a), (b), and (c) of the Loan Agreement;
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974, as amended) occurs that would permit the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan of any Borrower or
any affiliate of any Borrower, or the occurrence of an "ERISA Event" (as defined
in the Loan Agreement) which shall not have been cured within thirty (30) days
after any officer of any Borrower has knowledge thereof;
5. Any Borrower becomes insolvent or unable to pay its debts as they
become due;
6. Any Borrower (a) makes an assignment for the benefit of creditors;
(b) consents to the appointment of a custodian, receiver, or trustee for itself
or for a substantial part of its assets; or (c) commences or consents to any
proceeding under any bankruptcy, reorganization, liquidation, insolvency or
similar laws of any jurisdiction;
- 3 -
<PAGE> 23
7. A custodian, receiver or trustee is appointed for any Borrower or
for a substantial part of its assets without its consent and is not removed
within sixty (60) days after such appointment;
8. Proceedings are commenced against any Borrower under any bankruptcy,
reorganization, liquidation, or similar laws of any jurisdiction, and such
proceedings remain undismissed for sixty (60) days after commencement,
9. Any judgment is entered against any Borrower, or any attachment,
levy or garnishment is issued against any property of any Borrower, in excess of
$250,000.00, and which judgment, attachment, levy or garnishment has not been
discharged or stayed within thirty (30) days after issuance, or for such longer
period as the Bank may agree to in writing;
10. Any Borrower, without the Bank's written consent, (a) is dissolved,
(b) merges or consolidates with any third party, (c) sells a material part of
its assets or business outside the ordinary course of its business, or (d)
agrees to do any of the foregoing;
11. There is a substantial change (other than with respect to changes
in the normal course of any Borrower's business, such as seasonal fluctuations)
in the existing or prospective financial condition of any Borrower which the
Bank in good faith determines to be materially adverse; or
12. The Bank in good faith deems itself insecure:
then this Note shall become due immediately, without notice, at the Bank's
option.
Remedies: If this Note is not paid at maturity, whether by demand, acceleration
or otherwise, the Agent and the Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of reasonable notice shall be
met if the Agent or the Bank sends the notice to the Borrower at least seven (7)
days prior to the date of public or private sale, disposition or other event
giving rise to the required notice. Upon default, the Agent and the Bank are
authorized to cause all or any part of any collateral securing this Note to be
transferred to or registered in its (their) name(s) or in the name of any other
person, firm or corporation, with or without designation of the capacity of such
nominee. The Borrower shall be liable for any deficiency remaining after
disposition of any collateral securing this Note. The Borrower is liable to the
Agent and the Bank for all reasonable costs and expenses of every kind incurred
in the making or collection of this Note, including, without limitation,
reasonable attorneys' fees and court costs. These costs and expenses shall
include, without limitation, any reasonable costs or expenses incurred by the
Agent and the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
Waiver: Each endorser and any other party liable on this Note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
collateral securing this Note, to the addition of any party, and to the release
or discharge of, or suspension of any rights and remedies against, any person
who may be liable for the
- 4 -
<PAGE> 24
payment of this Note. No delay on the part of the Bank in the exercise of any
right or remedy shall operate as a waiver, No single or partial exercise by the
Bank of any right or remedy shall preclude any other future exercise of it or
the exercise of any other right or remedy. No waiver or indulgence by the Bank
of any default shall be effective unless in writing and signed by the Bank, nor
shall a waiver on one occasion be construed as a bar to or waiver of that right
on any future occasion.
Miscellaneous: Each Borrower shall be jointly and severally liable under this
Note. This Note shall be binding on each Borrower and its successors, and shall
inure to the benefit of the Bank, its successors and assigns. Any reference to
the Bank shall include any holder of this Note. This Note is delivered in the
State of Ohio and governed by Ohio law. Section headings are for convenience of
reference only and shall not affect the interpretation of this Note. This Note
and all related loan documents embody the entire agreement between the Borrower
and the Bank regarding the terms of the loan evidenced by this Note, and
supersede all oral statements and prior writings relating to that loan.
WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT AND THE BANK, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE, THE LOAN AGREEMENT, OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE
BANKS OR THE AGENT'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF
JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN, IN THE LOAN AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT. NO BORROWER NOR THE BANK AND THE AGENT SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH, A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE BORROWER, THE AGENT OR THE BANK EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
Each Borrower irrevocably authorizes any attorney-at-law, including any
attorney-at-law employed or retained by the Bank or the Agent, to appear for the
Borrower in any court of record in Franklin County, Ohio (which the Borrower
acknowledges to be the place where this Note was made) or any other state or
jurisdiction wherein the Borrower may then reside, to (i) waive the issuing and
service of process, (ii) confess judgment against the Borrower in favor of the
holder of this Note for the amount then due, together with costs of suit, (iii)
release all errors, and (iv) waive all rights of appeal. Each Borrower consents
to the jurisdiction and venue of that court. Each Borrower waives any conflict
of interest that any attorney-at-law employed or retained by the Bank or the
Agent may have in confessing judgment under this Note and consents to payment of
a legal fee to any attorney-
-5-
<PAGE> 25
at-law confessing judgment under the Note. After judgment is entered against one
or more of the Borrowers, the power conferred may be exercised as to one or more
of the other Borrowers.
The undersigned have executed this Note in Columbus, Ohio, as of the date and
year first above written.
Rocky Shoes & Boots, Inc.,
an Ohio corporation
By:
---------------------------------
Title:
------------------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Five Star Enterprises Ltd., Lifestyle Footwear, Inc.,
a Cayman Islands corporation a Delaware corporation
By: By:
------------------------------- ---------------------------------
Title: Title:
------------------------------- ---------------------------------
- 6 -
<PAGE> 26
EXHIBIT B
HNB Second Amended and Restated Note
- 7 -
<PAGE> 27
SECOND AMENDED AND RESTATED MASTER BUSINESS LOAN NOTE
Due: May 31, 2003 $16,800,000
No._____________________ Date: May 29, 1998
Promise to Pay: On or before May 31, 2003 (or such later date as may be provided
in the Loan Agreement (defined below)), for value received, the undersigned,
Rocky Shoes & Boots, Inc., an Ohio corporation, Five Star Enterprises Ltd., a
Cayman Islands corporation, and Lifestyle Footwear, Inc., a Delaware corporation
(collectively referred to as the "Borrower"), promise to pay, jointly and
severally, to The Huntington National Bank, a national banking association (the
"Bank"), or order, at the office of the Agent (defined below) located at 100
East Broad Street, Columbus, Ohio 43271-0170, or at such other address as the
Agent may give notice of to the Borrower, the sum of $16,800,000 or such lesser
sum as is indicated on the Bank's records, plus interest on the unpaid principal
balance from time to time outstanding hereunder until paid in full at the
rate(s) of interest determined in accordance with Loan Agreement referred to
herein.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
Interest will be computed on the unpaid principal balance from the date of each
borrowing until paid.
Such principal and interest shall be due and payable on the dates set forth in
the Loan Agreement.
The Borrower may only prepay this Note in accordance with the terms of the Loan
Agreement.
The Bank shall have the right to assess a late payment processing fee in the
amount of the greater of $50.00 or 5% of the scheduled payment in the event of a
default in payment that remains uncured for a period of five (5) days.
Master Note: The Bank has authorized a committed credit facility to the Borrower
in a principal amount not to exceed the face amount of this Note. The credit
facility is in the form of loans made from time to time by the Bank to the
Borrower. This Note evidences the Borrower's obligation to repay those loans.
The aggregate principal amount of debt evidenced by this Note shall be the
amount reflected from time to time in the records of the Bank, but shall not
exceed the face amount of this Note. This Note amends and restates in its
entirety the Amended and Restated Master Business Loan Note, dated April 18,
1997, in the original principal amount of $16,800,000 executed by the Borrower
and payable to the order of the Bank, which in turn had amended and restated in
its entirety the Master Business Loan Note, dated January 28, 1997, in the
original principal amount of $14,000,000 executed by the Borrower and payable to
the order of the Bank, and is the "HNB Note" identified in the Loan Agreement.
This Note evidences the continuing indebtedness under the Loan Agreement and
such HNB Note and is not to be construed as a satisfaction or refinancing of
such indebtedness.
- 1 -
<PAGE> 28
Credit Agreement: This Note evidences a certain debt under the terms of a
Revolving Credit Loan Agreement between the Bank, the Borrower, Bank One, NA
(formerly known as Bank One, Columbus, NA) and Bank One, NA (formerly known as
Bank One, Columbus, NA), as Agent (the "Agent"), dated as of January 28, 1997,
as amended by a (i) Term Loan Agreement and First Amendment to Revolving Credit
Loan Agreement, dated as of April 18, 1997, and (ii) Second Amendment to
Revolving Credit Loan Agreement, dated as of May 29, 1998 (such agreement, as so
amended and as the same may be further amended, modified, supplemented, restated
or replaced from time to time, the "Loan Agreement"), Reference is made to the
Loan Agreement for additional provisions relating to the debt evidenced by this
Note.
Security: To secure the payment of this Note and other present and future
liabilities of the Borrower to the Bank, the Borrower has pledged and granted to
the Agent, for the ratable benefit of the Bank and Bank One, NA (formerly known
as Bank One, Columbus, NA), among other things, a continuing security interest
in certain assets of the Borrower pursuant to a Continuing Security Agreement
dated as of January 28, 1997, as the same may be amended, modified,
supplemented, restated or replaced from time to time. The Bank shall have the
right at any time to apply its own debt or liability to the Borrower or to any
other party liable on this Note in whole or partial payment of this Note or
other present or future liabilities, without any requirement for mutual
maturity.
Related Documents: The terms of any other documents executed as part of the loan
evidenced by this Note are incorporated herein by reference.
Representations by Borrower: Each Borrower represents that it is a corporation
duly organized and existing under the laws of its jurisdiction of formation, and
that the execution and delivery of this Note and the performance of the
obligations it imposes are within its corporate powers, have been duly
authorized by all necessary action of its directors and do not contravene the
terms of its articles (certificate) of incorporation and code of regulations
(by-laws). Each Borrower represents that the execution and delivery of this Note
and the performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, do not require the consent or
approval of any governmental authority or any third party, and that this Note is
a valid and binding agreement, enforceable according to its terms, except as
enforcement of such terms may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or similar laws affecting
creditors' rights generally, provided, however, that each Borrower represents
and warrants that no such limitations currently exist as of the date of this
Note, or (ii) equitable principles which may limit the availability of the
remedy of specific performance or other equitable remedies. Each Borrower also
represents that this Note evidences a business loan exempt from the Federal
Truth In Lending Act (15 USC Section 1601, et seq.), and the Board of Governors
of the Federal Reserve System's Regulation Z (12 CFR Section 226, et seq.).
- 2 -
<PAGE> 29
Additional Terms and Conditions
Events of Default: If any of the following events (each an "Event of Default")
occurs:
1 . Any Borrower fails to pay when due any amount payable under this
Note, and such failure continues for more than five (5) days after such payment
became due;
2. Any Borrower (a) fails to observe or perform any other term of this
Note, and such failure to observe or perform continues for more than fifteen
(15) days after such failure shall first become known to any officer of any
Borrower, provided, however, that such fifteen (15) day cure period shall not
apply to (i) any such failure which in the Bank's good faith opinion is
incapable of cure; and (ii) any such failure which has previously occurred; (b)
makes any materially incorrect or misleading representation, warranty, or
certificate to the Agent or the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement or other information
delivered to the Agent or the Bank; or (d) defaults under the terms of any
agreement or instrument relating to any debt for borrowed money (other than the
debt evidenced by this Note) such that the creditor declares the debt due before
its maturity;
3. Any other default occurs under the terms of any loan agreement,
mortgage, security agreement, or any other document, including the Loan
Agreement, executed as part of the loan evidenced by this Note or any other
obligation or indebtedness of any Borrower owed to the Bank at any time, and
such default continues for more than fifteen (15) days after such default shall
first become known to any officer of any Borrower, provided, however that such
fifteen (15) day cure period shall not apply to (a) any default which in the
Bank's good faith opinion is incapable of cure; (b) any default which has
previously occurred; (c) any failure to maintain and keep in effect any
insurance required under the Loan Agreement; or (d) any failure to provide to
the Bank the financial statements, documents and information required to be
provided pursuant to Sections 7.1 (a), (b), and (c) of the Loan Agreement;
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974, as amended) occurs that would permit the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan of any Borrower or
any affiliate of any Borrower, or the occurrence of an "ERISA Event" (as defined
in the Loan Agreement) which shall not have been cured within thirty (30) days
after any officer of any Borrower has knowledge thereof;
5. Any Borrower becomes insolvent or unable to pay its debts as they
become due;
6. Any Borrower (a) makes an assignment for the benefit of creditors;
(b) consents to the appointment of a custodian, receiver, or trustee for itself
or for a substantial part of its assets; or (c) commences or consents to any
proceeding under any bankruptcy, reorganization, liquidation, insolvency or
similar laws of any jurisdiction;
- 3 -
<PAGE> 30
7. A custodian, receiver or trustee is appointed for any Borrower or
for a substantial part of its assets without its consent and is not removed
within sixty (60) days after such appointment,
8. Proceedings are commenced against any Borrower under any bankruptcy,
reorganization, liquidation, or similar laws of any jurisdiction, and such
proceedings remain undismissed for sixty (60) days after commencement;
9. Any judgment is entered against any Borrower, or any attachment,
levy or garnishment is issued against any property of any Borrower, in excess of
$250,000.00, and which judgment, attachment, levy or garnishment has not been
discharged or stayed within thirty (30) days after issuance, or for such longer
period as the Bank may agree to in writing;
10. Any Borrower, without the Bank's written consent, (a) is dissolved,
(b) merges or consolidates with any third party, (c) sells a material part of
its assets or business outside the ordinary course of its business, or (d)
agrees to do any of the foregoing;
11. There is a substantial change (other than with respect to changes
in the normal course of any Borrower's business, such as seasonal fluctuations)
in the existing or prospective financial condition of any Borrower which the
Bank in good faith determines to be materially adverse; or
12. The Bank in good faith deems itself insecure:
then this Note shall become due immediately, without notice, at the Bank's
option.
Remedies: If this Note is not paid at maturity, whether by demand, acceleration
or otherwise, the Agent and the Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of reasonable notice shall be
met if the Agent or the Bank sends the notice to the Borrower at least seven (7)
days prior to the date of public or private sale, disposition or other event
giving rise to the required notice. Upon default, the Agent and the Bank are
authorized to cause all or any part of any collateral securing this Note to be
transferred to or registered in its (their) name(s) or in the name of any other
person, firm or corporation, with or without designation of the capacity of such
nominee. The Borrower shall be liable for any deficiency remaining after
disposition of any collateral securing this Note. The Borrower is liable to the
Agent and the Bank for all reasonable costs and expenses of every kind incurred
in the making or collection of this Note, including, without limitation,
reasonable attorneys' fees and court costs. These costs and expenses shall
include, without limitation, any reasonable costs or expenses incurred by the
Agent and the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
Waiver: Each endorser and any other party liable on this Note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
collateral securing this Note, to the addition of any party, and to the release
or discharge of, or suspension of any rights and remedies against, any person
who may be liable for the
- 4 -
<PAGE> 31
payment of this Note. No delay on the part of the Bank in the exercise of any
right or remedy shall operate as a waiver. No single or partial exercise by the
Bank of any right or remedy shall preclude any other future exercise of it or
the exercise of any other right or remedy. No waiver or indulgence by the Bank
of any default shall be effective unless in writing and signed by the Bank, nor
shall a waiver on one occasion be construed as a bar to or waiver of that right
on any future occasion.
Miscellaneous: Each Borrower shall be jointly and severally liable under this
Note. This Note shall be binding on each Borrower and its successors, and shall
inure to the benefit of the Bank, its successors and assigns. Any reference to
the Bank shall include any holder of this Note. This Note is delivered in the
State of Ohio and governed by Ohio law. Section headings are for convenience of
reference only and shall not affect the interpretation of this Note. This Note
and all related loan documents embody the entire agreement between the Borrower
and the Bank regarding the terms of the loan evidenced by this Note, and
supersede all oral statements and prior writings relating to that loan.
WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT AND THE BANK, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE, THE LOAN AGREEMENT, OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE
BANKS OR THE AGENT'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF
JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN, IN THE LOAN AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT. NO BORROWER NOR THE BANK AND THE AGENT SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE BORROWER, THE AGENT OR THE BANK EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
Each Borrower irrevocably authorizes any attorney-at-law, including any
attorney-at-law employed or retained by the Bank or the Agent, to appear for the
Borrower in any court of record in Franklin County, Ohio (which the Borrower
acknowledges to be the place where this Note was made) or any other state or
jurisdiction wherein the Borrower may then reside, to (i) waive the issuing and
service of process, (ii) confess judgment against the Borrower in favor of the
holder of this Note for the amount then due, together with costs of suit, (iii)
release all errors, and (iv) waive all rights of appeal. Each Borrower consents
to the jurisdiction and venue of that court. Each Borrower waives any conflict
of interest that any attorney-at-law employed or retained by the Bank or the
Agent may have in confessing judgment under this Note and consents to payment of
a legal fee to any attorney-
-5-
<PAGE> 32
at-law confessing judgment under the Note. After judgment is entered against one
or more of the Borrowers, the power conferred may be exercised as to one or more
of the other Borrowers.
The undersigned have executed this Note in Columbus, Ohio, as of the date and
year first above written.
Rocky Shoes & Boots, Inc.,
an Ohio corporation
By:
------------------------------
Title:
---------------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Five Star Enterprises Ltd., Lifestyle Footwear, Inc.,
a Cayman Islands corporation a Delaware corporation
By: By:
-------------------------------- ------------------------------
Title: Title:
----------------------------- ---------------------------
- 6 -
<PAGE> 1
Exhibit 10.3
SECOND AMENDED AND RESTATED MASTER BUSINESS LOAN NOTE
Due: May 31, 2003 $25,200,000
No._________________ Date: May 29, 1998
Promise to Pay: On or before May 31, 2003 (or such later date as may be provided
in the Loan Agreement (defined below)), for value received, the undersigned,
Rocky Shoes & Boots, Inc., an Ohio corporation, Five Star Enterprises Ltd., a
Cayman Islands corporation , and Lifestyle Footwear, Inc., a Delaware
corporation (collectively referred to as the "Borrower"), promise to pay,
jointly and severally, to Bank One, NA (formerly known as Bank One, Columbus,
NA), a national banking association (the "Bank"), or order, at the office of the
Agent (defined below) located at 100 East Broad Street, Columbus, Ohio
43271-0170, or at such other address as the Agent may give notice of to the
Borrower, the sum of $25,200,000 or such lesser sum as is indicated on the
Bank's records, plus interest on the unpaid principal balance from time to time
outstanding hereunder until paid in full at the rate(s) of interest determined
in accordance with Loan Agreement referred to herein,
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
Interest will be computed on the unpaid principal balance from the date of each
borrowing until paid.
Such principal and interest shall be due and payable on the dates set forth in
the Loan Agreement.
The Borrower may only prepay this Note in accordance with the terms of the Loan
Agreement.
The Bank shall have the right to assess a late payment processing fee in the
amount of the greater of $50.00 or 5% of the scheduled payment in the event of a
default in payment that remains uncured for a period of five (5) days.
Master Note: The Bank has authorized a committed credit facility to the Borrower
in a principal amount not to exceed the face amount of this Note. The credit
facility is in the form of loans made from time to time by the Bank to the
Borrower. This Note evidences the Borrower's obligation to repay those loans.
The aggregate principal amount of debt evidenced by this Note shall be the
amount reflected from time to time in the records of the Bank, but shall not
exceed the face amount of this Note. This Note amends and restates in its
entirety the Amended and Restated Master Business Loan Note, dated April 18,
1997, in the original principal amount of $25,200,000 executed by the Borrower
and payable to the order of the Bank, which in turn had amended and restated in
its entirety the Master Business Loan Note, dated January 28, 1997, in the
original principal amount of $21,000,000, executed by the Borrower and payable
to the order
<PAGE> 2
of the Bank, and is the "Bank One Note" identified in the Loan Agreement. This
Note evidences the continuing indebtedness under the Loan Agreement and such
Bank One Note and is not to be construed as a satisfaction or refinancing of
such indebtedness.
Credit Agreement: This Note evidences a certain debt under the terms of a
Revolving Credit Loan Agreement between the Bank, the Borrower, The Huntington
National Bank and Bank One, NA (formerly known as Bank One, Columbus, NA), as
Agent (the "Agent"), dated as of January 28, 1997, as amended by a (i) Term Loan
Agreement and First Amendment to Revolving Credit Loan Agreement, dated as of
April 18, 1997, and (ii) Second Amendment to Revolving Credit Loan Agreement,
dated as of May 29, 1998 (such agreement, as so amended and as the same may be
further amended, modified, supplemented, restated or replaced from time to time,
the "Loan Agreement"). Reference is made to the Loan Agreement for additional
provisions relating to the debt evidenced by this Note.
Security: To secure the payment of this Note and other present and future
liabilities of the Borrower to the Bank, the Borrower has pledged and granted to
the Agent, for the ratable benefit of the Bank and The Huntington National Bank,
among other things, a continuing security interest in certain assets of the
Borrower pursuant to a Continuing Security Agreement dated as of January 28,
1997, as the same may be amended, modified, supplemented, restated or replaced
from time to time. The Bank shall have the right at any time to apply its own
debt or liability to the Borrower or to any other party liable on this Note in
whole or partial payment of this Note or other present or future liabilities,
without any requirement for mutual maturity.
Related Documents: The terms of any other documents executed as part of the loan
evidenced by this Note are incorporated herein by reference.
Representations by Borrower: Each Borrower represents that it is a corporation
duly organized and existing under the laws of its jurisdiction of formation, and
that the execution and delivery of this Note and the performance of the
obligations it imposes are within its corporate powers, have been duly
authorized by all necessary action of its directors and do not contravene the
terms of its articles (certificate) of incorporation and code of regulations
(by-laws). Each Borrower represents that the execution and delivery of this Note
and the performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, do not require the consent or
approval of any governmental authority or any third party, and that this Note is
a valid and binding agreement, enforceable according to its terms, except as
enforcement of such terms may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or similar laws affecting
creditors' rights generally, provided, however, that each Borrower represents
and warrants that no such limitations currently exist as of the date of this
Note, or (ii) equitable principles which may limit the availability of the
remedy of specific performance or other equitable remedies. Each Borrower also
represents that this Note evidences a business loan exempt from the Federal
Truth In Lending Act (15 USC Section 1601, et seq.), and the Board of Governors
of the Federal Reserve System's Regulation Z (12 CFR Section 226, et seq.).
<PAGE> 3
Additional Terms and Conditions
Events of Default: If any of the following events (each an "Event of Default")
occurs:
1. Any Borrower fails to pay when due any amount payable under this
Note, and such failure continues for more than five (5) days after such payment
became due,
2. Any Borrower (a) fails to observe or perform any other term of this
Note, and such failure to observe or perform continues for more than fifteen
(15) days after such failure shall first become known to any officer of any
Borrower, provided, however, that such fifteen (15) day cure period shall not
apply to (i) any such failure which in the Bank's good faith opinion is
incapable of cure; and (ii) any such failure which has previously occurred; (b)
makes any materially incorrect or misleading representation, warranty, or
certificate to the Agent or the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement or other information
delivered to the Agent or the Bank; or (d) defaults under the terms of any
agreement or instrument relating to any debt for borrowed money (other than the
debt evidenced by this Note) such that the creditor declares the debt due before
its maturity;
3. Any other default occurs under the terms of any loan agreement,
mortgage, security agreement, or any other document, including the Loan
Agreement, executed as part of the loan evidenced by this Note or any other
obligation or indebtedness of any Borrower owed to the Bank at any time, and
such default continues for more than fifteen (15) days after such default shall
first become known to any officer of any Borrower, provided, however that such
fifteen (15) day cure period shall not apply to (a) any default which in the
Bank's good faith opinion is incapable of cure; (b) any default which has
previously occurred; (c) any failure to maintain and keep in effect any
insurance required under the Loan Agreement; or (d) any failure to provide to
the Bank the financial statements, documents and information required to be
provided pursuant to Sections 7.1 (a), (b), and (c) of the Loan Agreement;
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974, as amended) occurs that would permit the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan of any Borrower or
any affiliate of any Borrower, or the occurrence of an "ERISA Event" (as defined
in the Loan Agreement) which shall not have been cured within thirty (30) days
after any officer of any Borrower has knowledge thereof;
5. Any Borrower becomes insolvent or unable to pay its debts as they
become due;
6. Any Borrower (a) makes an assignment for the benefit of creditors;
(b) consents to the appointment of a custodian, receiver, or trustee for itself
or for a substantial part of its assets; or (c) commences or consents to any
proceeding under any bankruptcy, reorganization, liquidation, insolvency or
similar laws of any jurisdiction;
7. A custodian, receiver or trustee is appointed for any Borrower or
for a substantial part of its assets without its consent and is not removed
within sixty (60) days after such appointment;
<PAGE> 4
8. Proceedings are commenced against any Borrower under any
bankruptcy, reorganization, liquidation, or similar laws of any jurisdiction,
and such proceedings remain undismissed for sixty (60) days after commencement,
9. Any judgment is entered against any Borrower, or any attachment,
levy or garnishment is issued against any property of any Borrower, in excess of
$250,000.00, and which judgment, attachment, levy or garnishment has not been
discharged or stayed within thirty (30) days after issuance, or for such longer
period as the Bank may agree to in writing;
10. Any Borrower, without the Bank's written consent, (a) is dissolved,
(b) merges or consolidates with any third party, (c) sells a material part of
its assets or business outside the ordinary course of its business, or (d)
agrees to do any of the foregoing;
11. There is a substantial change (other than with respect to changes
in the normal course of any Borrower's business, such as seasonal fluctuations)
in the existing or prospective financial condition of any Borrower which the
Bank in good faith determines to be materially adverse; or
12. The Bank in good faith deems itself insecure:
then this Note shall become due immediately, without notice, at the Bank's
option.
Remedies: If this Note is not paid at maturity, whether by demand, acceleration
or otherwise, the Agent and the Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of reasonable notice shall be
met if the Agent or the Bank sends the notice to the Borrower at least seven (7)
days prior to the date of public or private sale, disposition or other event
giving rise to the required notice. Upon default, the Agent and the Bank are
authorized to cause all or any part of any collateral securing this Note to be
transferred to or registered in its (their) name(s) or in the name of any other
person, firm or corporation, with or without designation of the capacity of such
nominee. The Borrower shall be liable for any deficiency remaining after
disposition of any collateral securing this Note. The Borrower is liable to the
Agent and the Bank for all reasonable costs and expenses of every kind incurred
in the making or collection of this Note, including, without limitation,
reasonable attorneys' fees and court costs. These costs and expenses shall
include, without limitation, any reasonable costs or expenses incurred by the
Agent and the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
Waiver: Each endorser and any other party liable on this Note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
collateral securing this Note, to the addition of any party, and to the release
or discharge of, or suspension of any rights and remedies against, any person
who may be liable for the payment of this Note. No delay on the part of the Bank
in the exercise of any right or remedy shall operate as a waiver, No single or
partial exercise by the Bank of any right or remedy shall preclude any other
future exercise of it or the exercise of any other right or remedy.
<PAGE> 5
No waiver or indulgence by the Bank of any default shall be effective unless in
writing and signed by the Bank, nor shall a waiver on one occasion be construed
as a bar to or waiver of that right on any future occasion.
Miscellaneous: Each Borrower shall be jointly and severally liable under this
Note. This Note shall be binding on each Borrower and its successors, and shall
inure to the benefit of the Bank, its successors and assigns. Any reference to
the Bank shall include any holder of this Note. This Note is delivered in the
State of Ohio and governed by Ohio law. Section headings are for convenience of
reference only and shall not affect the interpretation of this Note. This Note
and all related loan documents embody the entire agreement between the Borrower
and the Bank regarding the terms of the loan evidenced by this Note, and
supersede all oral statements and prior writings relating to that loan.
WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT AND THE BANK, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE, THE LOAN AGREEMENT, OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE
BANKS OR THE AGENT'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF
JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN, IN THE LOAN AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT. NO BORROWER NOR THE BANK AND THE AGENT SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH, A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE BORROWER, THE AGENT OR THE BANK EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
Each Borrower irrevocably authorizes any attorney-at-law, including any
attorney-at-law employed or retained by the Bank or the Agent, to appear for the
Borrower in any court of record in Franklin County, Ohio (which the Borrower
acknowledges to be the place where this Note was made) or any other state or
jurisdiction wherein the Borrower may then reside, to (i) waive the issuing and
service of process, (ii) confess judgment against the Borrower in favor of the
holder of this Note for the amount then due, together with costs of suit, (iii)
release all errors, and (iv) waive all rights of appeal. Each Borrower consents
to the jurisdiction and venue of that court. Each Borrower waives any conflict
of interest that any attorney-at-law employed or retained by the Bank or the
Agent may have in confessing judgment under this Note and consents to payment of
a legal fee to any attorney-at-law confessing judgment under the Note. After
judgment is entered against one or more of the Borrowers, the power conferred
may be exercised as to one or more of the other Borrowers.
<PAGE> 6
The undersigned have executed this Note in Columbus, Ohio, as of the date and
year first above written.
Rocky Shoes & Boots, Inc.,
an Ohio corporation
By: /s/ DAVID FRAEDRICH
--------------------------
Title: Exec. V.P.
-----------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Five Star Enterprises Ltd., Lifestyle Footwear, Inc.,
a Cayman Islands corporation a Delaware corporation
By: /s/ DAVID FRAEDRICH By: /s/ DAVID FRAEDRICH
------------------------- --------------------------
Title: Exec. V.P. Title: Exec. V.P.
---------------------- -----------------------
<PAGE> 1
Exhibit 10.4
SECOND AMENDED AND RESTATED MASTER BUSINESS LOAN NOTE
Due: May 31, 2003 $16,800,000
No.______________ Date: May 29, 1998
Promise to Pay: On or before May 31, 2003 (or such later date as may be provided
in the Loan Agreement (defined below)), for value received, the undersigned,
Rocky Shoes & Boots, Inc., an Ohio corporation, Five Star Enterprises Ltd., a
Cayman Islands corporation, and Lifestyle Footwear, Inc., a Delaware corporation
(collectively referred to as the "Borrower"), promise to pay, jointly and
severally, to The Huntington National Bank, a national banking association (the
"Bank"), or order, at the office of the Agent (defined below) located at 100
East Broad Street, Columbus, Ohio 43271-0170, or at such other address as the
Agent may give notice of to the Borrower, the sum of $16,800,000 or such lesser
sum as is indicated on the Bank's records, plus interest on the unpaid principal
balance from time to time outstanding hereunder until paid in full at the
rate(s) of interest determined in accordance with Loan Agreement referred to
herein.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
Interest will be computed on the unpaid principal balance from the date of each
borrowing until paid.
Such principal and interest shall be due and payable on the dates set forth in
the Loan Agreement.
The Borrower may only prepay this Note in accordance with the terms of the Loan
Agreement.
The Bank shall have the right to assess a late payment processing fee in the
amount of the greater of $50.00 or 5% of the scheduled payment in the event of a
default in payment that remains uncured for a period of five (5) days.
Master Note: The Bank has authorized a committed credit facility to the Borrower
in a principal amount not to exceed the face amount of this Note. The credit
facility is in the form of loans made from time to time by the Bank to the
Borrower. This Note evidences the Borrower's obligation to repay those loans.
The aggregate principal amount of debt evidenced by this Note shall be the
amount reflected from time to time in the records of the Bank, but shall not
exceed the face amount of this Note. This Note amends and restates in its
entirety the Amended and Restated Master Business Loan Note, dated April 18,
1997, in the original principal amount of $16,800,000 executed by the Borrower
and payable to the order of the Bank, which in turn had amended and restated in
its entirety the Master Business Loan Note, dated January 28, 1997, in the
original principal amount of $14,000,000 executed by the Borrower and payable to
the order
<PAGE> 2
of the Bank, and is the "HNB Note" identified in the Loan Agreement. This Note
evidences the continuing indebtedness under the Loan Agreement and such HNB Note
and is not to be construed as a satisfaction or refinancing of such
indebtedness.
Credit Agreement: This Note evidences a certain debt under the terms of a
Revolving Credit Loan Agreement between the Bank, the Borrower, Bank One, NA
(formerly known as Bank One, Columbus, NA) and Bank One, NA (formerly known as
Bank One, Columbus, NA), as Agent (the "Agent"), dated as of January 28, 1997,
as amended by a (i) Term Loan Agreement and First Amendment to Revolving Credit
Loan Agreement, dated as of April 18, 1997, and (ii) Second Amendment to
Revolving Credit Loan Agreement, dated as of May 29, 1998 (such agreement, as so
amended and as the same may be further amended, modified, supplemented, restated
or replaced from time to time, the "Loan Agreement"), Reference is made to the
Loan Agreement for additional provisions relating to the debt evidenced by this
Note.
Security: To secure the payment of this Note and other present and future
liabilities of the Borrower to the Bank, the Borrower has pledged and granted to
the Agent, for the ratable benefit of the Bank and Bank One, NA (formerly known
as Bank One, Columbus, NA), among other things, a continuing security interest
in certain assets of the Borrower pursuant to a Continuing Security Agreement
dated as of January 28, 1997, as the same may be amended, modified,
supplemented, restated or replaced from time to time. The Bank shall have the
right at any time to apply its own debt or liability to the Borrower or to any
other party liable on this Note in whole or partial payment of this Note or
other present or future liabilities, without any requirement for mutual
maturity.
Related Documents: The terms of any other documents executed as part of the loan
evidenced by this Note are incorporated herein by reference.
Representations by Borrower: Each Borrower represents that it is a corporation
duly organized and existing under the laws of its jurisdiction of formation, and
that the execution and delivery of this Note and the performance of the
obligations it imposes are within its corporate powers, have been duly
authorized by all necessary action of its directors and do not contravene the
terms of its articles (certificate) of incorporation and code of regulations
(by-laws). Each Borrower represents that the execution and delivery of this Note
and the performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, do not require the consent or
approval of any governmental authority or any third party, and that this Note is
a valid and binding agreement, enforceable according to its terms, except as
enforcement of such terms may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or similar laws affecting
creditors' rights generally, provided, however, that each Borrower represents
and warrants that no such limitations currently exist as of the date of this
Note, or (ii) equitable principles which may limit the availability of the
remedy of specific performance or other equitable remedies. Each Borrower also
represents that this Note evidences a business loan exempt from the Federal
Truth In Lending Act (15 USC Section 1601, et seq.), and the Board of Governors
of the Federal Reserve System's Regulation Z (12 CFR Section 226, et seq.).
<PAGE> 3
Additional Terms and Conditions
Events of Default: If any of the following events (each an "Event of Default")
occurs:
1. Any Borrower fails to pay when due any amount payable under this
Note, and such failure continues for more than five (5) days after such payment
became due;
2. Any Borrower (a) fails to observe or perform any other term of this
Note, and such failure to observe or perform continues for more than fifteen
(15) days after such failure shall first become known to any officer of any
Borrower, provided, however, that such fifteen (15) day cure period shall not
apply to (i) any such failure which in the Bank's good faith opinion is
incapable of cure; and (ii) any such failure which has previously occurred; (b)
makes any materially incorrect or misleading representation, warranty, or
certificate to the Agent or the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement or other information
delivered to the Agent or the Bank; or (d) defaults under the terms of any
agreement or instrument relating to any debt for borrowed money (other than the
debt evidenced by this Note) such that the creditor declares the debt due before
its maturity;
3. Any other default occurs under the terms of any loan agreement,
mortgage, security agreement, or any other document, including the Loan
Agreement, executed as part of the loan evidenced by this Note or any other
obligation or indebtedness of any Borrower owed to the Bank at any time, and
such default continues for more than fifteen (15) days after such default shall
first become known to any officer of any Borrower, provided, however that such
fifteen (15) day cure period shall not apply to (a) any default which in the
Bank's good faith opinion is incapable of cure; (b) any default which has
previously occurred; (c) any failure to maintain and keep in effect any
insurance required under the Loan Agreement; or (d) any failure to provide to
the Bank the financial statements, documents and information required to be
provided pursuant to Sections 7.1 (a), (b), and (c) of the Loan Agreement;
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974, as amended) occurs that would permit the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan of any Borrower or
any affiliate of any Borrower, or the occurrence of an "ERISA Event" (as defined
in the Loan Agreement) which shall not have been cured within thirty (30) days
after any officer of any Borrower has knowledge thereof;
5. Any Borrower becomes insolvent or unable to pay its debts as they
become due;
6. Any Borrower (a) makes an assignment for the benefit of creditors;
(b) consents to the appointment of a custodian, receiver, or trustee for itself
or for a substantial part of its assets; or (c) commences or consents to any
proceeding under any bankruptcy, reorganization, liquidation, insolvency or
similar laws of any jurisdiction;
7. A custodian, receiver or trustee is appointed for any Borrower or
for a substantial part of its assets without its consent and is not removed
within sixty (60) days after such appointment,
<PAGE> 4
8. Proceedings are commenced against any Borrower under any
bankruptcy, reorganization, liquidation, or similar laws of any jurisdiction,
and such proceedings remain undismissed for sixty (60) days after commencement;
9. Any judgment is entered against any Borrower, or any attachment,
levy or garnishment is issued against any property of any Borrower, in excess of
$250,000.00, and which judgment, attachment, levy or garnishment has not been
discharged or stayed within thirty (30) days after issuance, or for such longer
period as the Bank may agree to in writing;
10. Any Borrower, without the Bank's written consent, (a) is dissolved,
(b) merges or consolidates with any third party, (c) sells a material part of
its assets or business outside the ordinary course of its business, or (d)
agrees to do any of the foregoing;
11. There is a substantial change (other than with respect to changes
in the normal course of any Borrower's business, such as seasonal fluctuations)
in the existing or prospective financial condition of any Borrower which the
Bank in good faith determines to be materially adverse; or
12. The Bank in good faith deems itself insecure:
then this Note shall become due immediately, without notice, at the Bank's
option.
Remedies: If this Note is not paid at maturity, whether by demand, acceleration
or otherwise, the Agent and the Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of reasonable notice shall be
met if the Agent or the Bank sends the notice to the Borrower at least seven (7)
days prior to the date of public or private sale, disposition or other event
giving rise to the required notice. Upon default, the Agent and the Bank are
authorized to cause all or any part of any collateral securing this Note to be
transferred to or registered in its (their) name(s) or in the name of any other
person, firm or corporation, with or without designation of the capacity of such
nominee. The Borrower shall be liable for any deficiency remaining after
disposition of any collateral securing this Note. The Borrower is liable to the
Agent and the Bank for all reasonable costs and expenses of every kind incurred
in the making or collection of this Note, including, without limitation,
reasonable attorneys' fees and court costs. These costs and expenses shall
include, without limitation, any reasonable costs or expenses incurred by the
Agent and the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
Waiver: Each endorser and any other party liable on this Note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
collateral securing this Note, to the addition of any party, and to the release
or discharge of, or suspension of any rights and remedies against, any person
who may be liable for the payment of this Note. No delay on the part of the Bank
in the exercise of any right or remedy shall operate as a waiver. No single or
partial exercise by the Bank of any right or remedy shall preclude any other
future exercise of it or the exercise of any other right or remedy.
<PAGE> 5
No waiver or indulgence by the Bank of any default shall be effective unless in
writing and signed by the Bank, nor shall a waiver on one occasion be construed
as a bar to or waiver of that right on any future occasion.
Miscellaneous: Each Borrower shall be jointly and severally liable under this
Note. This Note shall be binding on each Borrower and its successors, and shall
inure to the benefit of the Bank, its successors and assigns. Any reference to
the Bank shall include any holder of this Note. This Note is delivered in the
State of Ohio and governed by Ohio law. Section headings are for convenience of
reference only and shall not affect the interpretation of this Note. This Note
and all related loan documents embody the entire agreement between the Borrower
and the Bank regarding the terms of the loan evidenced by this Note, and
supersede all oral statements and prior writings relating to that loan.
WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT AND THE BANK, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE, THE LOAN AGREEMENT, OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE
BANKS OR THE AGENT'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF
JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN, IN THE LOAN AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT. NO BORROWER NOR THE BANK AND THE AGENT SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE BORROWER, THE AGENT OR THE BANK EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
Each Borrower irrevocably authorizes any attorney-at-law, including any
attorney-at-law employed or retained by the Bank or the Agent, to appear for the
Borrower in any court of record in Franklin County, Ohio (which the Borrower
acknowledges to be the place where this Note was made) or any other state or
jurisdiction wherein the Borrower may then reside, to (i) waive the issuing and
service of process, (ii) confess judgment against the Borrower in favor of the
holder of this Note for the amount then due, together with costs of suit, (iii)
release all errors, and (iv) waive all rights of appeal. Each Borrower consents
to the jurisdiction and venue of that court. Each Borrower waives any conflict
of interest that any attorney-at-law employed or retained by the Bank or the
Agent may have in confessing judgment under this Note and consents to payment of
a legal fee to any attorney-at-law confessing judgment under the Note. After
judgment is entered against one or more of the Borrowers, the power conferred
may be exercised as to one or more of the other Borrowers.
<PAGE> 6
The undersigned have executed this Note in Columbus, Ohio, as of the date and
year first above written.
Rocky Shoes & Boots, Inc.,
an Ohio corporation
By: /s/ DAVID FRAEDRICH
-----------------------------
Title: Exec. V.P.
--------------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Five Star Enterprises Ltd., Lifestyle Footwear, Inc.,
a Cayman Islands corporation a Delaware corporation
By: /s/ DAVID FRAEDRICH By: /s/ DAVID FRAEDRICH
-------------------------- ------------------------
Title: Exec. V.P. Title: Exec. V.P.
----------------------- ---------------------
<PAGE> 1
Exhibit 10.1
LEASE AGREEMENT
This lease agreement ("Lease") is made and entered into as of the 1st
day of May, 1998, at Nelsonville, Ohio, by and between William Brooks Real
Estate Company, 39 East Canal Street, Nelsonville, Ohio 45764, an Ohio
corporation ("Lessor"), and Rocky Shoes & Boots, Inc., 39 East Canal Street,
Nelsonville, Ohio 45764, an Ohio corporation ("Lessee").
AGREEMENT
ARTICLE 1. DEMISE, DESCRIPTION, AND TERM
1.01 Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, that certain property (the "Leased Premises") situated in the City of
Nelsonville, Athens County, Ohio, and described as follows:
Being the Shoe Factory located at 45 East Canal Street and the
parking lot located at 13-75 Myers Street in Nelsonville,
which is more particularly described in the attached Exhibit
"A".
for the term of five years commencing as of May 1, 1998, and ending on April 30,
2003 ("Initial Term") subject to two five year renewal options ("Renewal Terms")
as specified in Article 13. Hereinafter "Term" shall refer to the Initial Term
and any Renewal Term.
1.02 Lessor warrants that it holds good title to the Leased
Premises in fee simple, and has full power and authority to enter into this
lease agreement.
ARTICLE 2. RENT AND PLACE OF PAYMENT
2.01 Lessee shall pay Lessor at 39 East Canal Street, Nelsonville,
Ohio, or at such other place as the Lessor shall designate from time to time in
writing, as rent ("Rent") for the Leased Premises, the following sums:
<PAGE> 2
(a) During the first through third lease years: $7,000 per month;
(b) During the fourth and fifth lease years: $7,500 per month.
The monthly lease payments shall be paid without set off or deduction
in advance on the first day of each calendar month.
2.02 Effect of Default in Rent and Other Payments. If Lessee defaults
in the payment of any installment of rent hereunder, such installment shall bear
interest at the rate of twelve percent (12%) per annum from the day it is due
until actually paid. All other obligations, benefits, and moneys which may
become due to Lessor from Lessee under the terms hereof, or which are paid by
Lessor because of Lessee's default hereunder, shall bear interest at the rate of
twelve percent (12%) per annum from the due date until paid, or, in the case of
sums paid by Lessor, because of Lessee's default hereunder, from the date such
payments are made by Lessor until the date Lessor is reimbursed by Lessee
therefor.
ARTICLE 3. USE OF LEASED PREMISES
3.01 Use of Premises. Lessee shall have the right to use and occupy the
Leased Premises for any lawful purpose.
3.02 Compliance by Lessee. Except as provided otherwise herein, Lessee
shall comply with all laws, ordinances, rules and regulations of all federal,
state, county, and municipal governments applicable to the Leased Premises now
in force or that may be enacted hereafter, and with all directions, rules, and
regulations of the fire marshal, health officer, building inspector, or other
proper officers of the governmental agencies having jurisdiction over the Leased
Premises, and with standards established from time to time by the National Fire
Protection Association or any similar bodies (collectively, all of the foregoing
are "Laws"), if such Laws are applicable to Lessee's
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<PAGE> 3
specific use and occupancy of the Leased Premises. Lessee shall make all repairs
and structural alterations to the Leased Premises which hereafter may be
required in order to comply with the foregoing. Lessee may contest in good faith
any applicable Law for which Lessee's compliance is required.
ARTICLE 4. TAXES AND ASSESSMENTS
4.01 Payment by Lessee. In addition to the Rent, Lessee shall, as
further consideration for this Lease, pay and discharge all taxes, general and
special assessments, and other charges of every description which during the
term of this lease may be levied on or assessed against the Leased Premises and
all interests therein and all improvements and other property thereon, whether
belonging to Lessor or to Lessee, or to which either of them may become liable
in relation thereto. Lessee shall pay all such taxes, assessments, and charges
at least ten (10) days prior to the date of delinquency thereof and shall give
written notice of each such payment to Lessor within five days after such
payment is made.
4.02 Lessor's Option to Pay. If Lessee fails to pay such taxes,
assessments or charges, or fails to give written notice of any payment thereof
as herein provided at least ten days prior to the time the same becomes
delinquent, Lessor may, at its option, at any time within or after such ten day
period, pay such taxes, assessments, or charges, together with all penalties and
interest which may have been added thereto because of Lessee's delinquency or
default, and may likewise redeem the Leased Premises or any part thereof, or the
buildings or improvements situated thereof, from any tax sale or sales. Any such
amounts so paid by Lessor shall become immediately due and payable as rent by
Lessee to Lessor in accordance with Article 11 hereof.
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<PAGE> 4
4.03 Proration of Taxes. All such taxes and assessments for the first
and last years of this Lease shall be prorated between Lessor and Lessee on the
basis of the ratio between the time the Leased Premises are leased to Lessee and
the time the Leased Premises are not so leased.
4.04 Contesting Levy, Assessment, or Charge. Lessee shall have the
privilege, acting in the name of the Lessor, before delinquency occurs, of
protesting, contesting, objecting to, or opposing the legality or amount of any
such taxes, assessments, or public charges to be paid by Lessee hereunder, if
Lessee shall, in good faith, deem the same to be illegal or excessive. In the
event of any such contest, Lessee may to the extent provided by law defer
payment of any such tax, assessment, fees or charge so long as the legality or
the amount thereof is so contested in good faith; provided, however, that if at
any time payment of the whole or any part thereof shall become necessary in
order to prevent the termination, by sale or otherwise, of the right of
redemption of any property affected thereby, or to prevent eviction of either
Lessor or Lessee because of nonpayment thereof, Lessee shall pay the same in
order to prevent such termination of the right of redemption or such eviction.
Any such contest, whether before or after payment, may be made in the name of
Lessor or Lessee, or both, as Lessee may determine, but if such contest is made
by Lessee in the name of Lessor, then Lessor shall be notified thereof at least
ten days prior to the commencement of the proceeding, and Lessor shall
cooperate, reasonably, in such contest. Any such contest shall be at the sale
cost and expense of Lessee. Each refund of any tax, assessment, fee, or charge
so contested shall be paid to Lessee. Lessor shall not, without the prior
approval of Lessee, make or enter into or finally agree to any settlement,
compromise, or any disposition of any contest, or discontinue or withdraw any
contest, or accept any refund, other adjustments or credit of or from any such
tax or assessment as a result of any contest.
- 4 -
<PAGE> 5
4.05 Taxes Excluded. Nothing herein contained requires, or shall be
construed to require, Lessee to pay any property, gift, estate, inheritance, or
other tax assessed against Lessor, its successors or assigns, or any income or
other tax, assessment. charge, or levy on the Rent payable by Lessee under this
Lease.
ARTICLE 5. INSURANCE
5.01 Lessee's Obligations. Lessee shall secure from insurance carriers
acceptable to Lessor, and maintain during the entire Term and any Renewal Term
of this Lease, the following coverage:
(a) Fire and extended coverage insurance on the Leased Premises in an
amount not less than 100% percent of the replacement value of the Leased
Premises and other improvements on the Leased Premises, provided that insurance
in that percentage can be obtained, and, if not, then to the highest percentage
that can be obtained less than the said 100%.
(b) Comprehensive general public liability insurance covering all loss
or damage to the person or property of others arising out of the use, ownership,
operation or conduct on the Leased Premises with the limits of not less than
$1,000,000 for loss from an accident resulting in bodily injury to or death of
one or more persons, and $500,000.00 for all liability arising out of damage to
or destruction of property, in any one occurrence.
5.02 Required Provisions. All insurance policies maintained in
accordance with this Article 5 shall name Lessor as owner as additional insured
and shall provide that no cancellation reduction in amount or change in coverage
shall be effective unless at least 30 days written notice has been given to the
named insureds.
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<PAGE> 6
5.03 Failure to Secure. If Lessee at any time during the Term hereof
fails to secure or maintain the foregoing insurance, Lessor shall be permitted
but not obligated to obtain such insurance in Lessee's name or as agent of
Lessee and shall be compensated by Lessee for the cost of the insurance premiums
in accordance with Article 11 hereof.
ARTICLE 6. FIRE, CASUALTY, OR OTHER LOSS
6.01 Casualty and Restoration. If the building or other improvements on
the Leased Premises are destroyed or damaged by fire, flood, or other casualty,
Lessee shall give immediate written notice thereof to Lessor. Subject to Section
6.02 below, Lessor will proceed with reasonable diligence to restore, repair,
replace and rebuild the Leased Premises as the same existed prior to the
destruction or damage, reasonable wear and tear excepted.
6.02 Material Casualty. If all or parts of the Leased Premises are
damaged by fire or other casualty and the cost to repair such damage exceeds 50%
of the replacement cost of the improvements (a "Material Casualty"), this Lease
may, at the election of Lessor or Lessee, be terminated as of the date of the
casualty. Within 60 days of such Material Casualty, if Lessor or Lessee desires
to terminate this Lease, such party will so notify the other party hereto. If
the damage does not constitute a Material Casualty or if neither party elects to
terminate this Lease as permitted, Lessor shall make all repairs and restore the
Leased Premises promptly in accordance with Section 6.01. If Lessor does not
substantially complete the repair and reconstruction within one hundred eighty
(180) days after the loss or damage occurs, Lessee may, at its election,
terminate this Lease by written notice to Lessor.
6.03 Rent Abatement. From and after the date of any casualty or damage,
and irrespective of the time period required for making repairs, rent and all
other amounts due from Lessee under this
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<PAGE> 7
Lease shall abate equitably during the time from the casualty or damage until
repaired or restored, or until the Lease is terminated, in an amount equal to
the ratio that the portion of the improvements reasonably usable for commercial
purposes bears to the total area of the improvements.
6.04 Insurance Proceeds. If Lessor or Lessee terminates this Lease
pursuant to Section 6.02, all insurance proceeds from all policies covering the
improvements on the Leased Premises shall be paid to Lessor, except for any
separate insurance maintained by Lessee covering Lessee's contents and personal
property.
ARTICLE 7. UTILITIES
Lessee shall during the Term hereof pay before delinquency all charges
for telephone, telecommunications, gas, electricity, sewage, and water used in
or on the Leased Premises and for the removal of rubbish therefrom immediately
on becoming due and shall hold Lessor harmless from any liability therefor.
Lessee further agrees to pay all charges for repairs to water meters and lines,
sewer lines, electric, gas and telephone utilities on the Leased Premises
whether necessitated by ordinary wear and tear, temperature extremes, accident,
or any other causes. Such payments shall be made immediately on becoming due.
ARTICLE 8. WASTE AND NUISANCE
Lessee shall not commit, or suffer to be committed, any waste on the
Leased Premises, nor shall it maintain, commit, or permit the maintenance or
commission of any nuisance an the Leased Premises or use the Leased Premises for
any unlawful purpose.
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<PAGE> 8
ARTICLE 9. REPAIRS AND MAINTENANCE
9.01 Lessee's Duty. Lessee agrees to keep the Leased Premises in good
order and repair, reasonable wear and tear excepted. Lessee agrees to maintain
in good order and repair all of the leasehold improvements, including, but not
limited to, the structure, roof, doors, windows, walls, plumbing fixtures,
pipes, floors, stairways, railings, heating and air conditioning facilities and
all other portions of the Leased Premises. Lessee also agrees to maintain the
curbs and pavements in and about the Leased Premises, together with facilities
reasonably appurtenant thereto, including entryway and awnings. Lessee shall
keep the said pavements and appurtenances free of ice and snow and trash and
expressly assumes sole liability for accidents alleged to have been caused by
their defective condition.
9.02 Hazardous Substances. Lessee shall not cause or permit any
Hazardous Substance to be manufactured, stored, discharged, leaked or emitted
on, in or under the Leased Premises in violation of any Applicable Environmental
Laws. For purposes of this Lease, the term "Hazardous Substance" shall mean any
product, substance, chemical, waste or electromagnetic emissions that is or
shall hereafter be listed or defined as hazardous, toxic, or dangerous under
Applicable Environmental Laws. "Hazardous Substance" includes without limitation
petroleum products and polychlorobiphenyls ("pcbs"). The term "Applicable
Environmental Laws" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq., the Federal
Water Pollution Control Act, 33 U.S.C. 1251 et seq., the Clean Air Act, 42
U.S.C. 7401 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1471
et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 through 2629, the Safe
Drinking Water Act, 42 U.S.C. 300f through
- 8 -
<PAGE> 9
300j, and any similar state and local laws and ordinances, and the regulations
implementing such statutes. Lessee hereby agrees to indemnify, defend (with
counsel reasonably acceptable to Lessor) and hold harmless Lessor and Lessor's
employees, contractors, agents, officers, partners, assigns and successors of
Lessor and their affiliates from any claims (including without limitation third
party claims for personal injury or real or personal property damage), actions,
administrative proceedings (including informal proceedings), judgments, damages,
punitive damages, penalties, fines, costs, liabilities (including sums paid in
settlement of claims), interest or losses, including attorneys' fees (including
any fees and expenses incurred in enforcing this indemnity), consultant fees,
and expert fees that arise directly or indirectly from or in connection with the
presence, suspected presence, release or suspected release of any Hazardous
Substance of any kind, whether into the air, soil, surface water, ground water,
pavement, structures, fixtures, equipment, tanks, containers or other personalty
on, in, under or above the Leased Premises caused by Lessee or Lessee's
invitees, (which term shall not include Lessor and Lessor's invitees),
contractors, agents, employees or representatives. The indemnification
obligation of Lessee set forth in the preceding sentence shall survive the
termination of this Lease and shall include, without limitation, costs,
including capital, operating and maintenance costs incurred in any cleanup,
remedial, removal or restoration work required or performed by any federal,
state or local governmental agency or political subdivision or performed by any
nongovernmental entity or person because of the presence, suspected presence,
release or suspected release of any Hazardous Substance on, in, under or above
the Leased Premises (hereinafter the "remedial work").
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<PAGE> 10
ARTICLE 10. ALTERATIONS, IMPROVEMENTS, AND FIXTURES
10.01 Lessee shall not alter or improve the Leased Premises without the
prior written consent of Lessor to do so, which consent shall not be
unreasonably withheld. All improvements, equipment, and fixtures placed on the
Leased Premises by Lessee shall at all times be and remain the property of
Lessee, and Lessee shall have the right to remove said improvements, equipment,
and fixtures at any time during the term hereof. Should Lessee fail to remove
such improvements, equipment, fixtures, or any of them on or before the date of
termination of this Lease, such property remaining on the Leased Premises shall
be deemed abandoned by Lessee and shall thereupon become the absolute property
of Lessor without compensation to Lessee. Lessee nevertheless covenants and
agrees that any such improvements shall be made in a careful, workmanlike manner
and in compliance with all applicable, federal, state, and municipal laws and
regulations.
ARTICLE 11. LESSOR'S RIGHT TO PERFORM FOR LESSEE
If Lessee fails to perform or comply with any of its agreements
contained herein, Lessor shall give notice of such failure to Lessee and, 20
days after such notice is given, Lessor may itself make such payment or perform
or comply with such agreement (except that if Lessee's failure creates
substantial risk of harm to or forfeiture of the Leased Premises, Lessor may
make such payment or perform or comply with such agreement concurrently with or
at any time after the giving of such notice), and the amount of such payment and
the amount of the reasonable expenses of Lessor (including attorneys' fees)
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, shall be paid by Lessee to Lessor
together with interest thereon at an annual rate equal to 12% from the date of
such payment and expenses until paid to Lessor by Lessee.
- 10 -
<PAGE> 11
ARTICLE 12. QUIET POSSESSION
12.01 Covenant of Quiet Possession. Lessor covenants that at all times
during the Term of this Lease so long as Lessee is not in default hereunder,
Lessee's quiet enjoyment of the Leased Premises shall not be disturbed.
12.02 Encumbrance. Lessor reserves the right to encumber the Leased
Premises at any time during the Term of this Lease, and this Lease and any
renewal or extensions of the Term hereof shall be subordinate, at the option of
the Lessor, to any and all encumbrances given by Lessor to secure funds for the
Leased Premises. This subordination shall not defeat the continuation of the
Term of this Lease under the provisions of Articles 1.
ARTICLE 13. OPTION TO RENEW OR EXTEND 13.01 Renewal Option. If Lessee
is not then in default of its obligation to pay rent or of any other obligations
hereunder, Lessee shall have the right to renew this Lease for two Renewal Terms
of five years each beginning on May 1, 2003, and May 1, 2008 respectively under
the same terms and conditions as this Lease; provided, however that the monthly
base Rent during the two Renewal Terms shall be increased to $8,000 and $8,500,
respectively. Lessee may exercise the options to renew by giving Lessor written
notice thereof on or before January 1, 2003, and January 1, 2008 respectively.
13.02 Effect of Holding Over. If Lessee does not renew or extend the term of
this Lease as herein provided, and holds over beyond the expiration of the Term
hereof, such holding over shall be deemed a month-to-month tenancy only, with
Rent payable on the 1st day of each and every month thereafter until the tenancy
is terminated in a manner provided by law. Rent during such
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<PAGE> 12
holdover period shall be at the same monthly level as was payable with respect
to the last month of the Term.
ARTICLE 14. OPTION TO PURCHASE LEASED PREMISES
14.01 Grant of Option to Lessee. Lessor grants to Lessee the option
("Option") to purchase the Leased Premises at any time during the Initial Term
or Renewal Term of this Lease provided that Lessee is not then in default of any
of its obligations hereunder.
14.02 Method of Exercising Option. Lessee shall exercise the Option by
giving notice ("Option Notice") to Lessor.
14.03 Establishing Price. The purchase price shall be the greater of
(a) $250,000.00 and (b) the fair market value established by appraisal, as
hereinafter provided. Upon Lessee's exercise of the Option, the parties shall
attempt to appoint a qualified real estate appraiser acceptable to Lessor and
Lessee, within 15 days after the Option Notice is given to Lessor. The appraiser
shall have at least five (5) years commercial appraisal experience in the area
in which the Leased Premises are located and shall appraise and set the fair
market value of the Leased Premises. If a party does not participate in the
appointment of the appraiser within fifteen (15) days after Lessee exercises the
Option, the appraiser appointed by the other party shall be the sole appraiser
and shall set the fair market value of the Leased Premises. If the Lessor and
Lessee do not mutually agree on an appraiser, each of Lessor and Lessee shall
have the right to appoint an appraiser within said 15 day period, and if two
appraisers are appointed by the parties, they shall meet promptly and attempt to
set the fair market value of the Leased Premises. If the two appraisers do not
agree on the fair market value within thirty (30) days after the second
appraiser has been appointed, the two appraisers shall attempt to elect a third
appraiser meeting the qualifications stated in this section within ten (10)
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<PAGE> 13
days after the last day the two appraisers are given to set the fair market
value. If the two appraisers do not agree on the third appraiser, either of the
parties to this Lease, by giving ten (10) days notice to the other party, can
apply to the then president of the county real estate board of the county in
which the Leased Premises are located, or to the presiding judge of the superior
court of that county, for the selection of a third appraiser who meets the
qualifications stated in this section. Each of the parties shall bear one half
of the cost of appointing the third appraiser and of paying the third
appraiser's fee. The third appraiser, however, selected, shall be a person who
has not previously acted in any capacity for either party.
Within thirty (30) days after the selection of the third appraiser, a
majority of the appraisers shall set the fair market value of the Leased
Premises. If a majority of the appraisers do not set the fair market value
within the stipulated period of time, the three appraisers' appraisals shall be
added together and their total divided by three and the resulting quotient shall
be the fair market value for purposes of the purchase price of the Leased
Premises.
The value established by appraisal shall be the fair market value of
the Leased Premises at the time of appraisal. In appraising the Leased Premises
as provided in this Article, the appraisers shall not take into consideration
the existence of this Lease or Lessee improvements.
After the fair market value for the Leased Premises has been set, the
appraisers shall immediately notify the parties. If Lessee objects to the fair
market value that has been set, Lessee shall have the right to elect not to
purchase the Leased Premises, as long as Lessee pays all the costs in connection
with the appraisal procedure that set the fair market value. Lessee's election
not to purchase the Leased Premises must be exercised within thirty (30) days
after receipt of notice from the appraisers of the purchase price. If Lessee
does not exercise the election not to purchase within
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<PAGE> 14
the thirty (30) day period, Lessee shall purchase the Leased Premises from
Lessor, as provided in this Article.
14.04 Method of Payment. The purchase price shall be payable in cash in
lawful money of the United States to Lessor by Lessee at closing (the date the
deed is recorded).
14.05 Title To Premises. Lessor shall deliver to Lessee an executed
general warranty deed in recordable form conveying the Leased Premises. Title to
the Leased Premises shall be conveyed by Lessor to Lessee, subject only to
current real estate taxes not yet due and payable and title defects or
encumbrances created by Lessee.
14.06 Proration. Rent shall be prorated as of the date of closing. Any
other prepaid rent previously paid by Lessee to Lessor will be credited to
Lessee against the purchase price.
14.07 Closing Costs. Transfer taxes, recording fees on the deed, and
all other closing costs shall be allocated between and paid by the parties
hereto.
14.08 Deed and Other Documents. At time of closing, Lessor shall convey
good and marketable title to the Leased Premises by a transferrable and
recordable duly executed general warranty deed, which shall include release of
all dower interests, if applicable.
ARTICLE 15. CONDEMNATION
15.01 All of Premises. If during the Term of this Lease or any
extension or renewal thereof, all or substantially all of the Leased Premises
should be taken for any public or quasi-public use under any law, ordinance, or
regulation or by right of eminent domain, or should be sold to the condemning
authority under threat of condemnation, this Lease shall terminate on the date
of taking of possession of the Leased Premises by the condemning authority.
"Substantially all" of the Leased Premises will be deemed to have been taken if
50% or more of the Leased Premises are taken or if
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<PAGE> 15
such portion of the Leased Premises as will make it impracticable to use the
Leased Premises is taken.
15.02 Partial. If less than all of the Leased Premises shall be taken
for any public or quasi-public use under any law, ordinance, or regulation, or
by right of eminent domain, or should be sold to the condemning authority under
threat of condemnation, this Lease shall not terminate but Lessor shall
forthwith at its sole expense, restore and reconstruct the building and other
improvements situated on the Leased Premises, provided such restoration and
reconstruction shall make the Leased Premises reasonably suitable for the uses
for which the Leased Premises are leased. The award for any such partial taking
shall be paid to Lessor. The Rent payable hereunder during the unexpired portion
of this Lease shall be adjusted equitably.
15.03 Awards. Lessor and Lessee shall each be entitled to receive and
retain such separate awards and portions of lump sum awards as may be allocated
to their respective interests in any condemnation proceedings. The termination
of this Lease shall not affect the rights of the respective parties to such
awards.
ARTICLE 16. DEFAULTS
16.01 Default by Lessee. At any time during the Term, Lessee shall be
in default under this Lease if (i) Lessee shall default in the payment of any
rent or of any other sum of money whatsoever which Lessor shall be obligated to
pay under the provisions hereof, and such default shall remain uncured for a
period of thirty (30) days following written notice thereof, or (ii) Lessee
shall default in the performance or observance of any of the other terms,
covenants, conditions or agreements hereof and Lessee fails to cure such
nonmonetary default for thirty (30) days after written notice, or, if such
nonmonetary default shall be of such a nature that the same cannot practicably
be cured
- 15 -
<PAGE> 16
within said thirty (30) day period, Lessee shall not within said thirty (30) day
period commence with due diligence to cure and perform such defaulted term,
covenant, conditions or agreement, or Lessee shall within said thirty (30) day
period commence with due diligence to cure and perform such defaulted term,
covenant, condition or agreement, but shall thereafter fail or neglect to
prosecute and complete with due diligence, the curing and performance of any
such defaulted term, covenant, condition or agreement.
16.02 Remedies. Upon the occurrence of such default, Lessor, at
Lessor's option, may elect to terminate this Lease at any time, and the Term
shall expire upon such election as fully and completely as if said date were the
date herein originally fixed for the expiration of the Term hereof, and Lessee
shall thereupon quit and peacefully surrender the Leased Premises to Lessor,
without any payment therefor by Lessor, and Lessor may re-enter and remove all
persons and property therefrom pursuant to such proceedings as are provided by
law. Lessor may, at its option, elect to re-enter the Leased Premises, pursuant
to such proceedings as are provided by law, without terminating the Lease, in
which case Lessee shall surrender the Leased Premises to Lessor.
Lessor may take possession of the Leased Premises as provided herein
and/or terminate this Lease without waiving or releasing any other rights or
remedies provided by law.
ARTICLE 17. SURRENDER OF PREMISES
Lessee shall without demand therefor and at its own cost and expense on
or prior to expiration of the Term hereof or of any extended Term hereof, remove
all property belonging to it and all alterations, additions or improvements, and
fixtures which by the terms hereof it is permitted to remove, repair all damage
to the Leased Premises caused by such removal, and restore the Leased Premises
to the condition they were in prior to the installation of the property so
removed. Any
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<PAGE> 17
property not so removed shall be deemed to have been abandoned by Lessee and may
be retained or disposed of by Lessor.
ARTICLE 18. INSPECTION BY LESSOR
Lessee shall permit Lessor and its agents to enter into and upon the
Leased Premises at all reasonable times for the purpose of inspecting the same
or for the purpose of determining Lessee's compliance with the obligations of
this Lease.
ARTICLE 19. ASSIGNMENT AND SUBLEASE
Lessee shall not assign this Lease nor sublet all or any portion of the
Leased Premises without the prior written consent of Lessor, which consent may
be unreasonably withheld. Lessor is expressly given the right to assign any or
all of its interest under the terms of this lease.
ARTICLE 20. MISCELLANEOUS
20.01 Parties Bound. This Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrator, legal representations, successors, and assigns when permitted by
this Lease.
20.02 Ohio Law to Apply. This Lease shall be construed under and in
accordance with the laws of the State of Ohio, and all obligations of the
parties created hereunder are performable in Athens County, Ohio.
20.03 Legal Construction. In case any one or more of the provisions
contained in this Lease shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceable
shall not effect any other provision thereof and this Lease shall be construed
as if such invalid, illegal, or unenforceable provision had never been contained
herein.
- 17 -
<PAGE> 18
20.04 Sole Agreement of the Parties. This Lease constitutes the sole
and only agreement of the parties hereto and supersedes any prior understandings
or written or oral agreements between the parties respecting the within subject
matter.
20.05 Amendment. No amendment, modification, or alteration of the terms
hereof shall be binding unless the same be in writing, dated; subsequent to the
date hereof, and duly executed by the parties hereto.
20.06 Rights and Remedies Cumulative. The rights and remedies provided
by this Lease are cumulative and the use of any one right or remedy by either
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance, or otherwise.
20.07 Waiver of Default. No waiver by the parties hereto of any default
or breach of any term, condition, or covenant of this Lease shall be deemed to
be a waiver of any other breach of the same or any other term, condition, or
covenant contained herein.
20.08 Time of Essence. Time is of the essence of this agreement.
20.09 Exculpation of Lessor. If Lessor shall convey title to the Leased
Premises pursuant to a sale or exchange of property, the Lessor shall not be
liable to Lessee or any immediate or remote assignee or successor of Lessee as
to any act or omission from and after such conveyance.
ARTICLE 21. SAVE HARMLESS CLAUSE
Lessee does hereby agree to save the Lessor harmless from and against
all claims, demands, damages and causes of action arising with respect to the
Leasehold Premises or the use thereof by Lessee during the Term of this Lease or
any extension thereof.
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<PAGE> 19
ARTICLE 22. NOTICES
All notices hereby provided for or which may be given in connection
with this Lease shall be in writing, and such notices shall be deemed to have
been properly given when delivered personally at the address last designated
hereunder for the intended party or when sent by U.S. Registered or Certified
Mail Postage Prepaid, Return Receipt Requested or by overnight mail by a
recognized national carrier. If given to Lessor, notice shall be addressed to
Lessor at 39 East Canal Street, Nelsonville, Ohio 45764, Attention: Patricia
Robey. If given to Lessee, notice shall be addressed to Lessee at 39 East Canal
Street, Nelsonville, Ohio 45764, Attention: Mike Brooks, President. The mailing
of such notice in the manner aforesaid shall be deemed sufficient service and
shall be deemed given as of the date of the deposit thereof for mailing in a
duly constituted United States Post Office or branch thereof located in the same
state as is shown in the address to which directed, or on the third day after
such deposit if made in a Post Office or branch thereof in any other state in
the United States of America or one business day after deposit with an overnight
carrier.
IN WITNESS WHEREOF, the undersigned Lessor and Lessee hereto execute
this agreement as of the day and year first above written.
Signed and acknowledged
presence of: WILLIAM BROOKS REAL ESTATE COMPANY
LESSOR
/s/ CHRISTINE LEHMAN By /s/ PATRICIA H. ROBEY
- -------------------------- ----------------------------
Its President
---------------------------
/s/ BRENDA HAMMOND
- --------------------------
- 19 -
<PAGE> 20
ROCKY SHOES & BOOTS, INC.
LESSEE
/s/ BRENDA HAMMOND By /s/ DAVID FRAEDRICH
- -------------------------- ----------------------------
Its Exec. V.P.
--------------------------
/s/ CHRISTINE LEHMAN
- --------------------------
STATE OF OHIO,
COUNTY OF ATHENS, ss.
Before me, a Notary Public in and for said County, personally appeared
the above named William Brooks Real Estate Company, the Lessor, by Patricia H.
Robey its President in the foregoing lease, and acknowledged the signing thereof
to be the voluntary act and deed of the said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this 5th day of June, 1998.
/s/ ALAN C. YOUNG
----------------------------
Notary Public
STATE OF OHIO,
COUNTY OF ATHENS, ss.
Before me, a Notary Public in and for said County, personally appeared
the above named Rocky Shoes & Boots, Inc., the Lessee, David Fraedrich its
Executive Vice President in the foregoing Lease, and acknowledged the signing
thereof to be the voluntary act and deed of the said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this 5th day of June, 1998.
/s/ ALAN C. YOUNG
----------------------------
Notary Public
- 20 -
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<NAME> ROCKY SHOES & BOOTS, INC.
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