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LAKE > SEC Filings for LAKE > Form 8-K on 1-Jul-2013All Recent SEC Filings

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Form 8-K for LAKELAND INDUSTRIES INC


1-Jul-2013

Entry into a Material Definitive Agreement, Termination of a Material Def


Item 1.01. Entry into a Material Definitive Agreement.

On June 28, 2013, Lakeland Industries, Inc. (the "Company") and its wholly-owned subsidiary, Lakeland Protective Wear Inc. (collectively with the Company, the "Borrowers"), entered into a Loan and Security Agreement (the "Senior Loan Agreement") with AloStar Business Credit, a division of AloStar Bank of Commerce, a state banking institution formed under Alabama law (the "Senior Lender"). The Senior Loan Agreement provides the Borrowers with a three year $15 million revolving line of credit, at a variable interest rate based on LIBOR, with a first priority lien on substantially all of the United States and Canada assets of the Company.

On June 28, 2013, the Borrowers also entered into a Loan and Security Agreement (the "Subordinated Loan Agreement") with LKL Investments, LLC, an affiliate of Arenel Capital, a private equity fund (the "Junior Lender"). The Subordinated Loan Agreement provides for a $3.5 million term loan to be made to the Borrowers and a second priority lien on substantially all of the assets of the Company in the United States and Canada, except for a first lien on Mexican facility). Pursuant to the Subordinated Loan Agreement, among other things, Borrowers issued to the Junior Lender a five year term loan promissory note (the "Note"). At the election of the Junior Lender, interest under the Note may be paid in cash, by payment in kind (PIK) in additional notes or payable in shares of common stock, par value $.01 per share ("Common Stock"), of the Company (the "Interest Shares"). If shares of Common Stock are used to make interest payments on the Note, the number of Interest Shares will be based upon 100% of an average of the then current market value of the Common Stock, subject to the limitations set forth in the Subordinated Loan Agreement. The Junior Lender will also, in connection with this transaction, receive a common stock purchase warrant (the "Warrant") to purchase up to 566,015 shares of Common Stock (subject to adjustment), representing beneficial ownership of approximately 9.58% of the outstanding Common Stock of the Company, as of the closing of the transactions contemplated by the Subordinated Loan Agreement. The Company's receipt of gross proceeds of $3.5 million in subordinated debt financing was a condition precedent set by Senior Lender, of which this transaction satisfies.

The proceeds from such financing has been used to fully repay the Company's former financing facility with TD Bank, N.A. in the amount of approximately US$13.7 million. Also repaid upon closing of the financings was the warehouse loan in Canada with a balance of Cdn$1,362,000 Canadian dollars (approximately US $1,320,000), payable to Business Development Bank of Canada. The Company believes that the conditions that were reported in its Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended January 31, 2013 resulting in doubts about the Company's ability to continue as a going concern have now been resolved as a result of the closing of the financing and the repayment of such debt as described herein. The Company anticipates it will file an amendment to its Form 10-K shortly.

The following is a summary of the material terms of the financings:

$15 million Senior Credit Facility

Borrowers are both Lakeland Industries, Inc. and its Canadian operating subsidiary Lakeland Protective Wear Inc. (the "Borrowers").

Borrowing pursuant to a revolving credit facility subject to a borrowing base calculated as the sum of:

o 85% of eligible accounts receivable as defined

o The lesser of 60% of eligible inventory as defined or 85% of net orderly liquidation value of inventory

o In transit inventory in bound to the US up to a cap of $1,000,000, subject to a satisfactory appraisal of Alabama real estate

o Receivables and inventory held by the Canadian operating subsidiary to be included, up to a cap of $2 million of availability

o Amount available at closing was approximately $12.3 million

Collateral will be

o A perfected first security lien on all of the Borrowers United States and Canadian assets, other than its Mexican plant

o Pledge of 65% of Lakeland US stock in all foreign subsidiaries other than Canada subsidiary with 100% pledge of stock of its Canadian subsidiaries

Collection

o All customers of Borrowers must remit to a lockbox controlled by Senior Lender or into a blocked account with all collection proceeds applied against the outstanding loan balance

Maturity

o An initial term of three years from the Closing Date

. . .



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 June 28, 2013, that certain Loan and Security Agreement, dated January 14, 2010, and related agreements between the Company and TD Bank, N.A. terminated upon the receipt by TD Bank, N.A. of a payoff amount of approximately $13.7 million from the Company. The Company also terminated its loan agreements with Business Development Bank of Canada.



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 3.02. Unregistered Sales of Equity Securities.

The disclosures set forth in Item 1.01 regarding the Warrant and the Note are incorporated by reference to this item. The Warrant, any shares of Common Stock issued upon exercise of the Warrant and, to the extent issued as payment of interest under the Note, the Interest Shares were or will be issued to the Junior Lender in a private transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.



Item 8.01. Other Events.

On July 1, 2013, the Company issued a press release relating to the financings. A copy of the press release is furnished as 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.



Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

4.1 Investor Rights Agreement, dated June 28, 2013, by and between Lakeland Industries, Inc. and LKL Investments, LLC.

4.2 Registration Rights Agreement, dated June 28, 2013, by and between Lakeland Industries, Inc. and LKL Investments, LLC.

10.1 Loan and Security Agreement, dated June 28, 2013, by and among Lakeland Industries, Inc. and Lakeland Protective Wear Inc., as borrowers, and Alostar Bank of Commerce.

10.2 Amended and Restated Revolver Note, dated June 28, 2013, issued by Lakeland Industries, Inc. and Lakeland Protective Wear Inc., as borrowers, to Alostar Bank of Commerce.

10.3 Loan and Security Agreement, dated June 28, 2013, by and among Lakeland Industries, Inc. and Lakeland Protective Wear Inc., as borrowers, and LKL Investments, LLC.

10.4 Term Note, dated June 28, 2013, issued by Lakeland Industries, Inc. and Lakeland Protective Wear Inc., as borrowers, to LKL Investments, LLC.

10.5 Warrant to Purchase Common Stock, dated as of June 28, 2013, issued by Lakeland Industries, Inc. to LKL Investments, LLC.

99.1 Press Release, dated July 1, 2013.

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