EXHIBIT 10.1
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
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This Eighth Amendment to Loan and Security Agreement (the "AMENDMENT")
is made on October 21, 2002 by GMAC Business Credit, LLC ("LENDER") and ROCKY
SHOES & BOOTS, INC. and LIFESTYLE FOOTWEAR, INC. ("BORROWERS").
RECITALS
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A. Borrowers and Lender entered into a Loan and Security Agreement
dated September 18, 2000 (as amended from time to time, including by this
Amendment, the "LOAN AGREEMENT"). Capitalized terms used in this Amendment shall
have the meanings set forth in the Loan Agreement unless otherwise defined in
this Amendment; words placed in brackets "[ ]" are for convenience only and are
not intended to effect the substance of this Amendment.
B. Borrowers and Lender wish to amend the Loan Agreement as set forth
below.
THEREFORE, in consideration of the mutual promises and agreements of
the parties hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which is acknowledged, the parties agree as
follows:
TERMS AND CONDITIONS
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1. The reference to "$50,000,000.00" in Section 1(a) of the Loan
Agreement [maximum outstanding loans] is amended to read "$45,000,000.00".
2. Section 1(d) of the Loan Agreement is amended in its entirety to
read as follows:
(d) Subject to SECTION 3.8 below, the applicable interest
rate (prior to an Event of Default) on all
Obligations is initially the Prime Rate per annum OR
2.375% per annum in excess of the applicable LIBOR
Rate (the foregoing interest rates are referred to as
the "BASE RATES", a "BASE RATE," a "PRIME BASE RATE"
or a "LIBOR BASE RATE", as applicable); provided,
however if Borrowers' consolidated net income for
fiscal year 2002 (based on audited financial
statements prepared in accordance with GAAP) is less
than $2.0 million before extraordinary and
nonrecurring items, the applicable interest rates
will revert to the rates provided set forth in the
original Loan Agreement (one-quarter percent (0.25%)
per annum in excess of the Prime Rate and two and
one-half percent (2.50%) in excess of the applicable
LIBOR Rate).
3. The reference to "September 18, 2003" in Section 1(e) of the Loan
Agreement [the term of the Loan Agreement] is amended to read "September 30,
2005".
4. The reference to "$5,000" in Section 1(f) of the Loan Agreement
[monthly loan administration fee] is amended to read "$2,500".
5. The definition of Availability Reserve is amended in its entirety to
read as follows:
"AVAILABILITY RESERVE" means $1,000,000.00 unless Borrowers'
consolidated net income for fiscal year 2002 (based on audited
financial statements prepared in accordance with GAAP) is at
least $2.0 million before extraordinary and nonrecurring
items, in which case the Availability Reserve will be reduced
to $500,000, effective upon Lender's receipt of such financial
statements.
6. The reference to "180 days" in subpart (3) of the definition of
Eligible Accounts [maximum permitted days past invoice date or shipment on dated
accounts] is amended to read "210 days."
7. The definition of Fixed Charge Coverage Ratio is amended in its
entirety to read as follows:
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"FIXED CHARGE COVERAGE RATIO" means the ratio of (i) EBITDA
MINUS internally funded capital expenditures to (ii) interest,
scheduled principal payments on long term indebtedness and
scheduled payments on capitalized leases and all income taxes,
all as determined according to generally accepted accounting
principles, consistently applied for the twelve month period
ending on the applicable measurement date.
8. Section 3.6 of the Loan Agreement is amended in its entirety to read
as follows:
3.6 TERMINATION PREMIUM. If this Agreement is terminated
(including by application of SECTION 9.6) at any time prior to the
expiration of the Initial Term voluntarily by Parent or by Lender upon
the occurrence of an Event of Default that is not timely cured,
Borrowers shall be obligated to pay Lender a termination premium equal
to the following (the "TERMINATION PREMIUM"):
(a) 1% of the Revolving Advance Limit if terminated
before September 30, 2003;
(b) one-half percent (0.50%) of the Revolving Advance
Limit if terminated after September 30, 2003 but before
October 1, 2004; and
(c) zero after October 1, 2004.
The Termination Premium will also be due and payable in connection with
termination of this Agreement or payment of the Obligations by any
trustee or debtor-in-possession in any Insolvency Proceeding. The
Termination Premium is presumed to be a reasonable estimate of the
amount of damages sustained by Lender as a result of the early
termination of this Agreement and Borrower agrees that such amount is
reasonable under the circumstances currently existing.
9. The phrase in Section 3.6(b)(ii) of the Loan Agreement "up to
one-half" [amount of the Loans for which Borrowers may elect the LIBOR Rate
Option] is amended to read "up to three-quarters."
10. Section 8.6 of the Loan Agreement is amended in its entirety to
read as follows:
AUDITS AND EXAMINATIONS. Permit (a) Lender's representatives
to conduct on-site audits and examinations (an "EXAMINATION") of
Borrowers' business operations and Business Records as often as Lender
desires, (b) appraisers selected by Lender access to Borrowers'
Inventory for purposes of performing
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appraisals (an "APPRAISAL"). Borrowers will pay (i) $750.00 per day per
auditor plus out-of-pocket expenses incurred by Lender for each
Examination performed by or on behalf of Lender, and (ii) up to $11,000
plus out-of-pocket costs and expenses for each Appraisal; PROVIDED
HOWEVER, absent an Event of Default, Borrowers shall only be obligated
to reimburse Lender for 2 Appraisals per calendar year. Borrowers must
reimburse Lender for all costs incurred in connection with Examinations
and Appraisals within ten (10) Business Days after receipt of an
invoice therefor.
11. Section 8.11 of the Loan Agreement is amended in its entirety to
read as follows:
8.11 FINANCIAL COVENANTS.
(a) achieve Net Worth of at least $47 million as of
December 31, 2002 (adjusted for the effect of any permitted
stock redemptions), with such amount increasing by 75% of
Borrower's projected net income for each fiscal quarter
thereafter (based upon annual projections provided by
Borrowers by November 30 of each year); provided that Net
Worth shall not be less than $45.8 million (adjusted for the
effect of any permitted stock redemptions) at any time. The
Net Worth covenant shall be measured as of the last day of
each fiscal quarter.
(c) achieve a Fixed Charge Coverage Ratio of at least
1.6:1 on a trailing twelve month basis measured at the end of
each fiscal quarter.
12. Upon execution of this Amendment, Borrowers shall pay Lender an
amendment fee of $50,000.00 which will be fully earned on the date of this
Amendment and may be charged to Borrowers' Revolving Loans.
13. Except as amended by this Amendment, all the terms and conditions
in the Loan Agreement remain in full force and effect.
14. This Amendment constitutes the entire agreement of the parties in
connection with the subject matter of this Amendment and cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties and negotiations regarding the subject matter hereof, if any, are
merged into this Amendment.
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15. Borrowers and the signatory noted below represent that all
necessary corporate action to authorize Borrowers to enter into this Amendment
has been taken, including, without limitation, board of directors approval and
resolutions necessary to authorize Borrowers' execution of this Amendment.
16. This Amendment may be executed in counterparts, each of which when
so executed and delivered shall be deemed an original, and all of such
counterparts together shall constitute but one and the same agreement.
17. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of Michigan.
GMAC BUSINESS CREDIT, LLC ROCKY SHOES & BOOTS, INC
By: /s/ Xxxxxx X. Xxxxxxxxxx By: /s/ Xxxx Xxxxxx
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Xxxxxx X. Xxxxxxxxxx Xxxxxxx Xxxxxx
Vice President President/Chief Executive Officer
LIFESTYLE FOOTWEAR, INC.
By:/s/ Xxxx Xxxxxx
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Xxxxxxx Xxxxxx
President/Chief Executive Officer
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