(Registrant’s
telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
LAKE
The NASDAQ Stock Market LLC
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐
Written communication pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth
company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
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 purposes.
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
quarter.
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.
2
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 reference.
Copies of the
Loan 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, warranties and covenants may change after the
date of such agreements, which subsequent information may or may
not be fully reflected the Company’s public
disclosures.
Item
1.02 Termination of a Material Definitive
Agreement.
On June25, 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.
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
