ROCKY SHOES & BOOTS INC
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>ex10-3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>

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                                                                    Exhibit 10.3


                                                           LOAN NO. 001-5056-001


                                 PROMISSORY NOTE


$3,750,000.00                                                   JANUARY 31, 2000


      FOR VALUE RECEIVED, ROCKY SHOES & BOOTS, INC., an Ohio corporation
("BORROWER"), promises to pay to the order of GENERAL ELECTRIC CAPITAL BUSINESS
ASSET FUNDING CORPORATION ("GE CAPITAL") at GE CAPITAL's office at 10900 N.E.
4th St., Suite 500, Bellevue, Washington 98004, Attention: Real Estate
Department, or at such other address as the holder hereof may from time to time
designate in writing, the principal sum of THREE MILLION SEVEN HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($3,750,000.00) together with interest from the date
the proceeds of the loan (the "Loan") evidenced by this Promissory Note (this
"Note") are initially disbursed until maturity on the principal balance from
time to time remaining unpaid hereon at the rate of 8.275% per annum (computed
on the basis of a 360-day year of twelve (12) consecutive thirty (30)-day
months) in installments as follows: (i) interest only in advance at the rate of
$861.98 per day shall be due and payable on the date the proceeds of the Loan
are initially disbursed to or for the benefit of BORROWER (including, without
limitation, disbursement into an escrow for the benefit of BORROWER) for the
period beginning on the date of such disbursement and ending on January 31,
2000; (ii) one hundred seventy-nine (179) installments of principal and interest
in the amount of $36,434.82 each shall be payable commencing on March 1, 2000,
and continuing on the first day of each and every succeeding month until and
including January 1, 2015, and (iii) on February 1, 2015, all then unpaid
principal and interest hereon shall be due and payable.

      If any payment shall not be paid when due and shall remain unpaid for ten
(10) days, BORROWER shall pay an additional charge equal to five percent (5.00%)
of the delinquent payment or the highest additional charge permitted by law,
whichever is less.

      Upon not less than thirty (30) days advance written notice to GE CAPITAL
at any time after March 1, 2005, and upon payment of the Prepayment Premium,
BORROWER shall have the right to prepay all, but not less than all, of the
outstanding balance of this Note on any regularly scheduled principal and
interest payment date. The Prepayment Premium shall be determined by (i)
calculating the decrease (expressed in basis points) in the current weekly
average yield of ten (10)-year U.S. Treasury Constant Maturities (as published
in Federal Reserve Statistical Release H.15 [519]) (the "Index") from Friday,
June 4, 1999, to the Friday immediately preceding the week in which the
prepayment is made, (ii) dividing the decrease by 100, (iii) multiplying the
result by the following described applicable premium factor (the "Premium
Factor"), and (iv) multiplying the product by the principal balance to be
prepaid. If the Index is unchanged or has increased from Friday, June 4, 1999,
to the Friday immediately preceding the prepayment date, no Prepayment Premium
shall be due. The Premium Factor shall be the amount shown on the following
chart for the month in which prepayment occurs:



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                     Number of
                      Months
                     Remaining        (Years)      Premium Factor
                     ----------       -------      --------------

                     180 -  169        (15)            .073
                     168 -  157        (14)            .069
                     157 -  145        (13)            .064
                      144 - 133        (12)            .059
                      132 - 121        (11)            .054
                      120 - 109        (10)            .049
                      108 -  97         (9)            .044
                       96 -  85         (8)            .039
                       84 -  73         (7)            .035
                       72 -  61         (6)            .030
                       60 -  49         (5)            .025
                       48 -  37         (4)            .020
                       36 -  25         (3)            .015
                       24 -  13         (2)            .010
                       12 -   1         (1)            .005

      If the Federal Reserve Board ceases to publish the Index, then the
decrease in the weekly average yield of ten (10)-year U.S. Treasury Constant
Maturities will be determined from another comparable source designated by GE
CAPITAL. Prepayment prior to March 1, 2005 will not be permitted.

      If GE CAPITAL at any time accelerates this Note after an Event of Default
(defined below), then BORROWER shall be obligated to pay the Prepayment Premium
in accordance with the foregoing schedule. The Prepayment Premium shall not be
payable with respect to condemnation awards or insurance proceeds from fire or
other casualty which GE CAPITAL applies to prepayment, nor with respect to
BORROWER's prepayment of the Note in full during the last three (3) months of
the term of this Note unless an Event of Default has occurred. BORROWER
expressly acknowledges that the Prepayment Premium is not a penalty but is
intended solely to compensate GE CAPITAL for the loss of its bargain and the
reimbursement of internal expenses and administrative fees and expenses incurred
by GE CAPITAL.

      The Loan is secured, in part, by a certain Open-End Mortgage, Security
Agreement, Assignment of Leases and Rents and Fixture Filing (the "Mortgage")
covering the real property and other assets (the "Property") described therein,
and by certain other documents executed and delivered in connection herewith
(the "Loan Documents").

      Each of the following shall constitute an Event of Default ("Event of
Default") hereunder and under the Mortgage:

           a. Failure of or refusal by BORROWER to make any payment of
principal, interest, or any Prepayment Premium due under this Note when due, and
such failure or refusal shall continue for a period of ten (10) days after
written notice is given to BORROWER by GE CAPITAL specifying such failure; or


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           b. Failure of BORROWER within the time required by the Mortgage to
make any payment for taxes, insurance or for reserves for such payments, or any
other payment necessary to prevent the filing of any lien, and such failure
shall continue for a period of ten (10) days after written notice is given to
BORROWER by GE CAPITAL specifying such failure; or

           c. Failure by BORROWER to observe or perform any obligations of
BORROWER to GE CAPITAL on or with respect to any transaction, debt, undertaking
or agreement other than the transaction evidenced by this Note and the
continuation of such failure beyond the expiration of the applicable cure
period, if any, set forth in the documents evidencing or securing such other
transaction, debt, undertaking or agreement; or

           d. Failure of BORROWER to make any payment or perform any obligation
under any superior liens or encumbrances on the Property, within the time
required thereunder, or commencement of any suit or other action to foreclose
any superior liens or encumbrances; or

           e. Failure by BORROWER to observe or perform any of its obligations
under any of the lease agreements covering the Property; or

           f. The Property is transferred or any agreement to transfer any part
or interest in the Property in any manner whatsoever is made or entered into
without the prior written consent of GE CAPITAL; or

           g. Filing by BORROWER of a voluntary petition in bankruptcy or filing
by BORROWER of any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation, or similar
relief for itself under any present or future federal, state or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, or the seeking, consenting to, or acquiescing by BORROWER in the
appointment of any trustee, receiver, custodian, conservator or liquidator for
BORROWER, any part of the Property, or any of the income or rents of the
Property, or the making by BORROWER of any general assignment for the benefit of
creditors, or the inability of or failure by BORROWER to pay its debts generally
as they become due, or the insolvency on a balance sheet basis or business
failure of BORROWER, or the making or suffering of a preference within the
meaning of federal bankruptcy law or the making of a fraudulent transfer under
applicable federal or state law, or concealment by BORROWER of any of its
property in fraud of creditors, or the imposition of a lien upon any of the
property of BORROWER which is not discharged in the manner permitted by the
Mortgage, or the giving of notice by BORROWER to any governmental body of
insolvency or suspension of operations; or

           h. Filing of a petition against BORROWER seeking any reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under any
present or future federal, state or other law or regulation relating to
bankruptcy, insolvency or other relief for debts, or the appointment of any
trustee, receiver, custodian, conservator or liquidator of BORROWER, of any part
of the Property or of any of the income or rents of the Property, unless such
petition shall be dismissed within ninety (90) days after such filing, but in
any event prior to the entry of an order, judgment or decree approving such
petition; or


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           i. The institution of any proceeding for the dissolution or
termination of BORROWER voluntarily, involuntarily, or by operation of law, or
the death of BORROWER; or

           j. A material adverse change occurs in the assets, liabilities or net
worth of BORROWER or any of the guarantors of the indebtedness evidenced by this
Note from the assets, liabilities or net worth of BORROWER or any of the
guarantors of the indebtedness evidenced by this Note previously disclosed to GE
CAPITAL; or

           k. Any warranty, representation or statement furnished to GE CAPITAL
by or on behalf of BORROWER under this Note, the Mortgage, or any of the Loan
Documents shall prove to have been false or misleading in any material respect;
or

           l. Failure of BORROWER to observe or perform any other covenant or
condition contained in this Note and such failure shall continue for thirty (30)
days after notice is given to BORROWER specifying the nature of the failure. No
notice of default and no opportunity to cure shall be required if during the
prior twelve (12) months GE CAPITAL has already sent a notice to BORROWER
concerning default in performance of the same obligation; or

           m. Failure of BORROWER to observe or perform any other obligation
under the Mortgage or any of the Loan Documents when such observance or
performance is due, and such failure shall continue beyond the applicable cure
period set forth in the Loan Documents, or if the default cannot be cured within
such applicable cure period, if BORROWER fails within such time to commence and
pursue curative action with reasonable diligence or fails at any time after
expiration of such applicable cure period to continue with reasonable diligence
all necessary curative actions. No notice of default and no opportunity to cure
shall be required if during the prior twelve (12) months GE CAPITAL has already
sent a notice to BORROWER concerning default in performance of the same
obligation; or

           n. Any of the foregoing events occur with respect to any tenant of
the Property, with respect to any guarantor of any of BORROWER's obligations in
connection with the indebtedness evidenced by this Note or with respect to any
guarantor of any tenant's obligations relating to the Property, or such
guarantor dies or becomes incompetent; or

           o. The occurrence of any event of default under the documents
evidencing or securing (i) GE CAPITAL Loan No. 001-5056-002 in the original
principal amount of $1,500,000.00, (ii) GE CAPITAL Loan No. 001-5056-003 in the
original principal amount of $1,050,000.00, or (ii) any other amounts owed to GE
CAPITAL by Borrower or any entity related to Borrower or any of the guarantors
of the indebtedness evidenced by this Note.

      Upon the occurrence of any Event of Default, GE CAPITAL shall have the
option to declare the entire amount of principal and interest due under this
Note immediately due and payable without notice or demand, and GE CAPITAL may
exercise any of its rights under this Note, under the Mortgage and under the
Loan Documents. After acceleration or maturity, BORROWER shall pay interest on
the outstanding principal balance of this Note at the rate of five percent
(5.00%) per annum above Chase Manhattan Bank's prime interest rate in effect
from



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time to time, or fifteen percent (15.00%) per annum, whichever is higher,
provided that such interest rate shall not exceed the maximum interest rate
permitted by law.

      All payments of the principal and interest on this Note shall be made in
coin or currency of the United States of America which at the time shall be the
legal tender for the payment of public and private debts.

      If this Note is placed in the hands of an attorney for collection,
BORROWER agrees to pay reasonable attorneys' fees and costs incurred by GE
CAPITAL in connection therewith, and in the event suit or action is instituted
to enforce or interpret this Note (including without limitation efforts to
modify or vacate any automatic stay or injunction), the prevailing party shall
be entitled to recover all expenses reasonably incurred at, before or after
trial and on appeal, whether or not taxable as costs, or in any bankruptcy
proceeding, or in connection with post-judgment collection efforts, including,
without limitation, attorneys' fees, witness fees (expert and otherwise),
deposition costs, copying charges and other expenses.

      This Note shall be governed and construed in accordance with the laws of
the State of Ohio applicable to contracts made and to be performed therein
(excluding choice-of-law principles).

      This Note is given in a commercial transaction for business purposes.

      This Note may be declared due prior to its expressed maturity date, all in
the events, on the terms, and in the manner provided for in the Mortgage.

      BORROWER and all sureties, endorsers, guarantors and other parties now or
hereafter liable for the payment of this Note, in whole or in part, hereby
severally (i) waive demand, notice of demand, presentment for payment, notice of
nonpayment, notice of default, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices, and further waive
diligence in collecting this Note or in enforcing any of the security for this
Note; (ii) agree to any substitution, subordination, exchange or release of any
security for this Note or the release of any party primarily or secondarily
liable for the payment of this Note; (iii) agree that GE CAPITAL shall not be
required to first institute suit or exhaust its remedies hereon against BORROWER
or others liable or to become liable for the payment of this Note or to enforce
its rights against any security for the payment of this Note; and (iv) consent
to any extension of time for the payment of this Note, or any installment
hereof, made by agreement by GE CAPITAL with any person now or hereafter liable
for the payment of this Note, even if BORROWER is not a party to such agreement.

      All agreements between BORROWER and GE CAPITAL, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand or acceleration of the final maturity
of this Note or otherwise, shall the interest contracted for, charged, received,
paid or agreed to be paid to GE CAPITAL exceed the maximum amount permissible
under the applicable law. If, from any circumstance whatsoever, interest would
otherwise be payable to GE CAPITAL in excess of the maximum amount permissible
under applicable law, the interest payable to GE CAPITAL shall be reduced to the
maximum amount permissible under applicable law; and if from any circumstance GE



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CAPITAL shall ever receive anything of value deemed interest by applicable law
in excess of the maximum amount permissible under applicable law, an amount
equal to the excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive amount
of interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to BORROWER. All interest paid or agreed to be paid to GE CAPITAL
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full period (including any renewal or
extension) until payment in full of the principal so that the interest hereon
for such full period shall not exceed the maximum amount permissible under
applicable law. GE CAPITAL expressly disavows any intent to contract for, charge
or receive interest in an amount which exceeds the maximum amount permissible
under applicable law. BORROWER expressly acknowledges and represents that the
Loan is a "business loan" within the meaning of Chapter 1343 of the Ohio Revised
Code.

      BORROWER authorizes any attorney-at-law to appear in any Court of Record
in the State of Ohio or in any other state or territory of the United States
after the above indebtedness becomes due, whether by acceleration or otherwise,
after not less than ten (10) days' written notice to BORROWER to waive the
issuing and service of process, and to confess judgment against BORROWER in
favor of the holder of this Note for the amount then appearing due together with
costs of suit, and thereupon to waive all error and all rights of appeal and
stays of execution.


                            [SIGNATURE PAGE FOLLOWS]



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   IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
  CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS
     OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY
  ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN
                                   AGREEMENT.

           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 WILL 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.


Signed in the presence of:                  BORROWER:
                                            ---------

                                            ROCKY SHOES & BOOTS, INC.,
/s/ Brenda Hammond                          an Ohio corporation
-----------------------------
Print Name: Brenda Hammond
            --------------
                                            By: /s/ David Fraedrich
                                                ---------------------------
/s/ Susan Harmony                           Print: David Fraedrich
-----------------------------                      ------------------------
Print Name: Susan Harmony                   Its: Exec VP & CFO
            -------------                        --------------------------


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