LAKELAND INDUSTRIES, INC. (NASDAQ:LAKE) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
| Entry into a Material Definitive Agreement. |
On May 10, 2017, Lakeland Industries, Inc. (the Company) entered
into a Loan Agreement (the Loan Agreement) with SunTrust Bank
(Lender). The Loan Agreement provides the Company with a secured
(i) $20 million revolving credit facility, which includes a $5
million letter of credit sub-facility, and (ii) $1,575,000 term
loan with Lender. The Company may request from time to time an
increase in the revolving credit loan commitment of up to $10
million (for a total commitment of up to $30 million). Borrowing
to the revolving credit facility is subject to a borrowing base
amount calculated as (a) 85% of eligible accounts receivable, as
defined, plus (b) an inventory formula amount, as defined, minus
(c) an amount equal to the greater of (i) $1,500,000 or (ii) 7.5%
of the then current revolver commitment amount, minus (d) certain
reserves as determined by the Loan Agreement. The credit facility
matures on May 10, 2020 (subject to earlier termination upon the
occurrence of certain events of default as set forth in the Loan
Agreement). At the closing, the Companys existing financing
facility with AloStar Bank of Commerce was fully repaid and
terminated using proceeds of the revolver in the amount of
approximately $3.0 million. Proceeds will also be used to finance
working capital and other general corporate needs.
Borrowings under the term loan and the revolving credit facility
bear interest at an interest rate determined by reference whether
the loan is a base rate loan or Eurodollar loan, with the rate
election made by the Company at the time of the borrowing or at
any time the Company elects to the terms of the Loan Agreement.
The term loan is payable in equal monthly principal installments
of $13,125 each, beginning on June 1, 2017, and on the first day
of each succeeding month, with a final payment of the remaining
principal and interest on May 10, 2020 (subject to earlier
termination as provided in the Loan Agreement). For that portion
of the term loan that consists of Eurodollar loans, the term loan
shall bear interest at the LIBOR Market Index Rate (LIBOR) plus
2.0% per annum, and for that portion of the term loan that
consists of base rate loans, the term loan shall bear interest at
the base rate then in effect plus 1.0% per annum. All principal
and unpaid accrued interest under the revolver credit facility
shall be due and payable on the maturity date of the revolver.
For that portion of the revolver loan that consists of Eurodollar
loans, the revolver shall bear interest at LIBOR plus a margin
rate of 1.75% per annum for the first six months and thereafter
of between 1.5% and 2.0%, depending on the Companys availability
calculation (as defined in the Loan Agreement) and, for that
portion of the revolver that consists of base rate loans, the
revolver shall bear interest at the base rate then in effect plus
a margin rate of 0.75% per annum for the first six months and
thereafter of between 0.50% and 1.0%, depending on the
availability calculation. As of the closing, the Company elected
all borrowings under the Loan Agreement to accrue interest at
LIBOR which, as of that date, was 0.99500%. As such, the initial
rate of interest for the revolver is 2.745% per annum and the
initial rate of interest for the term loan is 2.995% per annum.
The Loan Agreement provides for payment of an unused line fee of
between .25% and .50%, depending on the amount by which the
revolving credit loan commitment exceeds the amount of the
revolving credit loans outstanding (including letters of credit),
which shall be payable monthly in arrears on the average daily
unused portion of the revolver.
The Company made certain representations and warranties to Lender
in the Loan Agreement that are customary for credit arrangements
of this type. The Company also agreed to maintain a minimum fixed
charge coverage ratio (as defined in the Loan Agreement) as of
the end of each fiscal quarter, commencing with the fiscal
quarter ending July 31, 2017, of not less than 1.10 to 1.00
during the applicable fiscal quarter, and agreed to certain
negative covenants that are customary for credit arrangements of
this type, including restrictions on the Companys ability to
enter into mergers, acquisitions or other business combination
transactions, conduct its business, grant liens, make certain
investments, incur additional indebtedness, and make stock
repurchases.
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, violation of covenants, inaccuracy of
representations and warranties, bankruptcy and insolvency events,
material judgements, material adverse change, and specified
change of control events. Upon the occurrence of an event of
default, Lender may terminate all loan commitments, declare all
of the unpaid principal of all loans, all accrued and unpaid
interest, and all other amounts 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 a
security agreement (the Security Agreement), dated May 10, 2017,
with Lender to which the Company granted to Lender a first
priority perfected security interest in substantially all real
and personal property of the Company. The Companys obligations
under the Loan Agreement are also guaranteed by its subsidiary,
Laidlaw Adams Peck, Inc., and further secured by a grant of
security interests in substantially all of such guarantors
assets.
The foregoing description of the Loan Agreement and Security
Agreement does not purport to be complete and is qualified in its
entirety by reference to the full text of the Loan Agreement and
Security Agreement, copies of which are attached as Exhibits 10.1
and 10.2 to this Current Report on Form 8-K and are incorporated
herein by reference.
| Item 1.02. | Termination of a Material Definitive Agreement. |
The disclosures set forth in Item 1.01 are incorporated by
reference to this item. On May 10, 2017, that certain Loan and
Security Agreement, dated June 28, 2013, as amended, by and among
the Company and Lakeland Protective Wear Inc., as borrowers, and
Alostar Bank of Commerce, and related agreements between the
Company and Lakeland Protective Wear Inc., as borrowers, and
Alostar Bank of Commerce, terminated upon the receipt by Alostar
Bank of Commerce of a payoff amount of approximately $3.0 million
from the Company.
| Item 2.03. |
Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of the Registrant. |
The disclosures set forth in Item 1.01 are incorporated by
reference to this item.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| 10.1 |
Loan Agreement, dated May 10, 2017, by and between Lakeland Industries, Inc. and SunTrust Bank. |
| 10.2 |
Security Agreement, dated May 10, 2017, by and between Lakeland Industries, Inc. and SunTrust Bank. |
About LAKELAND INDUSTRIES, INC. (NASDAQ:LAKE)
Lakeland Industries, Inc. (Lakeland) manufactures and sells a line of safety garments and accessories for the industrial and public protective clothing market. The Company’s product categories include limited use/disposable protective clothing; high-end chemical protective suits; firefighting, flame resistant personal protective equipment (FR PPE) and heat protective apparel; reusable woven garments; high visibility clothing, and glove and sleeves. The Company’s products are sold by its in-house customer service group, its regional sales managers and independent sales representatives to a network of over 1,200 North American safety and mill supply distributors. These distributors in turn supply end user industrial customers, such as integrated oil, chemical/petrochemical, utilities, automobile, steel, glass, construction, smelting, munition plants, janitorial, pharmaceutical, mortuaries and high technology electronics manufacturers, as well as scientific and medical laboratories. LAKELAND INDUSTRIES, INC. (NASDAQ:LAKE) Recent Trading Information
LAKELAND INDUSTRIES, INC. (NASDAQ:LAKE) closed its last trading session down -0.25 at 11.35 with 124,898 shares trading hands.