Item 1.01 Entry into a Material Definitive Agreement.
On June 25, 2020, Lakeland Industries, Inc. (the "Company") entered into a Loan
Agreement (the "Loan Agreement") with Bank of America, N.A. (the "Lender"). The
Loan Agreement provides the Company with a $12.5 million senior secured
revolving credit facility, which includes a $5 million letter of credit
sub-facility and an option to convert up to $5 million of the revolving credit
facility into a term loan facility. The senior secured revolving credit facility
includes an accordion feature under which the Company may request from time to
time an increase in the revolving commitment of up to $5 million (for a total
commitment of up to $17.5 million).
Borrowing pursuant to the revolving credit facility is subject to a borrowing
base amount calculated as (a) 80% of the balance due on acceptable accounts
receivable, as defined, plus (b) 50% of the value of acceptable inventory, as
defined, minus (c) an amount of certain reserves as the Lender may establish for
the amount of estimated exposure, as reasonably determined by the Lender from
time to time, under certain interest rate swap contracts. The borrowing base
limitation only applies during periods when the Company's quarterly funded debt
to EBITDA ratio, as defined, exceeds 2.00 to 1.00.
The revolving credit facility matures on June 25, 2025, subject to earlier
termination upon the occurrence of certain events of default as set forth in the
Loan Agreement. The Loan Agreement provides that the proceeds of any amounts
drawn under the revolving credit facility are to be used only for business
Borrowings under the revolving credit facility bear interest at a rate per annum
equal to the sum of the LIBOR Daily Floating Rate ("LIBOR"), plus 125 basis
points. LIBOR is subject to a floor of 100 basis points. All outstanding
principal and unpaid accrued interest under the revolving credit facility is due
and payable on the maturity date. On a one-time basis, and subject to there not
existing an event of default, the Company may elect convert up to $5 million of
the then outstanding principal of the revolving credit facility to a term loan
facility with an assumed amortization of 15 years and the same interest rate and
maturity date as the revolving credit facility. The Loan Agreement provides for
an annual unused line of credit commitment fee, payable quarterly, of 0.25%,
based on the difference between the total credit line commitment and the average
daily amount of credit outstanding under the facility during the preceding
The Company made certain representations and warranties to the Lender in the
Loan Agreement that are customary for credit arrangements of this type. The
Company also agreed to maintain, as of the end of each fiscal quarter, a minimum
"basic fixed charge coverage ratio" (as defined in the Loan Agreement) of at
least 1.15 to 1.00 and a "funded debt to EBITDA ratio" (as defined in the Loan
Agreement) not to exceed 3.00 to 1.00, in each case for the trailing 12-month
period ending with the applicable quarterly reporting period. The Company also
agreed to certain negative covenants that are customary for credit arrangements
of this type, including restrictions on the Company's ability to enter into
mergers, acquisitions or other business combination transactions, conduct its
business, grant liens, make certain investments, make substantial change in the
present executive or management personnel and incur additional indebtedness,
which negative covenants are subject to certain exceptions.
The Loan Agreement contains customary events of default that include, among
other things (subject to any applicable cure periods and materiality qualifier),
non-payment of principal, interest or fees, defaults under related agreements
with the Lender, cross-defaults under agreements for other indebtedness,
violation of covenants, inaccuracy of representations and warranties, bankruptcy
and insolvency events, material judgements and material adverse change. Upon the
occurrence of an event of default, the Lender may terminate all loan
commitments, declare all outstanding indebtedness owing under the Loan Agreement
and related documents to be immediately due and payable, and may exercise its
other rights and remedies provided for under the Loan Agreement.
In connection with the Loan Agreement, the Company entered into with the Lender
(i) a security agreement dated June 25, 2020 (the "Security Agreement"),
pursuant to which the Company granted to the Lender a first priority perfected
security interest in substantially all of the personal property and the
intangibles of the Company, and (ii) a pledge agreement, dated June 25, 2020
(the "Pledge Agreement"), pursuant to which the Company granted to the Lender a
first priority perfected security interest in the stock of its subsidiaries
(limited to 65% of those subsidiaries that are considered "controlled foreign
subsidiaries" as set forth in the Internal Revenue Code and regulations). The
Company's obligations to the Lender under the Loan Agreement are also secured by
a negative pledge evidenced by a Non-encumbrance Agreement (the "Non-encumbrance
Agreement") covering the real property owned by the Company in Decatur, Alabama.
The foregoing descriptions of the Loan Agreement, the Security Agreement, the
Pledge Agreement and the Non-encumbrance Agreement do not purport to be complete
and are qualified in their entirety by reference to the full text of the Loan
Agreement, the Security Agreement, the Pledge Agreement and the Non-encumbrance
Agreement, copies of which are attached to this Current Report on Form 8-K as
Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by
Copies of theLoan Agreement, the Security Agreement, the Pledge Agreement and
the Non-encumbrance Agreement have been included as exhibits to this Current
Report on Form 8-K to provide investors with information regarding their
respective terms. They are not intended to provide any other factual information
about the Company or any of its subsidiaries or affiliates. The representations,
warranties and covenants contained in the Loan Agreement, the Security
Agreement, the Pledge Agreement and the Non-encumbrance Agreement were made only
for purposes of such agreements and as of the specific date of such agreements;
were made solely for the benefit of the parties to such agreements; may be
subject to limitations agreed upon by the contracting parties, including being
qualified by information that may modify, qualify or create exceptions to the
representations and warranties set forth in such agreements; may not have been
intended to be statements of fact, but rather, as a method of allocating
contractual risk and governing the contractual rights and relationships between
the parties to such agreements; and may be subject to standards of materiality
applicable to contracting parties that differ from those applicable to
investors. Investors should not rely on the representations, warranties and
covenants or any descriptions thereof as characterizations of the actual state
of facts or condition of the Company or any of its subsidiaries or affiliates.
Moreover, information concerning the subject matter of the representations,
. . .
Item 1.02 Termination of a Material Definitive Agreement.
On June 25, 2020, that certain loan agreement, dated May 10, 2017 (the "Prior
Loan Agreement"), by and between the Company, as borrower, and Truist Bank (as
the successor to SunTrust Bank), as lender, and the related agreements between
the Company and Truist Bank, terminated. No indebtedness was outstanding under
the Prior Loan Agreement at the time of its termination.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above is hereby incorporated by
reference into this Item 2.03. No amounts have been drawn down under the
revolving credit facility of the Loan Agreement as of the date hereof.
Item 9.01 Financial Statements and Exhibits.
The following exhibits are filed herewith:
Exhibit Number Description
10.1 Loan Agreement, dated as of June 25, 2020, by and between Lakeland
Industries, Inc. and Bank of America, N.A.
10.2 Security Agreement, dated as of June 25, 2020, by and between
Lakeland Industries, Inc. and Bank of America, N.A.
10.3 Pledge Agreement, dated as of June 25, 2020, by and between Lakeland
Industries, Inc. and Bank of America, N.A.
10.4 Non-encumbrance Agreement, dated as of June 25, 2020, by Lakeland
Industries, Inc. for the benefit of Bank of America, N.A.
99.1 Press Release dated July 1, 2020.
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