UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended, July 31, 1995
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _____________
Commission File Number: 0-15535
LAKELAND INDUSTRIES, INC.
(Exact name of Registrant as specified in it's charter)
Delaware 13-3115216
(State of incorporation) (IRS Employer Identification Number)
711-2 Koehler Ave., Ronkonkoma, New York 11779
(Address of principal executive offices)
(516) 981-9700
(Registrant's telephone number, including area code)
Indicate by check mark whether, the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common Stock, $.01 par value, outstanding at September 8, 1995 -
2,550,000 shares.
<PAGE>
LAKELAND INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-Q
The following information of the Registrant and its subsidiaries is
submitted herewith:
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements:
Page
Introduction 1
Condensed Consolidated Balance Sheets -
July 31, 1995 and January 31, 1995 2
Condensed Consolidated Statements of
Operations and Retained Earnings - Three Months
and Six Months Ended July 31, 1995 and 1994 3
Condensed Consolidated Statements of Cash Flow
Ended July 31, 1995 and 1994 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 6
Signatures 7
LAKELAND INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Introduction
The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments which are, in the opinion of management, necessary to present
fairly the consolidated financial information required therein. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the year
ended January 31, 1995.
The results of operations for the three month and six month periods
ended July 31, 1995 and 1994 are not necessarily indicative of the results
to be expected for the full year.
<PAGE>
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
July 31, January 31,
ASSETS 1995 1995
Current Assets:
Cash $169,003 $119,919
Accounts receivable-trade, net of
allowance for doubtful accounts of
$326,000 at July 31, 1995 and
$376,000 at January 31, 1995 4,612,541 4,408,871
Inventories 10,094,642 8,858,298
Deferred income taxes 455,000 455,000
Other current assets 317,566 160,551
Total current assets 15,648,752 14,002,639
Property and equipment, net of
accumulated depreciation of
$1,316,000 at July 31, 1995
and $1,208,000 at January 31,1995 950,775 691,258
Excess of cost over the fair value
of net assets acquired, net of
accumulated amortization
of $210,000 at July 31, 1995 and
$195,000 at January 31, 1995 381,766 396,428
Mortgage receivable 150,986 154,437
Other assets 352,066 317,086
$17,484,345 $15,561,848
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $3,816,579 $2,824,548
Current portion of long-term
liabilities 4,327,414 3,615,873
Accrued expenses and other
current liabilities 250,514 372,416
Total current liabilities 8,394,507 6,812,837
Long-term liabilities 453,415 440,915
Deferred income taxes 133,000 133,000
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.01 par;
1,500,000 shares authorized; none issued
Common stock, $.01 par;
10,000,000 shares authorized;
2,550,000 shares issued and
outstanding 25,500 25,500
Capital in excess of par value 5,981,226 5,981,226
Retained earnings 2,496,697 2,168,370
Total stockholders' equity 8,503,423 8,175,096
$17,484,345 $15,561,848
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
July 31, July 31,
1995 1994 1995 1994
Net Sales $10,757,255 $9,224,207 $21,417,84 $18,040,053
Cost of Goods Sold 9,281,383 7,442,449 18,058,011 14,584,758
Gross Profit 1,475,872 1,781,758 3,359,837 3,455,295
Operating expenses 1,235,944 1,203,434 2,613,946 2,405,834
Income from Operations 239,928 578,324 745,891 1,049,461
Other Income/(Expense) 13,768 7,298 36,302 15,412
Interest Expense (126,406) (63,032) (239,866) (120,963)
Income before income
taxes 127,290 522,590 542,327 943,910
Provision for income
taxes 49,000 180,000 214,000 315,000
Net Income 78,290 342,590 328,327 628,910
Retained Earnings at
Beginning of Period 2,418,407 1,033,212 2,168,370 746,892
Retained Earnings at
End of Period $2,496,697 $1,375,802 $2,496,697 $1,375,802
========== ========== ========== ==========
Income per common and
common equivalent
share $.03 $.13 $.12 $.24
Number of common and
common equivalent
shares outstanding 2,647,015 2,616,767 2,651,406 2,605,730
========= ========= ========= =========
See notes to condensed consolidated financial statements.<PAGE>
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
July 31,
1995 1994
Cash Flows from Operating Activities:
Net Income $328,327 $628,910
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Depreciation and amortization 122,790 139,484
Decrease (increase) in accounts
receivable (203,670) 401,960
Decrease (increase) in inventories (1,236,344) (1,008,154)
Increase in deferred income tax (20,000)
Decrease (increase) in other
current assets (157,015) 26,653
Decrease (increase) in other
asssets (31,529) -
Increase (decrease) in accounts
payable, accrued expenses
and other current liabilities 882,629 (15,617)
Net cash (used in) provided by
operating activities (294,812) 153,236
Cash Flows from Investing Activities:
Purchases of property and equipment (367,645) (41,074)
Cash Flows from Financing Activities:
Net borrowings (reduction) under
line of credit agreement 711,541 (114,953)
Net increase (decrease) in cash 49,084 (2,791)
Cash at beginning of period 119,919 13,353
Cash at end of period $169,003 $10,562
======== =======
See notes to condensed consolidated financial statements.
<PAGE>
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Inventories:
Inventories consist of the following:
July 31, January 31,
1995 1995
Raw materials $3,252,850 $3,097,052
Work in process 2,926,136 2,092,028
Finished goods 3,915,656 3,669,218
$10,094,642 $8,858,298
========== ==========
Inventories are stated at the lower of cost or market. Cost is
determined generally on the first-in, first-out method.
B. Earnings Per Common and Common Equivalent Share:
Earnings per share for the three and six month periods ended July
31, 1995 and 1994 is based on the weighted average number of common shares
outstanding and common share equivalents.
C. Revolving Credit Facility:
At July 31, 1995, the balance outstanding under the Company's
$5,000,000 secured revolving credit facility amounted to $4,277,414. This
facility bears interest at the bank's prime rate, plus 1.5%, is
collateralized by the Company's inventories and accounts receivable and
expires on September 22, 1995. On August 30, 1995 the Company entered into
an $8 million revolving credit agreement with its Bank. Such agreement
expires on July 31, 1998 and bears interest at the lower of the prime rate
or LIBOR, plus 200 points. The facility is collaterallized as the prior
facility was and contains restrictive covenants ralating to minimum tangible
net worth, capital expenditures, current ratio and interest coverage.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
Six months ended July 31, 1995 compared to the six months ended
July 31, 1994.
Net sales for the six month period ended July 31, 1995 increased
$3,378,000 or 18.7% to $21,418,000 from $18,040,000 reported for the six
month period ended July 31, 1994. Increased prices and unit shipments of
various protective garment products are the principal reasons for this
upward movement in sales. This industry, however, continues to be highly
competitive.
Gross profit as a percentage of net sales decreased to 15.7% for
the six month period ended July 31, 1995 from 19.2% reported for the
corresponding period of prior year, principally due to increased cost of
raw materials and the meeting of competitive pricing on the most popular
disposable products.
Operating expenses as a percentage of net sales decreased to 12.2%
for the six month period ended July 31, 1995 from 13.3% for the
corresponding period of the prior year, as sales continue to increase
coupled with a decrease in allowance for doubtful accounts and pension
expense.
Interest expense increased as both interest rates and aggregate
borrowings increased during the current year six month period.
As a result of the foregoing, operating results decreased to a net
income of $328,000 for the six month period ended July 31, 1995 from net
income of $629,000 for the six month period ended July 31, 1994.
Three months ended July 31, 1995 compared to the three months
ended July 31, 1994.
Net sales for the three month period ended July 31, 1995 increased
$1,533,000 or 16.6% to $10,757,000 from $9,224,000 reported for the three
month period ended July 31, 1994. Increased prices and unit shipments of
various protective garment products are the principal reasons for this
upward movement in sales. This industry, however, continues to be highly
competitive. Net sales remained steady during the quarter ended July 31,
1995 as compared to the immediate preceding quarter.
Gross profit as a percentage of net sales decreased to 13.7% for
the three month period ended July 31, 1995 from 19.3% reported for the
corresponding period of the prior year, principally due to increased cost
of raw materials for the entire quarter, the meeting of competitive pricing
on the most popular disposable products and the liquidation of certain non-
woven protective garment products and woven cloth products.
Operating expenses as a percentage of net sales decreased to 11.5%
for the three month period ended July 31, 1995 from 13% for the
corresponding period of the prior year, as sales continue to increase
coupled with a decrease in allowance for doubtful accounts and pension
expense.
Interest expense increased as both interest rates and aggregate
borrowings increased during the current year three month period.
As a result of the foregoing, operating results decreased to net
income of $78,000 for the three month period ended July 31, 1995 from net
income of $343,000 for the three month period ended July 31, 1994.
LIQUIDITY and CAPITAL RESOURCES
Lakeland has historically met its cash requirements through funds
generated from operations and borrowings under a revolving credit facility.
In September 1993, the Company entered into a $5 million, two-year, secured
revolving credit agreement with a bank. On August 30, 1995 the Company
entered into a new $8 million facility with its Bank. This facility matures
on July 31, 1998. Borrowings under this credit facility bear interest at a
rate per annum equal to the lower of the prime rate or LIBOR, plus 200
points. The Company's July 31, 1995 balance sheet shows strong current
ratios and working capital position and management believes that its
positive financial position, together with this new credit agreement, will
provide sufficient funds for operating purposes for the next twelve months.
Item 6. Exhibits and Reports on Form 8-K:
a - (10) - Revolving credit agreement dated August 30, 1995.
b - No reports on Form 8-K were filed during the three month
period ended July 31, 1995.
<PAGE>
_________________SIGNATURES_________________
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
LAKELAND INDUSTRIES, INC.
(Registrant)
Date: September 12, 1995 Raymond J. Smith
Raymond J. Smith,
President and Chief Executive Officer
Date: September 12, 1995 James M. McComick
James M. McCormick,
Vice President and Treasurer
(Principal Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from [identify
specific financial statement [s]] and is qualified in its entirety by reference
to such financial statement[s].
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> FEB-01-1995
<PERIOD-END> JUL-31-1995
<CASH> 169,003
<SECURITIES> 0
<RECEIVABLES> 4,612,541
<ALLOWANCES> 0
<INVENTORY> 10,094,642
<CURRENT-ASSETS> 15,648,752
<PP&E> 950,775
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,484,345
<CURRENT-LIABILITIES> 8,394,507
<BONDS> 0
<COMMON> 25,500
0
0
<OTHER-SE> 5,981,226
<TOTAL-LIABILITY-AND-EQUITY> 8,503,423
<SALES> 21,417,848
<TOTAL-REVENUES> 21,417,848
<CGS> 18,058,011
<TOTAL-COSTS> 18,058,011
<OTHER-EXPENSES> 2,613,946
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239,866
<INCOME-PRETAX> 542,327
<INCOME-TAX> 214,000
<INCOME-CONTINUING> 328,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328,327
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement is made as of
August 30, 1995 by and between THE BANK OF NEW YORK ("Lender"),
having offices at 1100 Old Country Road, Plainview, New York 11803
and LAKELAND INDUSTRIES, INC. ("Borrower"), having its principal
place of business at 711-2 Koehler Avenue, Ronkonkoma, New York
11779.
BACKGROUND
Borrower and The Bank of New York Commercial Corporation
("BNYCC") are parties to a Loan and Security Agreement dated as of
September 23, 1993 as amended by a Waiver and Amendment No. 1 to
Loan and Security Agreement dated as of January 31, 1994 (as the
same may have been further amended, modified or supplemented from
time to time the "Original Loan Agreement").
BNYCC, pursuant to an Assignment dated as of August 30,
1995 (the "Assignment") has assigned all of its rights and
obligations under the Original Loan Agreement to Lender.
By execution of this Agreement, Borrower and Lender wish
to amend and restate the Original Loan Agreement on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
and undertakings herein contained, the parties hereto hereby agree
as follows:
A. AMENDMENT AND RESTATEMENT
As of the date of this Agreement, the terms, conditions,
covenants, agreements, representations and warranties contained in
the Original Loan Agreement shall be deemed amended and restated in
their entirety as follows and the Original Loan Agreement shall be
consolidated with and into and superseded by this Agreement;
provided, however, that nothing contained in this Agreement shall
impair, limit or affect the Liens heretofore granted, pledged
and/or assigned as security for Borrower's obligations under the
Original Loan Agreement.
B. 1. General Definitions. (i) When used in this
Agreement, the following terms shall have the following meanings:
"Acceptance Fees" shall have the meaning set forth in
Section 5(d) hereof.
"Acceptance Rate" shall mean with respect to any
Acceptance hereunder, a discount charge (calculated with respect to
the face amount of such Acceptance on the basis of a 360-day year
for the number of days from the date such Acceptance is accepted by
Lender (the "Acceptance Date") to its maturity date) at a rate per
annum equal to the sum of (a) the discount rate as determined by
Lender in its sole discretion in the New York banker's acceptance
market on the Acceptance Date, plus (b) a margin of 1.5%.
"Acceptances" shall have the meaning set forth in Section
4(h) hereof.
"Advance Rates" means the Inventory Advance Rate and the
Receivables Advance Rate.
"Affiliate" of any Person shall mean (a) any Person
(other than a Subsidiary) which, directly or indirectly, is in
control of, is controlled by, or is under common control with such
Person, or (b) any Person who is a director or officer (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any
Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or
indirect, (i) to vote 5% or more of the securities having ordinary
voting power for the election of directors of such Person, or (ii)
to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Alternate Base Rate" means, for any day, a rate per
annum equal to the higher of (i) the Prime Rate in effect on such
day and (ii) the Federal Funds Rate in effect on such day plus 1/2
of 1%.
"Ancillary Agreements" means all agreements, instruments,
and documents including, without limitation, mortgages, pledges,
powers of attorney, consents, assignments, contracts, notices,
security agreements, trust agreements whether heretofore,
concurrently, or hereafter executed by or on behalf of Borrower or
delivered to Lender, relating to this Agreement or to the
transactions contemplated by this Agreement.
"Business Day" shall mean with respect to Eurodollar Rate
Loans, any day on which commercial banks are open for domestic and
international business, including dealings in Dollar deposits in
London, England and New York, New York and with respect to all
other loans, any day other than a day on which commercial banks in
New York are authorized or required by law to close.
"Canadian Inventory" means and includes all of Lakeland
Canada's now owned or hereafter acquired goods, merchandise and
other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be
used or consumed in Lakeland Canada's business or used in selling
or furnishing such goods, merchandise and other personal property,
and all documents of title or other documents representing them.
"Canadian Receivables" means and includes all of Lakeland
Canada's now owned or hereafter acquired (including without
limitation, under any trade names, trade styles or divisions
thereof) accounts and contract rights, instruments, letters of
credit and Lakeland Canada's rights to receive payment thereunder,
any and all rights to the payment or receipt of money or other
forms of consideration of any kind at any time now or hereafter
owing or to be owing to, together with all of Lakeland Canada's
rights to any merchandise which is represented thereby, and all
Lakeland Canada's right, title, security and guaranties with
respect to each Canadian Receivable, including, without limitation,
all rights of stoppage in transit, replevin and reclamation and all
rights as an unpaid vendor.
"Change of Control" shall mean (i) the acquisition by any
Person, or two or more Persons acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of
50% or more of the outstanding shares of voting stock of Borrower
or (ii) Persons who are currently directors of Borrower plus
Persons who are nominated by a majority of Persons who are
currently members of the Board of Directors of Borrower shall cease
to constitute at least a majority of the members of the Board of
Directors of Borrower.
"Closing Date" shall mean August 30, 1995 or such other
date as may be agreed upon by the parties hereto.
"Collateral" shall mean and include:
(A) all Inventory;
(B) all General Intangibles;
(C) all Receivables;
(D) all books, records, ledgercards, files,
correspondence, computer programs, tapes, disks and related data
processing software (owned by Borrower or in which it has an
interest) which at any time evidence or contain information
relating to (A), (B) and (C) above or are otherwise necessary or
helpful in the collection thereof or realization thereupon;
(E) documents of title, policies and certificates
of insurance, securities, chattel paper, other documents or
instruments evidencing or pertaining to (A), (B), (C) and (D)
above;
(F) all guaranties, liens on real or personal
property, leases, and other agreements and property which in any
way secure or relate to (A), (B), (C), (D) and (E) above, or are
acquired for the purpose of securing and enforcing any item
thereof;
(G) (i) all cash held as cash collateral to the
extent not otherwise constituting Collateral, all other cash or
property at any time on deposit with or held by Lender for the
account of Borrower (whether for safekeeping, custody, pledge,
transmission or otherwise), (ii) all present or future deposit
accounts (whether time or demand or interest or non-interest
bearing) of Borrower with Lender or any other Person including
those to which any such cash may at any time and from time to time
be credited, (iii) all investments and reinvestments (however
evidenced) of amounts from time to time credited to such accounts,
and (iv) all interest, dividends, distributions and other proceeds
payable on or with respect to (x) such investments and
reinvestments and (y) such accounts; and
(H) all products and proceeds of (A), (B), (C),
(D), (E), (F) and (G) above (including, but not limited to, all
claims to items referred to in (A), (B), (C), (D), (E), (F), (G)
and (H) above) and all claims of Borrower against third parties (x)
for (i) loss of, damage to, or destruction of, and (ii) payments
due or to become due under leases, rentals and hires of, any or all
of (A), (B), (C), (D), (E), (F) and (G) above and (y) proceeds
payable under, or unearned premiums with respect to policies of
insurance in whatever form.
"Current Assets" at a particular date, shall mean all
cash, cash equivalents, accounts and inventory of Borrower and all
other items which would, in conformity with GAAP, be included under
current assets on a balance sheet of the Borrower as at such date;
provided, however, that such amounts shall not include (a) any
amounts for any indebtedness owing by an Affiliate of the Borrower,
unless such indebtedness arose in connection with the sale of goods
or other property in the ordinary course of business and would
otherwise constitute current assets in conformity with GAAP, (b)
any shares of stock issued by an Affiliate of the Borrower, (c) the
cash surrender value of any life insurance policy (d) any assets
which would be classified as intangible assets under GAAP, or (e)
any prepaid expenses.
"Current Liabilities" at a particular date, shall mean
all amounts which would, in conformity with GAAP, be included under
current liabilities on a balance sheet of the Borrower as at such
date, but in any event including, without limitation, the amounts
of (a) all indebtedness payable on demand, or, at the option of the
Person to whom such indebtedness is owed, not more than twelve (12)
months after such date, (b) any payments in respect of any
indebtedness (whether installment, serial maturity, sinking fund
payment or otherwise) required to be made not more than twelve (12)
months after such date, (c) all reserves in respect of liabilities
or indebtedness payable on demand or, at the option of the Person
to whom such indebtedness is owed, not more than twelve (12) months
after such date, the validity of which is contested at such date
and (d) all accruals for federal or other taxes measured by income
payable within a twelve (12) month period.
"Customer" means and includes the account debtor with
respect to any Receivable and/or the prospective purchaser of
goods, services or both with respect to any contract or contract
right, and/or any party who enters into or proposes to enter into
any contract or other arrangement with Borrower, pursuant to which
Borrower is to deliver any personal property or perform any
services.
"Debt" at a particular date shall mean all
unsubordinated amounts which would, in conformity with GAAP, be
included under liabilities on a balance sheet of Borrower at such
date.
"Default" means any act or event which, with the giving
of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" means a rate equal to two (2%) percent per
annum in excess of the Interest Rate.
"Dollar" and the sign "$" shall mean lawful money of the
United States of America.
"Domestic Rate Loan" shall mean any Revolving Credit
Advance at any time that bears interest based upon the Alternate
Base Rate.
"Eligible Inventory" means Inventory and Canadian
Inventory, which the Lender, in its sole and absolute discretion,
determines: (a) is subject to the security interest of Lender and
is subject to no other liens or encumbrances whatsoever (other than
Permitted Liens); (b) is in good condition and meets all standards
imposed by any governmental agency, or department or division
thereof having regulatory authority over such Inventory, its use or
sale including but not limited to the Federal Fair Labor Standards
Act of 1938 as amended, and all rules, regulations and orders
thereunder; (c) is currently either usable or salable in the normal
course of Borrower's business; and (d) is not determined by the
Lender, in its reasonable discretion, to be ineligible for any
other reason.
"Eligible Receivables" shall mean and include each
Receivable and each Canadian Receivable which conforms to the
following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) no return, rejection
or repossession of the merchandise has occurred; (c) merchandise or
services shall not have been rejected or disputed by the Customer
and there shall not have been asserted any offset, defense or
counterclaim; (d) continues to be in full conformity with the
representations and warranties made by the Borrower or Lakeland
Canada to the Lender with respect thereto; (e) Lender is, and
continues to be, satisfied with the credit standing of the Customer
in relation to the amount of credit extended; (f) is documented by
an invoice in a form approved by Lender and shall not be unpaid
more than ninety (90) days from invoice date; (g) less than 50% of
the unpaid amount of invoices due from such Customer remain unpaid
more than ninety (90) days from invoice date; (h) is not evidenced
by chattel paper or an instrument of any kind with respect to or in
payment of the Receivable unless such instrument is duly endorsed
to and in possession of the Lender or represents a check in payment
of a Receivable; (i) if the Customer is located outside of the
United States or Canada, the goods which gave rise to such
Receivable were shipped after receipt by the Borrower or Lakeland
Canada from or on behalf of the Customer of an irrevocable letter
of credit, assigned and delivered to the Lender and confirmed by a
financial institution acceptable to the Lender and is in form and
substance acceptable to the Lender[, payable in the full amount of
the Receivable in United States dollars at a place of payment
located within the United States]; (j) such Receivable is not
subject to any lien, other than Permitted Liens; (k) does not arise
out of transactions with any employee, officer, agent, director,
stockholder or Affiliate of the Borrower or Lakeland Canada; (l) is
payable to the Borrower or Lakeland Canada; (m) does not arise out
of a bill and hold sale prior to shipment and, if the Receivable
arises out of a sale to any Person to which the Borrower or
Lakeland Canada is indebted, the amount of such indebtedness, and
any anticipated indebtedness, is deducted in determining the face
amount of such Receivable; (n) is net of any returns, discounts,
claims, credits and allowances; (o) if the Receivable arises out of
contracts between the Borrower or Lakeland Canada and the United
States, any state, or any department, agency or instrumentality of
any of them, Borrower or Lakeland Canada has so notified Lender, in
writing, prior to the creation of such Receivable, and, if Lender
so requests, there has been compliance with any governmental notice
or approval requirements, including without limitation, compliance
with the Federal Assignment of Claims Act; (p) is a good and valid
account representing an undisputed bona fide indebtedness incurred
by the Customer therein named, for a fixed sum as set forth in the
invoice relating thereto with respect to an unconditional sale and
delivery upon the stated terms of goods sold by the Borrower or
Lakeland Canada, or work, labor and/or services rendered by the
Borrower or Lakeland Canada; and (q) is otherwise satisfactory to
the Lender as determined in good faith by the Lender in the
reasonable exercise of its discretion.
"Equipment" means and includes all of Borrower's now
owned or hereafter acquired equipment, machinery and goods
(excluding Inventory), whether or not constituting fixtures,
including, without limitation: plant and office equipment, tools,
dies, parts, data processing equipment, furniture and trade
fixtures, trucks, trailers, loaders and other vehicles and all
replacements and substitutions therefore and all accessions
thereto.
"Eurodollar Rate Loan" shall mean a Revolving Credit
Advance at any time that bears interest based on the Eurodollar
Rate.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan
for the then current Interest Period relating thereto the rate per
annum (such Eurodollar Rate to be adjusted to the next higher 1/100
of one (1%) percent) equal to the quotient of (a) LIBOR, divided by
(b) a number equal to 1.00 minus the aggregate of the rates
(expressed as a decimal) of reserve requirements current on the day
that is two Business Days prior to the beginning of the Interest
Period (including without limitation basic, supplemental, marginal
and emergency reserves) under any regulation promulgated by the
Board of Governors of the Federal Reserve System (or any other
governmental authority having jurisdiction over the Bank) as in
effect from time to time, dealing with reserve requirements
prescribed for Eurocurrency funding including any reserve
requirements with respect to "Eurocurrency liabilities" under
Regulation D of the Board of Governors of the Federal Reserve
System.
"Event of Default" shall mean the occurrence of any of
the events set forth in paragraph 18.
"Federal Funds Rate" means, for any day, the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or if such day is not a
Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for such
day on such transactions received by The Bank of New York from
three Federal funds brokers of recognized standing selected by The
Bank of New York.
"Formula Amount" shall have the meaning set forth in
paragraph 2(a).
"GAAP" means generally accepted accounting principles,
practices and procedures in effect from time to time.
"General Intangibles" means and includes all of
Borrower's now owned or hereafter acquired general intangibles as
said term is defined in the Uniform Commercial Code in effect in
the State of New York including, without limitation, trademarks,
tradenames, tradestyles, trade secrets, equipment formulation,
manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights,
registrations, contract rights, choses in action, causes of action,
corporate or other business records, inventions, designs, goodwill,
claims under guarantees, licenses, franchises, tax refunds, tax
refund claims, computer programs, computer data bases, computer
program flow diagrams, source codes, object codes and all other
intangible property of every kind and nature.
"Guarantor" or "Guarantors" means individually or
collectively Fireland Industries, Inc. and Lakeland Canada and any
other Person who may hereafter guarantee payment or performance of
the whole or any part of the Obligations and "Guarantors" means
collectively all such Persons.
"Guaranty Agreements" means the Guaranty Agreements
executed by each Guarantor in favor of Lender with respect to the
Original Loan which have been ratified and confirmed by each
Guarantor with respect to the Obligations hereunder as of the
Closing Date.
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated byphenyls, petroleum
and petroleum products, methane, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials as
defined in CERCLA, the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and
27 of the New York State Environmental Conservation Law or any
other applicable Environmental Law and in the regulations adopted
pursuant thereto.
"Interest Coverage" shall mean and include with respect
to any fiscal period the ratio of (A) Borrower's earnings before
interest and taxes plus depreciation to (B) interest expense of
Borrower for such period.
"Interest Period" shall mean the period provided for any
Eurodollar Rate Loan pursuant to Section 4(b).
"Interest Rate" shall mean an interest rate per annum
equal to (a) the Alternate Base Rate with respect to Domestic Rate
Loans or (b) the sum of the Eurodollar Rate plus two percent (2.0%)
with respect to Eurodollar Loans.
"Inventory" means and includes all of Borrower's now
owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind,
nature or description which are or might be used or consumed in
Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title
or other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth
in the definition of Inventory Availability.
"Inventory Availability" means the amount of Revolving
Credit Advances against Eligible Inventory consisting of raw
materials and finished goods Lender may from time to time during
the Term make available to Borrower up to the lesser of (a)
$3,500,000 or (b) up to fifty percent (50%) ("Inventory Advance
Rate") of the value of Eligible Inventory consisting of raw
materials and finished goods (calculated on the basis of the lower
of cost or market, on a first-in-first-out basis).
"Lakeland Canada" shall mean Lakeland Protective Wear,
Inc., an Ontario corporation.
"Lease Reserves" shall mean an amount equal to three (3)
months rental payments with respect to each location of Borrower
and/or Lakeland Canada for which Lender has not received an
executed landlord's waiver in form and substance satisfactory to
Lender.
"Letter of Credit Fees" shall have the meaning set forth
in Section 5(d) hereof.
"Letters of Credit" shall have the meaning set forth in
Section 4(h) hereof.
"Leverage Ratio" shall mean the ratio of Debt to Tangible
Net Worth.
"LIBOR" shall mean for any Eurodollar Rate Loan for the
then current Interest Period relating thereto, the rate per annum
quoted by Lender two (2) Business Days prior to the first day of
such Interest Period for the offering by the Bank to prime
commercial banks in the London interbank Eurodollar market of
Dollar deposits in immediately available funds for a period equal
to such Interest Period and in an amount equal to the amount of
such Eurodollar Rate Loan.
"Loans" means the Revolving Credit Advances, Letters of
Credit, Acceptances and all other extensions of credit hereunder.
"Maximum Loan Amount" means $8,000,000.
"Obligations" means and includes all Loans, all advances,
debts, liabilities, obligations, covenants and duties owing by
Borrower to Lender (or any corporation that directly or indirectly
controls or is controlled by or is under common control with
Lender) of every kind and description (whether or not evidenced by
any note or other instrument and whether or not for the payment of
money or the performance or non-performance of any act), direct or
indirect, absolute or contingent, due or to become due, contractual
or tortious, liquidated or unliquidated, whether existing by
operation of law or otherwise now existing or hereafter arising
including, without limitation, any debt, liability or obligation
owing from Borrower to others which Lender may have obtained by
assignment or otherwise and further including, without limitation,
all interest, charges or any other payments Borrower is required to
make by law or otherwise arising under or as a result of this
Agreement and the Ancillary Agreements, together with all
reasonable expenses and reasonable attorneys' fees chargeable to
Borrower's account or incurred by Lender in connection with
Borrower's account whether provided for herein or in any Ancillary
Agreement.
"Permitted Liens" means (i) liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business securing sums not overdue; (ii) liens incurred
in the ordinary course of business in connection with workmen's
compensation, unemployment insurance or other forms of governmental
insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided
that adequate reserves with respect thereto are maintained on the
books of Borrower in conformity with GAAP, (iii) liens in favor of
Lender, (iv) liens for taxes (a) not yet due or (b) being
diligently contested in good faith, provided that adequate reserves
with respect thereto are maintained on the books of Borrower in
conformity with GAAP and (v) liens specified on Schedule 1(A)
hereto.
"Person" means an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Prime Rate" means the prime commercial lending rate of
Lender as publicly announced in New York, New York to be in effect
from time to time, such rate to be adjusted automatically, without
notice, on the effective date of any change in such rate. This
rate of interest is determined from time to time and is neither
tied to any external rate of interest or index nor does it
necessarily reflect the lowest rate of interest actually charged
to any particular class or category of customers.
"Receivables" means and includes all of Borrower's now
owned or hereafter acquired accounts and contract rights,
instruments, insurance proceeds, documents, chattel paper, letters
of credit and Borrower's rights to receive payment thereunder, any
and all rights to the payment or receipt of money or other forms of
consideration of any kind at any time now or hereafter owing or to
be owing to Borrower, all proceeds thereof and all files in which
Borrower has any interest whatsoever containing information
identifying or pertaining to any of Borrower's Receivables,
together with all of Borrower's rights to any merchandise which is
represented thereby, and all Borrower's right, title, security and
guaranties with respect to each Receivable, including, without
limitation, all rights of stoppage in transit, replevin and recla-
mation and all rights as an unpaid vendor.
"Receivables Advance Rate" shall have the meaning set
forth in the definition of Receivables Availability.
"Receivables Availability" means the amount of Revolving
Credit Advances against Eligible Receivables Lender may from time
to time during the term of this Agreement make available to
Borrower up to 85% ("Receivables Advance Rate") of the net face
amount of Eligible Receivables.
"Revolving Credit Advances" shall have the meaning set
forth in paragraph 2(a).
"Subsidiary" of any Person shall mean a corporation or
other entity of whose shares of stock or other ownership interests
having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such
entity, are owned, directly or indirectly, by such Person.
"Tangible Net Worth" at a particular date means (a) the
aggregate amount of all assets of Borrower as may be properly
classified as such in accordance with GAAP consistently applied
excluding such other assets as are properly classified as
intangible assets under GAAP, less (b) the aggregate amount of all
liabilities of the Borrower at such date.
"Term" means the Closing Date through July 31, 1998.
(ii) Accounting Terms. Any accounting terms used in
this Agreement which are not specifically defined shall have the
meanings customarily given them in accordance with GAAP.
(iii) Other Terms. All other terms used in this
Agreement and defined in the Uniform Commercial Code as adopted in
the State of New York, shall have the meaning given therein unless
otherwise defined herein.
2. Loans.
(a) Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Lender will make revolving
credit advances (the "Revolving Credit Advances") to Borrower from
time to time during the term of this Agreement which, in the
aggregate at any time outstanding, will not exceed the lesser of
(x) the Maximum Loan Amount less the aggregate amount of
outstanding Letters of Credit and Acceptances or (y) an amount
equal to the sum of:
(i) Receivables Availability, plus
(ii) Inventory Availability, plus
(iii) the product of (a) the aggregate amount of
outstanding trade or documentary Letters of Credit times (b) the
Inventory Advance Rate, minus
(iv) the aggregate amount of all outstanding
Letters of Credit and Acceptances, minus
(v) such reserves as Lender may reasonably deem
proper and necessary from time to time including, without
limitation, the Lease Reserves.
The sum of 2(a)(y)(i), plus (y)(ii) plus (y)(iii) minus
(y)(v) shall be referred to as the "Formula Amount".
Notwithstanding anything to the contrary set forth above, at no
time shall total outstanding Loans less Receivables Availability
exceed fifty percent (50%) of total outstanding Loans.
(b) Notwithstanding the limitations set forth above,
Lender retains the right to lend Borrower from time to time such
amounts in excess of such limitations as Lender may determine in
its sole discretion.
(c) Borrower acknowledges that the exercise of
Lender's discretionary rights hereunder may result during the term
of this Agreement in one or more increases or decreases in the
Advance Rates and Borrower hereby consents to any such increases or
decreases which may limit or restrict advances requested by
Borrower.
(d) If Borrower does not pay any interest, fees, costs
or charges to Lender when due, Borrower shall thereby be deemed to
have requested, and Lender is hereby authorized at its discretion
to make and charge to Borrower's account, a Revolving Credit
Advance to Borrower as of such date in an amount equal to such
unpaid interest, fees, costs or charges.
(e) Any sums expended by Lender due to Borrower's
failure to perform or comply with its obligations under this
Agreement, including but not limited to the payment of taxes,
insurance premiums or leasehold obligations, shall be charged to
Borrower's account as a Revolving Credit Advance and added to the
Obligations.
(f) Lender will account to Borrower monthly with a
statement of all Loans and other advances, charges and payments
made pursuant to this Agreement, and such account rendered by
Lender shall be deemed final, binding and conclusive unless Lender
is notified by Borrower in writing to the contrary within thirty
(30) days of the date each account was rendered specifying the item
or items to which objection is made.
(g) During the Term, Borrower may borrow, prepay and
reborrow Revolving Credit Advances, all in accordance with the
terms and conditions hereof.
3. Repayment of Loans.
Borrower may, from time to time, repay the Revolving
Credit Advances and shall be required to (i) make a mandatory
prepayment hereunder at any time that the aggregate outstanding
principal balance of the Loans made by Lender to Borrower hereunder
is in excess of the lesser of (x) the Maximum Loan Amount or (y)
the Formula Amount in an amount equal to such excess, and (ii)
repay on the expiration of the Term (x) the then aggregate
outstanding principal balance of Loans made by Lender to Borrower
hereunder together with accrued and unpaid interest, fees and
charges and (y) all other amounts owed Lender under this Agreement
and the Ancillary Agreements.
4. Procedure for Revolving Credit Advances. (a) The
Borrower may by written notice request a borrowing of Revolving
Credit Advances prior to 1:00 P.M. New York time on the Business
Day of its request to incur, on that day, a Revolving Credit
Advance. All Revolving Credit Advances shall be disbursed from
whichever office or other place Lender may designate from time to
time and, together with any and all other Obligations of Borrower
to Lender, shall be charged to the Borrower's account on Lender's
books. The proceeds of each Revolving Credit Advance made by the
Lender shall be made available to the Borrower on the day so
requested by way of credit to the Borrower's operating account
maintained with Lender or such bank as Borrower designated to
Lender. Any and all Obligations due and owing hereunder may be
charged to Borrower's account and shall constitute Revolving Credit
Advances.
(b) Notwithstanding the provisions of (a) above, in
the event Borrower desires to obtain a Eurodollar Rate Loan, it
shall give Lender at least three (3) Business Days' prior written
notice specifying (i) the date of the proposed borrowing (which
shall be a Business Day), (ii) the type of borrowing and the amount
to be borrowed, which amount shall be an integral multiple of
$50,000, and (iii) the duration of the first Interest Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for
30, 60, 90, 120, 150 or 180 days.
(c) Each Interest Period of a Eurodollar Rate Loan
shall commence on the date such Eurodollar Rate Loan is made and
shall end on such date as Borrower may elect as set forth in
(b)(iii) above provided that:
(i) any Interest Period which would otherwise end
on a day which is not a Business Day shall be the next preceding or
succeeding Business Day as is Lender's custom in the market to
which such Eurodollar Rate Loan relates;
(ii) each Interest Period which commences during
an Interest Period in effect for outstanding Eurodollar Rate Loans
(as applicable) shall end on the last day of such Interest Period
then in effect for loans of the same type;
(iii) all Interest Periods which commence on the
same date shall end on the same date;
(iv) each Interest Period which commences before,
and would otherwise end after the end of the Term shall end on the
last day of the Term; and
(v) any Interest Period which begins on a day for
which there is no numerically corresponding day in the calendar
month during which such Interest Period is to end, shall (subject
to clause (i) above) end on the last day of such calendar month.
Borrower shall elect the initial Interest Period
applicable to a Eurodollar Rate Loan by its notice of borrowing
given to Lender pursuant to Section 4(b) or by its notice of
conversion given to Lender pursuant to Section 4(d), as the case
may be. Borrower shall elect the duration of each succeeding
Interest Period by giving irrevocable written notice to Lender of
such duration not less than three (3) Business Days prior to the
last day of the then current Interest Period applicable to such
Eurodollar Rate Loan. If Lender does not receive timely notice of
the Interest Period elected by Borrower, Borrower shall be deemed
to have elected to convert to a Domestic Rate Loan subject to
Section 4(d) hereinbelow.
(d) Provided that no Event of Default shall have
occurred and be continuing, Borrower may, on any Business Day,
convert any outstanding Eurodollar Rate Loan or Domestic Rate Loan
into a loan of another type in the same aggregate principal amount
provided that any conversion of a Eurodollar Rate Loan shall be
made only on the last Business Day of the then current Interest
Period applicable to such Eurodollar Rate Loan. If Borrower
desires to convert a loan, it shall give Lender not less than three
(3) Business Days' prior written notice, specifying the date of
such conversion, the loans to be converted and if the conversion is
from a Domestic Rate Loan to any other type of loan, the duration
of the first Interest Period therefor. After giving effect to each
such conversion, there shall not be outstanding more than ten (10)
Eurodollar Rate Loans, in the aggregate.
(e) Borrower may prepay the Revolving Credit Advances
in whole part in accordance with the provisions of this Agreement.
Borrowers shall specify the date of prepayment of Revolving Credit
Advances which are Eurodollar Rate Loans and the amount of loans to
be prepaid. In the event that any prepayment of a Eurodollar Rate
Loan is required or permitted on a date other than the last
Business Day of the then current Interest Period with respect
thereto, Borrower shall indemnify Lender therefor in accordance
with Section 4(f) hereof.
(f) Borrower shall indemnify Lender and hold Lender
harmless from and against any and all losses or expenses that
Lender may sustain or incur as a consequence of any prepayment or
any default by Borrower in the payment of the principal of or
interest on any Eurodollar Rate Loan or failure by Borrower to
complete a borrowing of, a prepayment of or conversion of or to a
Eurodollar Rate Loan after notice thereof has been given, including
(but not limited to) any interest payable by Lender to lenders of
funds obtained by it in order to make or maintain its Eurodollar
Rate Loans hereunder.
(g) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, or any change
therein or in the interpretation or application thereof, shall make
it unlawful for Lender (for purposes of this subsection (g), the
term "Lender" shall include Lender and the office or branch where
Lender or any corporation or bank controlling Lender makes or
maintains any Eurodollar Rate Loans to make or maintain its
Eurodollar Rate Loans, the obligation of Lender to make Eurodollar
Rate Loans hereunder shall forthwith be cancelled and Borrower
shall, if any affected Eurodollar Rate Loans are then outstanding,
promptly upon request from Lender, either pay all such affected
Eurodollar Rate Loans or convert such affected Eurodollar Rate
Loans into loans of another type. If any such payment or
conversion of any Eurodollar Rate Loan is made on a day that is not
applicable to such Eurodollar Rate Loan, Borrower shall pay Lender,
upon Lender's request, such amount or amounts as may be necessary
to compensate Lender for any loss or expense sustained or incurred
by Lender in respect of such Eurodollar Rate Loan as a result of
such payment or conversion, including (but not limited to) any
interest or other amounts payable by Lender to lenders of funds
obtained by Lender in order to make or maintain such Eurodollar
Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lender to Borrower
shall be conclusive absent manifest error.
(h) Subject to the terms and conditions hereof, Lender
shall issue or cause the issuance of Letters of Credit ("Letters of
Credit"); provided, however, that Lender will not be required to
issue or cause to be issued any Letters of Credit to the extent
that the face amount of such Letters of Credit would then cause the
sum of (i) the outstanding Revolving Credit Advances plus (ii)
outstanding Letters of Credit (with the requested Letter of Credit
being deemed to be outstanding for purposes of this calculation)
plus (iii) outstanding Acceptances (with the requested Acceptance
being deemed outstanding for purposes of this calculation) to
exceed the lesser of (x) the Maximum Loan Amount or (y) the Formula
Amount. The maximum amount of outstanding Letters of Credit shall
not exceed $3,000,000. All disbursements or payments related to
Letters of Credit shall be deemed to be Revolving Credit Advances
and shall bear interest at the applicable Interest Rate; Letters of
Credit that have not been drawn upon shall not bear interest.
Letters of Credit shall be subject to the terms and conditions set
forth in the Letter of Credit and Security Agreement attached
hereto as Exhibit 4(h).
(i) Borrower may request Lender to issue or cause the
issuance of a Letter of Credit by delivering to Lender at the
Payment Office, Lender's standard form of Letter of Credit and
Security Agreement together with Lender's standard form of Letter
of Credit Application (collectively, the "Letter of Credit
Application") and any draft, if applicable, completed to the
satisfaction of Lender; and, such other certificates, documents and
other papers and information as Lender may reasonably request.
(j) Each Letter of Credit shall, among other things,
(i) provide for the payment of sight drafts when presented for
honor thereunder in accordance with the terms thereof and when
accompanied by the documents described therein and (ii) have an
expiry date not later than six months after such Letter of Credit's
date of issuance and in no event later than the last day of the
Term. Each Letter of Credit Application and each Letter of Credit
shall be subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any amendments or revision
thereof and, to the extent not inconsistent therewith, the laws of
the State of New York.
(k) Lender shall have absolute discretion whether to
present for acceptance any draft (each, an "Acceptance"). Without
in any way limiting Lender's absolute discretion whether to present
any draft, Lender will generally not present any drafts for
acceptance (i) that have a maturity of more than 180 days, (ii)
that arise out of transactions involving the sale of goods by
Borrower not in the ordinary course of its business, (iii) that
involve a sale to an Affiliate, (iv) that involve any purchase for
which Lender has not received all related documents, instruments
and forms requested by Lender, (v) for which Lender is unable to
locate a purchaser in the ordinary course of business on standard
terms, or (vi) that is not eligible for discounting with Federal
Reserve Banks pursuant to paragraph 7 of Section 13 of the Federal
Reserve Act, as amended.
(l) Subject to terms set by Lender from time to time
in its discretion with respect to the acceptance of drafts
generally, Borrower may request Acceptances on any Business Day (so
long as the maximum aggregate amount of outstanding Acceptances
shall not exceed $5,000,000 at any time, each Acceptances is for an
amount which is an integral multiple of $25,000 and such Acceptance
would not cause the sum of (i) outstanding Revolving Credit
Advances plus (ii) outstanding Letters of Credit plus (iii)
outstanding Acceptances (with the requested Acceptance being deemed
outstanding for the purpose of this calculation) to exceed the
lesser of (x) the Maximum Loan Amount or (y) the Formula Amount),
by delivering to Lender a request for an Acceptance in
substantially the form of Exhibit 4(l) and upon demand, copies of
all invoices, delivery receipts and related documents relating to
that request that Lender might require. Provided that the request
for Acceptance is received prior to 10:30 a.m. (New York time) and
approved by Lender, Lender shall make the net proceeds of the
Acceptance available to Borrower by crediting the net amount of the
Acceptance in lawful money of the United States and in immediately
available funds to the Borrower's account. The net amount of the
Acceptance shall be calculated by discounting the Acceptance at the
Acceptance Rate for the applicable maturity period upon the
creation by Lender of an Acceptance.
(m) Borrower shall pay to Lender the amount of any
Acceptance on or before its maturity date. In addition, Lender is
hereby irrevocably authorized, in the Lender's sole discretion, to
make Revolving Credit Advances from time to time, or to charge any
account of Borrower to pay any Acceptance for which payment is due,
or at any time after the occurrence of an Event of Default to fund
cash collateral for any outstanding Acceptance.
(n) In connection with the issuance of any Letter of
Credit or Acceptance, Borrower shall indemnify, save and hold
Lender harmless from any loss, cost, expense or liability,
including, without limitation, payments made by Lender, and
expenses and reasonable attorneys' fees incurred by Lender arising
out of, or in connection with, any Letter of Credit or Acceptance
to be issued or created for Borrower. Borrower shall be bound by
Lender's or any issuing or accepting bank's regulations and good
faith interpretations of any Letter of Credit or Acceptance issued
or created for Borrower's account, although this interpretation may
be different from Borrower's own;, and, neither Lender, the bank
which opened the Letter of Credit, nor any of its correspondents
shall be liable for any error, negligence, or mistakes, whether of
omission or commission, in following Borrower's instructions or
those contained in any Letter of Credit , Acceptance or of any
modifications, amendments or supplements thereto or in issuing or
paying any Letter of Credit or Acceptance, except for Lender's or
such correspondents' willful misconduct or gross negligence.
(o) Borrower shall authorize and direct any bank which
issues a Letter of Credit to name Borrower as the "Account Party"
therein and to deliver to Lender all instruments, documents, and
other writings and property received by the bank pursuant to the
Letter of Credit or in connection with any Acceptance and to accept
and rely upon Lender's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit, the
application therefor or any Acceptance therefor.
(p) In connection with all Letters of Credit and
Acceptances issued or caused to be issued created by Lender under
this Agreement, Borrower hereby appoints Lender, or its designee,
as its attorney, with full power and authority (i) to sign and/or
endorse Borrower's name upon any warehouse or other receipts,
letter of credit applications and acceptances; (ii) to sign
Borrower's name on bills of lading; (iii) to clear Inventory
through the United States of America Customs Department ("Customs")
in the name of Borrower or Lender or Lender's designee, and to sign
and deliver to Customs officials powers of attorney in the name of
Borrower for such purpose; and (iv) to complete in Borrower's name
or Lender's, or in the name of Lender's designee, any order, sale
or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Lender nor
its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Lender's
or its attorney's willful misconduct or gross negligence. This
power, being coupled with an interest, is irrevocable as long as
any Letters of Credit or Acceptances remain outstanding.
5. Interest and Fees.
(a) Interest.
(i) Except as modified by paragraph 5(a)(iii)
below, interest on Revolving Credit Advances shall be payable in
arrears on the last day of each month with respect to Domestic Rate
Loans, and with respect to Eurodollar Rate Loans, at the end of
each Interest Period. Interest charges shall be computed on the
actual principal amount of Revolving Credit Advances outstanding at
the end of each day at a rate per annum equal to the applicable
Interest Rate. Whenever, subsequent to the date of this Agreement,
the Alternate Base Rate is increased or decreased, the applicable
Interest Rate with respect to Domestic Rate Loans shall be
similarly changed without notice or demand of any kind by an amount
equal to the amount of such change in the Alternate Base Rate
during the time such change or changes remain in effect.
(ii) Interest shall be computed on the basis of
actual days elapsed over a 360-day year. Interest shall be com-
puted by Lender and billed to Borrower monthly, and shall be
payable in arrears on the last day of each month, or, at Lender's
option, Lender may charge Borrower's account for said interest.
(iii) From and after the declaration and during
the continuance of an Event of Default, interest shall be payable
at the Default Rate.
(iv) Notwithstanding the foregoing, in no event
shall interest exceed the maximum rate permitted under any
applicable law or regulation, and if any provision of this
Agreement or an Ancillary Agreement is in contravention of any such
law or regulation, such provision shall be deemed amended to
provide for interest at said maximum rate and any excess amount
shall either be applied, at Lender's option, to the outstanding
Loans in such order as Lender shall determine or refunded by Lender
to Borrower.
(v) Borrower shall pay principal, interest and
all other amounts payable hereunder, or under any Ancillary
Agreement, without any deduction whatsoever, including, but not
limited to, any deduction for any set-off or counterclaim.
(b) Fees.
(vi) Closing Fee. Upon execution of this
Agreement by Borrower and Lender, Borrower shall pay to Lender a
closing fee in an amount equal to $10,000.
(vii) Unused Line Fee. In the event the average
closing daily unpaid balances of all Revolving Credit Advances
hereunder during any calendar month is less than the Maximum Loan
Amount, Borrower shall pay to Lender a fee at a rate per annum
equal to one-quarter of one percent (.25%) on the amount by which
the Maximum Loan Amount exceeds such average daily unpaid balance.
Such fee shall be calculated on the basis of a year of 360 days and
actual days elapsed, and shall be charged to Borrower's account on
the first day of each month with respect to the prior month.
(b) Increased Costs. In the event that any applicable
law, treaty or governmental regulation, or any change therein or in
the interpretation or application thereof, or compliance by Lender
(for purposes of this Section 5(c), the term "Lender" shall include
Lender and any corporation or bank controlling Lender and the
office or branch where Lender, as so defined, makes or maintains
any Eurodollar Rate Loans) with any request or directive (whether
or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:
(i) subject Lender to any tax of any kind
whatsoever with respect to this Agreement or change the basis of
taxation of payments to Lender of principal, fees, interest or any
other amount payable hereunder or under any Ancillary Agreements
(except for changes in the rate of tax on the overall net income of
Lender by the jurisdiction in which it maintains its principal
office);
(ii) impose, modify or hold applicable any
reserve, special deposit, assessment or similar requirement against
assets held by, or deposits in or for the account of, advances or
loans by, or other credit extended by, any office of Lender,
including (without limitation) pursuant to Regulation D of the
Board of Governors of the Federal Reserve System; or
(iii) impose on Lender or the London interbank
Eurodollar market any other condition with respect to this
Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to
Lender of making, renewing or maintaining its Loans hereunder by an
amount that Lender deems to be material or to reduce the amount of
any payment (whether of principal, interest or otherwise) in
respect of any of the Loans by an amount that Lender deems to be
material, then, in any case Borrower shall promptly pay Lender,
upon its demand, such additional amount as will compensate Lender
for such additional cost or such reduction, as the case may be.
Lender shall certify the amount of such additional cost or reduced
amount to Borrower, and such certification shall be conclusive
absent manifest error.
(c) Letter of Credit Fees.
Borrower shall pay Lender for issuing or causing
the issuance of a Letter of Credit that is not a standby Letter of
Credit, a fee equal to 1/4% of the original and of each increase in
the face amount thereof for each 120 days or part thereof of its
term ("Letter of Credit Fee"), and Bank's other customary charges
payable in connection with Letters of Credit as in effect from time
to time (which charges shall be furnished to Borrower by Lender
upon request). Such fees and charges shall be payable (i) 1/8% on
the opening of such Letter of Credit and (ii) 1/8% at the time of
payment thereof. With respect to any increase in the face amount
of any Letter of Credit, such fees and charges shall be payable (i)
1/8% at the time of each increase in the face amount thereof and
(ii) 1/8% at the time of payment thereof. Any such charge in
effect at the time of a particular transaction shall be the charge
for that transaction, notwithstanding any subsequent change in
Lender's prevailing charges for that type of transaction. All
Letter of Credit Fees payable hereunder shall be deemed earned in
full on the date when the same are due and payable hereunder and
shall not be subject to rebate or proration upon the termination of
this Agreement for any reason.
(d) Acceptance Fees. In addition to the discount
charge at the Acceptance Rate payable to Lender pursuant to Section
3(k) hereof, Borrower shall pay to Lender, Lender's other customary
charges payable in connection with Acceptances, as in effect from
time to time (which charges shall be furnished to Borrower by
Lender upon request and as of the date hereof are set forth on
Exhibit 5(e). Such charges shall be payable at the time of the
creation of an Acceptance. All such charges shall be deemed earned
in full on the date when the same are due and payable hereunder and
shall not be subject to rebate or pro ration upon the termination
of this Agreement for any reason.
(e) Capital Adequacy.
(i) In the event that Lender shall have
determined that any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender
(for purposes of this Section 5(f), the term "Lender" shall include
Lender and any corporation or bank controlling Lender and the
office or branch where Lender, as so defined, makes or maintains
any Eurodollar Rate Loans) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Lender's capital
as a consequence of its obligations hereunder to a level below that
which Lender could have achieved but for such adoption, change or
compliance (taking into consideration Lender's policies with
respect to capital adequacy) by an amount deemed by Lender to be
material, then, from time to time, Borrower shall pay upon demand
to Lender such additional amount or amounts as will compensate
Lender for such reduction. In determining such amount or amounts,
Lender may use any reasonable averaging or attribution methods.
The protection of this Section shall be available to Lender
regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or
condition.
(ii) A certificate of Lender setting forth such
amount or amounts as shall be necessary to compensate Lender with
respect to Section 5(f) hereof when delivered to Borrower shall be
conclusive absent manifest error.
(f) Basis for Determining Interest Rate Inadequate or
Unfair. In the event that Lender shall have determined that:
(i) reasonable means do not exist for
ascertaining the Eurodollar Rate for any Interest Period;
(ii) Dollar deposits in the relevant amount and
for the relevant maturity are not available in the London interbank
Eurodollar market, with respect to an outstanding Eurodollar Rate
Loan, a proposed Eurodollar Rate Loan, or a proposed conversion of
a Domestic Rate Loan into a Eurodollar Rate Loan;
Lender shall give Borrower prompt written, telephonic or
telegraphic notice of such determination. If such notice is given,
(i) any such requested Eurodollar Rate Loan shall be made as a
Domestic Rate Loan, unless Borrower shall notify Lender no later
than 10:00 a.m. (New York City time) two (2) Business Days prior to
the date of such proposed borrowing, that its request for such
borrowing shall be cancelled or made as an unaffected type of
Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar
Rate Loan which was to have been converted to an affected type of
Eurodollar Rate Loan shall be continued as or converted into a
Domestic Rate Loan, or, if Borrower shall notify Lender, no later
than 10:00 a.m. (New York City time) two (2) Business Days prior to
the proposed conversion, shall be maintained as an unaffected type
of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan,
or, if Borrower shall notify Lender, no later than 10:00 a.m. (New
York City time) two (2) Business Days prior to the last Business
Day of the then current Interest Period applicable to such affected
Eurodollar Rate Loan, shall be converted into an unaffected type of
Eurodollar Rate Loan, on the last Business Day of the then current
Interest Period for such affected Eurodollar Rate Loans. Until
such notice has been withdrawn, Lender shall have no obligation to
make an affected type of Eurodollar Rate Loan or maintain
outstanding affected Eurodollar Rate Loans and Borrower shall not
have the right to convert a Domestic Rate Loan or an unaffected
type of Eurodollar Rate Loan into an affected type of Eurodollar
Rate Loan.
6. Security Interest.
(a) To secure the prompt payment to Lender of the
Obligations, Borrower hereby assigns, pledges and grants to Lender
a continuing security interest in and to the Collateral, whether
now owned or existing or hereafter acquired or arising and
wheresoever located (whether or not the same is subject to Article
9 of the Uniform Commercial Code). All of the Borrower's ledger
sheets, files, records, books of account, business papers and
documents relating to the Collateral shall, until delivered to or
removed by Lender, be kept by Borrower in trust for Lender until
all Obligations have been paid in full. Each confirmatory
assignment schedule or other form of assignment hereafter executed
by Borrower shall be deemed to include the foregoing grant, whether
or not the same appears therein.
(b) Lender may file one or more financing
statements disclosing Lender's security interest in the Collateral
without Borrower's signature appearing thereon or Lender may sign
on Borrower's behalf as provided in paragraph 13 hereof. The
parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement. If
any Receivable becomes evidenced by a promissory note or any other
instrument for the payment of money, Borrower will immediately
deliver such instrument to Lender appropriately endorsed.
7. Representations Concerning the Collateral.
Borrower represents and warrants (each of which such
representations and warranties shall be deemed repeated upon the
making of each request for a Revolving Credit Advance and made as
of the time of each and every Revolving Credit Advance hereunder):
(a) all the Collateral (i) is owned by Borrower free
and clear of all claims, liens, security interests and encumbrances
(including without limitation any claims of infringement) except
(A) those in Lender's favor and (B) Permitted Liens and (ii) is not
subject to any agreement prohibiting the granting of a security
interest or requiring notice of or consent to the granting of a
security interest;
(b) all Receivables (i) represent complete bona fide
transactions which require no further act under any circumstances
on Borrower's part to make such Receivables payable by the account
debtors, (ii) to the best of Borrower's knowledge, are not subject
to any present, future or contingent offsets or counterclaims, and
(iii) do not represent bill and hold sales, consignment sales,
guaranteed sales, sale or return or other similar understandings or
obligations of any Affiliate or Subsidiary of Borrower.
8. Covenants Concerning the Collateral. During the
Term, Borrower covenants that it shall:
(a) not dispose of any of the Collateral whether by
sale, lease or otherwise except for the sale of Inventory in the
ordinary course of business;
(b) not encumber, mortgage, pledge, assign or grant
any security interest in any Collateral or any of Borrower's other
assets to anyone other than Lender except as set forth on Schedule
1(A) attached hereto and made a part hereof;
(c) place notations upon Borrower's books of account
and any financial statement prepared by Borrower to disclose
Lender's security interest in the Collateral;
(d) defend the Collateral against the claims and
demands of all parties;
(e) keep all of its Inventory at the locations set
forth on Schedule 12(1) and shall not move any Inventory from such
locations without the prior written consent of Lender except with
respect to sales of Inventory in the ordinary course of business;
(f) not extend the payment terms of any Receivable
without prompt notice thereof to Lender; and
(g) perform all other steps requested by Lender to
create and maintain in Lender's favor a valid perfected first
security interest in all Collateral.
9. Collection and Maintenance of Collateral and Re-
cords. Lender may at any time verify Borrower's Receivables
utilizing an audit control company or any other agent of Lender.
Lender or Lender's designee may notify customers or account
debtors, at any time following the occurrence and during the
continuance of an Event of Default, of Lender's security interest
in Receivables, collect them directly and charge the collection
costs and expenses to Borrower's account, but, unless and until
Lender does so or gives Borrower other instructions, Borrower shall
collect all Receivables for Lender and receive all payments
thereon. At any time following an Event of Default Lender may
require Borrower to collect all receivables for Lender's benefit in
trust as Lender's trustee and immediately deliver them to Lender in
their original form with all necessary endorsements or, as directed
by Lender, deposit such payments as directed by Lender. Lender
will credit (conditional upon final collection) all such payments
to Borrower's account two (2) Business Days after receipt by Lender
of such payments by wire transfer or electronic depository check.
Promptly after the creation of any Receivables, Borrower shall
provide Lender with schedules describing all Receivables created or
acquired by Borrower and shall execute and deliver confirmatory
written assignments of such Receivables to Lender, but Borrower's
failure to execute and deliver such schedules or written
confirmatory assignments of such Receivables shall not affect or
limit Lender's security interest or other rights in and to the
Receivables. Borrower shall furnish, at Lender's request, copies
of contracts, invoices or the equivalent, and any original shipping
and delivery receipts for all merchandise sold or services rendered
and such other documents and information as Lender may require.
Borrower shall also provide Lender on a monthly (within ten (10)
days after the end of each month) or more frequent basis, as
requested by Lender, a detailed aged trial balance of all of
Borrower's existing Receivables specifying the names and balances
due for each account debtor and such other information pertaining
to the Receivables as Lender may request. Borrower shall provide
Lender on a monthly (within ten (10) days after the end of each
month), or more frequent basis, as requested by Lender, a summary
report of Borrower's current Inventory, certified as true and
accurate by Borrower's President or Chief Financial Officer, as
well as an aged trial balance of Borrower's existing accounts
payable. Borrower shall provide Lender, as requested by Lender,
such other schedules, documents and/or information regarding the
Collateral as Lender may require.
10. Inspections. At all times during normal business
hours, Lender shall have the right to (a) visit and inspect
Borrower's properties and the Collateral, (b) inspect, audit and
make extracts from Borrower's relevant books and records,
including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal
officers, and independent accountants, Borrower's business, assets,
liabilities, financial condition, results of operations and
business prospects. Borrower will deliver to Lender any instrument
necessary for Lender to obtain records from any service bureau
maintaining records for Borrower.
11. Financial Information. Borrower shall provide
Lender (a) as soon as available, but in any event within ninety
(90) days after the end of each of Borrower's fiscal years, a
balance sheet as at the end of such fiscal year and the related
statements of income, retained earnings and changes in cash flow of
Borrower for such fiscal year on a consolidated and consolidating
basis, which shall have been reported on by independent certified
public accountants who shall be satisfactory to Lender and shall be
accompanied by an unqualified audit report issued by such
independent certified public accountants; (b) as soon as available,
drafts of the balance sheet as at the end of each of Borrower's
fiscal years and the related statements of income, retained
earnings and changes in cash flow of Borrower for such fiscal year,
which have been internally prepared by Borrower; (c) as soon as
available, but in any event within thirty (30) days after the close
of each quarter, the balance sheet as at the end of such quarter
and the related statements of income, retained earnings and changes
in cash flow for such quarter of Borrower on a consolidating basis,
which have been internally prepared by Borrower, (d) as soon as
available but in any event on or before the 20th day of each month,
a borrowing base certificate including accounts receivable ageings,
accounts payable schedules and Inventory reports and (e)(i) as soon
as available, but in any event within ten (10) days after the
issuance thereof, with copies of such financial statements, reports
and proxy statements as Borrower shall send to its shareholders and
(ii) promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which Borrower files with the Securities and Exchange Commission.
All financial statements required under (a), (b) and (c) above
shall be prepared in accordance with GAAP, subject to year-end
adjustments in the case of monthly and quarterly statements.
Together with the financial statements furnished pursuant to (a)
above, Borrower shall deliver a certificate of Borrower's certified
public accountants addressed to Lender stating that (i) they have
caused this Agreement and the Ancillary Agreements to be reviewed
and (ii) in making the examination necessary for the issuance of
such financial statements, nothing has come to their attention to
lead them to believe that any Event of Default or Default exists
and, in particular, they have no knowledge of any Event of Default
or Default or, if such is not the case, specifying such Event of
Default or Default and its nature, when it occurred and whether it
is continuing. At the times the financial statements are furnished
pursuant to (a), (b) and (c) above, a certificate of Borrower's
President or Chief Financial Officer shall be delivered to Lender
(i) stating that, based on an examination sufficient to enable him
to make an informed statement, no Event of Default or Default
exists, or, if such is not the case, specifying such Event of
Default or Default and its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to
such event and (ii) reflecting a calculation of each of the
financial covenants set forth in Sections 12(n), 12(o), 12(q),
12(r) and 12(s) hereof. If any internally prepared financial
information, including that required under this paragraph, is
unsatisfactory in any manner to Lender, Lender may request that
Borrower's independent certified public accountants review same.
In addition to the foregoing financial statements,
Borrower shall furnish Lender (i) promptly upon receipt, copies of
any management letters received by Borrower from its independent
certified public accountants and (ii) no less than thirty (30) days
prior to the beginning of each fiscal year commencing with the
fiscal year ending January 31, 1996, a month by month projected
operating budget and cash flow for such fiscal year (including an
income statement and balance sheet for each month), such
projections to be accompanied by a certificate signed by Borrower's
President or Chief Financial Officer to the effect that such
projections have been prepared on the basis of sound financial
planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such
projections were prepared.
12. Additional Representations, Warranties and
Covenants. Borrower represents and warrants (each of which such
representations and warranties shall be deemed repeated upon the
making of a request for a Revolving Credit Advance and made as of
the time of each Revolving Credit Advance made hereunder), and
covenants that:
(a) Borrower is a corporation duly organized and
validly existing under the laws of the State of Delaware and duly
qualified and in good standing in every other state or jurisdiction
in which the nature of Borrower's business requires such
qualification;
(b) the execution, delivery and performance of this
Agreement and the Ancillary Agreements (i) have been duly
authorized, (ii) are not in contravention of Borrower's certificate
of incorporation, by-laws or of any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is
bound and (iii) are within Borrower's corporate powers;
(c) this Agreement and the Ancillary Agreements
executed and delivered by Borrower are Borrower's legal, valid and
binding obligations, enforceable in accordance with their terms;
(d) it keeps and will continue to keep all of its
books and records concerning the Collateral at Borrower's executive
offices located at the address set forth in the introductory
paragraph of this Agreement and will not move such books and
records without giving Lender at least thirty (30) days prior
written notice;
(e) (i) the operation of Borrower's business is and
will continue to be in compliance in all material respects with all
applicable federal, state and local laws, including but not limited
to all applicable environmental laws and regulations;
(ii) Borrower will establish and maintain a system
to assure and monitor continued compliance with all applicable
environmental laws, which system shall include periodic reviews of
such compliance.
(iii) In the event the Borrower obtains, gives or
receives notice of any release or threat of release of a reportable
quantity of any Hazardous Substances on its property (any such
event being hereinafter referred to as a "Hazardous Discharge") or
receives any notice of violation, request for information or
notification that it is potentially responsible for investigation
or cleanup of environmental conditions on its property, demand
letter or complaint, order, citation, or other written notice with
regard to any Hazardous Discharge or violation of any environmental
laws affecting its property or Borrower's interest therein (any of
the foregoing is referred to herein as an "Environmental
Complaint") from any Person or entity, including any state agency
responsible in whole or in part for environmental matters in the
state in which such property is located or the United States
Environmental Protection Agency (any such person or entity
hereinafter the "Authority"), then the Borrower shall, within five
(5) Business Days, give written notice of same to the Lender
detailing facts and circumstances of which the Borrower is aware
giving rise to the Hazardous Discharge or Environmental Complaint
and periodically inform Lender of the status of the matter. Such
information is to be provided to allow the Lender to protect its
security interest in the Collateral and is not intended to create
nor shall it create any obligation upon the Lender with respect
thereto.
(iv) Borrower shall respond promptly to any
Hazardous Discharge or Environmental Complaint and take all
necessary action in order to safeguard the health of any Person and
to avoid subjecting the Collateral to any lien, charge, claim or
encumbrance. If Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or Borrower shall
fail to comply with any of the requirements of any environmental
laws, the Lender may, but without the obligation to do so, for the
sole purpose of protecting the Lender's interest in Collateral:
(A) give such notices or (B) enter onto Borrower's property (or
authorize third parties to enter onto such property) and take such
actions as the Lender (or such third parties as directed by the
Lender) deem reasonably necessary or advisable, to clean up,
remove, mitigate or otherwise deal with any such Hazardous
Discharge or Environmental Complaint. All reasonable costs and
expenses incurred by the Lender (or such third parties) in the
exercise of any such rights, including any sums paid in connection
with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date
expended at the Default Rate for Revolving Credit Advances shall be
paid upon demand by the Borrower, and until paid shall be added to
and become a part of the Obligations secured by the Liens created
by the terms of this Agreement or any other agreement between
Lender and Borrower.
(v) Borrower shall defend and indemnify the
Lender and hold the Lender harmless from and against all loss,
liability, damage and expense, claims, costs, fines and penalties,
including attorney's fees, suffered or incurred by the Lender under
or on account of any environmental laws, including, without
limitation, the assertion of any lien thereunder, with respect to
any Hazardous Discharge, the presence of any hazardous substances
affecting Borrower's property, whether or not the same originates
or emerges from Borrower's property or any contiguous real estate,
including any loss of value of the Collateral as a result of the
foregoing except to the extent such loss, liability, damage and
expense is attributable to any Hazardous Discharge resulting from
actions on the part of the Lender. The Borrower's obligations
under this paragraph 12(e) shall arise upon the discovery of the
presence of any Hazardous Substances on the Borrower's property,
whether or not any federal, state, or local environmental agency
has taken or threatened any action in connection with the presence
of any hazardous substances. The Borrower's obligation and the
indemnifications hereunder shall survive the termination of this
Agreement.
(vi) For purposes of paragraph 12(e) all
references to Borrower's property shall be deemed to include all of
Borrower's right, title and interest in and to all owned and/or
leased premises.
(f) based upon the Employee Retirement Income Security
Act of 1974 ("ERISA"), and the regulations and published
interpretations thereunder: (i) Borrower has not engaged in any
Prohibited Transactions as defined in paragraph 406 of ERISA and
paragraph 4975 of the Internal Revenue Code, as amended; (ii)
Borrower has met all applicable minimum funding requirements under
paragraph 302 of ERISA in respect of its plans; (iii) Borrower has
no knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under
Title IV of ERISA to terminate any employee benefit plan(s); (iv)
Borrower has no fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than
Borrower's employees; and (v) Borrower has not withdrawn,
completely or partially, from any multi-employer pension plan so as
to incur liability under the Multiemployer Pension Plan Amendments
Act of 1980;
(g) it is solvent, able to pay its debts as they
mature, has capital sufficient to carry on its business and all
businesses in which it is about to engage and the fair saleable
value of its assets (calculated on a going concern basis) is in
excess of the amount of its liabilities;
(h) there is no pending or threatened litigation,
actions or proceeding which involve the possibility of materially
and adversely affecting the Borrower's business, assets,
operations, condition or prospects, financial or otherwise, or the
Collateral or the ability of Borrower to perform this Agreement;
(i) all balance sheets and income statements which
have been delivered to Lender fairly, accurately and properly state
Borrower's financial condition on a basis consistent with that of
previous financial statements and there has been no material
adverse change in Borrower's financial condition as reflected in
such statements since the date thereof and such statements do not
fail to disclose any fact or facts which might materially and
adversely affect Borrower's financial condition;
(j) (x) it possesses all of the licenses, patents,
copyrights, trademarks, tradenames and permits necessary to conduct
its business, (y) there has been no assertion or claim of violation
or infringement with respect thereof and (z) all such licenses,
patents, copyrights, trademarks, tradenames and permits are listed
on Schedule 12(j);
(k) it will pay or discharge when due all taxes,
assessments and governmental charges or levies imposed upon it;
(l) it will promptly inform Lender in writing of: (i)
the commencement of all proceedings and investigations by or before
and/or the receipt of any notices from, any governmental or
nongovernmental body and all actions and proceedings in any court
or before any arbitrator against or in any way concerning any of
Borrower's properties, assets or business, which might singly or in
the aggregate, have a materially adverse effect on Borrower; (ii)
any amendment of Borrower's certificate of incorporation or by-
laws; (iii) any change in Borrower's business, assets, liabilities,
condition (financial or otherwise), results of operations or
business prospects which has had or might have a materially adverse
effect on Borrower; (iv) any Event of Default or Default; (v) any
default or any event which with the passage of time or giving of
notice or both would constitute a default under any agreement for
the payment of money to which Borrower is a party or by which
Borrower or any of Borrower's properties may be bound which would
have a material adverse effect on Borrower's business, operations,
property or condition (financial or otherwise) or the Collateral;
(vi) any change in the location of Borrower's executive offices;
(vii) any change in the location of Borrower's Inventory or
Equipment from the locations listed on Schedule 12(l) attached
hereto, (viii) any change in Borrower's corporate name; (ix) any
material delay in Borrower's performance of any of its obligations
to any account debtor and of any assertion of any material claims,
offsets or counterclaims by any account debtor and of any
allowances, credits and/or other monies granted by it to any
account debtor; (x) furnish to and inform Lender of all material
adverse information relating to the financial condition of any
account debtor; and (xi) any material return of goods;
(m) it will not (i) create, incur, assume or suffer to
exist any indebtedness (exclusive of trade debt) whether secured or
unsecured other than Borrower's indebtedness to Lender and as set
forth on Schedule 12(m) attached hereto and made a part hereof;
(ii) declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of Borrower or apply
any of its funds, property or assets to the purchase, redemption or
other retirement of any common or preferred stock of Borrower;
(iii) directly or indirectly, prepay any indebtedness (other than
to Lender), or repurchase, redeem, retire or otherwise acquire any
indebtedness of Borrower; (iv) makes advances, loans or extensions
of credit to any Person; (v) become either directly or contingently
liable upon the obligations of any Person by assumption,
endorsement or guaranty thereof or otherwise; (vi) enter into any
merger, consolidation or other reorganization with or into any
other Person or acquire all or a portion of the assets or stock of
any Person or permit any other Person to consolidate with or merge
with it; (vii) form any Subsidiary or enter into any partnership,
joint venture or similar arrangement; (viii) materially change the
nature of the business in which it is presently engaged; (ix)
change its fiscal year or make any changes in accounting treatment
and reporting practices without prior written notice to Lender
except as required by GAAP or in the tax reporting treatment or
except as required by law; (x) enter into any transaction with any
Affiliate, except in ordinary course on arms-length terms; or (xi)
bill Receivables under any name except the present name of the
Borrower;
(n) it shall not permit its Tangible Net Worth to be
less than the following amounts during the periods set forth below:
Periods Amount
Closing Date - January 30, 1996 $8,000,000
January 31, 1996 - January 30, 1997 $8,000,000 plus the greater
of (a) $300,000 or (b) 50% of the actual net income of Borrower for
the fiscal year ended January 31, 1996
January 31, 1997 - January 30, 1998 Borrower's Tangible Net
Worth for the fiscal year
ended January 31, 1996 plus
the greater of (a) $500,000
or (b) 50% of the actual
net income of Borrower for
the fiscal year ended
January 31, 1997
January 31, 1998 - January 30, 1999 Borrower's Tangible Net
Worth for the fiscal year
ended January 31, 1997 plus
the greater of (a) $500,000
or (b) 50% of net income of
Borrower for the fiscal
year ended January 31, 1998
(o) it shall maintain at all times Leverage Ratio not
greater than 1.3 to 1.0;
(p) all financial projections of Borrower's
performance prepared by Borrower or at Borrower's direction and
delivered to Lender will represent, at the time of delivery to
Lender, Borrower's best estimate of Borrower's future financial
performance and will be based upon assumptions which are reasonable
in light of Borrower's past performance and then current business
conditions;
(q) it will not make capital expenditures in an amount
in excess of $500,000 during any fiscal year;
(r) it shall maintain as of the end of each fiscal
year Interest Coverage not less than 3.00 to 1.0;
(s) it shall maintain at all times a ratio of Current
Assets (excluding Inventory) to Current Liabilities (including, for
purposes of this calculation, all Revolving Credit Advances) of .5
to 1.0;
(t) none of the proceeds of the Loans hereunder will
be used directly or indirectly to "purchase" or "carry" "margin
stock" or to repay indebtedness incurred to "purchase" or "carry"
"margin stock" within the respective meanings of each of the quoted
terms under Regulation G of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect;
(u) it will bear the full risk of loss from any loss
of any nature whatsoever with respect to the Collateral. At it's
own cost and expense in amounts and with carriers acceptable to
Lender, it shall (i) keep all its insurable properties and
properties in which it has an interest insured against the hazards
of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such
amounts, as is customary in the case of companies engaged in
businesses similar to Borrower's including, without limitation,
business interruption insurance; (ii) maintain public and product
liability insurance against claims for personal injury, death or
property damage suffered by others; (iii) maintain all such
workmen's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which Borrower is
engaged in business; and (iv) furnish Lender with (x) copies of all
policies and evidence of the maintenance of such policies at least
thirty (30) days before any expiration date, and (y) appropriate
loss payable endorsements in form and substance satisfactory to
Lender, naming Lender as loss payee and providing that as to Lender
the insurance coverage shall not be impaired or invalidated by any
act or neglect of Borrower and the insurer will provide Lender with
at least thirty (30) days notice prior to cancellation. Borrower
shall instruct the insurance carriers that in the event of any loss
thereunder, the carriers shall make payment for such loss to Lender
and not to Borrower and Lender jointly. If any insurance losses
are paid by check, draft or other instrument payable to Borrower
and Lender jointly, Lender may endorse Borrower's name thereon and
do such other things as Lender may deem advisable to reduce the
same to cash. Lender is hereby authorized to adjust and compromise
claims. All loss recoveries received by Lender upon any such
insurance may be applied to the Obligations, in such order as
Lender in its sole discretion shall determine. Any surplus shall
be paid by Lender to Borrower or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by Borrower
to Lender, on demand; and
(v) it shall deliver to Lender within thirty (30)
days' of the Closing Date, a fully-executed landlord's waiver for
the premises located at 711-2 Koehler Avenue, Ronkonkoma, New York
in form and substance satisfactory to Lender.
13. Power of Attorney. Borrower hereby appoints
Lender or any other Person whom Lender may designate as Borrower's
attorney, with power to: (i) endorse Borrower's name on any
checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come into Lender's possession; (ii)
sign Borrower's name on any invoice or bill of lading relating to
any Receivables, drafts against customers, schedules and
assignments of Receivables, notices of assignment, financing
statements and other public records, verifications of account and
notices to or from customers; (iii) verify the validity, amount or
any other matter relating to any Receivable by mail, telephone,
telegraph or otherwise with account debtors; (iv) execute customs
declarations and such other documents as may be required to clear
Inventory through Customs; (v) do all things necessary to carry out
this Agreement, any Ancillary Agreement and all related documents;
and (vi) on or after the occurrence and continuation of an Event of
Default, notify the post office authorities to change the address
for delivery of Borrower's mail to an address designated by Lender,
and to receive, open and dispose of all mail addressed to Borrower.
Borrower hereby ratifies and approves all acts of the attorney.
Neither Lender nor the attorney will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law.
This power, being coupled with an interest, is irrevocable so long
as any Receivable which is assigned to Lender or in which Lender
has a security interest remains unpaid and until the Obligations
have been fully satisfied.
14. Expenses. Borrower shall pay all of Lender's out-
of-pocket costs and expenses, including without limitation
reasonable fees and disbursements of counsel and appraisers, in
connection with the preparation, execution and delivery of this
Agreement and the Ancillary Agreements, and in connection with the
prosecution or defense of any action, contest, dispute, suit or
proceeding concerning any matter in any way arising out of, related
to or connected with this Agreement or any Ancillary Agreement
provided, that Borrower's obligation with respect to the fees of
Lender's counsel in connection with the preparation, execution and
delivery of this Agreement shall not exceed $10,000. Borrower
shall also pay all of Lender's out-of-pocket costs and expenses,
including without limitation reasonable fees and disbursements of
counsel, in connection with (a) the preparation, execution and
delivery of any waiver, any amendment thereto or consent proposed
or executed in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements, (b) Lender's obtaining
performance of the Obligations under this Agreement and any
Ancillary Agreements, including, but not limited to, the
enforcement or defense of Lender's security interests, assignments
of rights and liens hereunder as valid perfected security
interests, (c) any attempt to inspect, verify, protect, collect,
sell, liquidate or otherwise dispose of any Collateral, and (d) any
consultations in connection with any of the foregoing. Borrower
shall also pay Lender's customary bank charges for all bank
services performed or caused to be performed by Lender for Borrower
at Borrower's request. All such costs and expenses together with
all filing, recording and search fees, taxes and interest payable
by Borrower to Lender shall be payable on demand and shall be
secured by the Collateral. If any tax by any governmental
authority is or may be imposed on or as a result of any transaction
between Borrower and Lender which Lender is or may be required to
withhold or pay, Borrower agrees to indemnify and hold Lender
harmless in respect of such taxes, and Borrower will repay to
Lender the amount of any such taxes which shall be charged to
Borrower's account; and until Borrower shall furnish Lender with
indemnity therefor (or supply Lender with evidence satisfactory to
it that due provision for the payment thereof has been made),
Lender may hold without interest any balance standing to Borrower's
credit and Lender shall retain its security interests in any and
all Collateral.
15. Assignment By Lender. Lender may assign any or
all of the Obligations together with any or all of the security
therefor and any transferee shall succeed to all of Lender's rights
with respect thereto. Upon such transfer, Lender shall be released
from all responsibility for the Collateral to the extent same is
assigned to any transferee. Lender may from time to time sell or
otherwise grant participations in any of the Obligations and the
holder of any such participation shall, subject to the terms of any
agreement between Lender and such holder, be entitled to the same
benefits as Lender with respect to any security for the Obligations
in which such holder is a participant. Borrower agrees that each
such holder may exercise any and all rights of banker's lien, set-
off and counterclaim with respect to its participation in the
Obligations as fully as though Borrower were directly indebted to
such holder in the amount of such participation.
16. Waivers. Borrower waives presentment and protest
of any instrument and notice thereof, notice of default and all
other notices to which Borrower might otherwise be entitled.
17. Term of Agreement. This Agreement shall continue
in full force and effect until the expiration of the Term. The
Borrower may terminate this Agreement at any time upon ninety (90)
days' prior written notice and upon payment in full of the
Obligations.
18. Events of Default. The occurrence of any of the
following shall constitute an Event of Default:
(a) failure to make payment of any of the Obligations
when required hereunder;
(b) failure to pay any taxes when due unless such
taxes are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been provided on
Borrower's books;
(c) failure to perform under and/or committing any
material breach of this Agreement or any Ancillary Agreement or any
other agreement between Borrower and Lender;
(d) occurrence of a default under any agreement to
which Borrower is a party with third parties which has a material
adverse affect upon Borrower's business, operations, property or
condition (financial or otherwise) including all leases for any
premises where Inventory or Equipment is located;
(e) any representation, warranty or statement made by
Borrower hereunder, in any Ancillary Agreement, any certificate,
statement or document delivered pursuant to the terms hereof, or in
connection with the transactions contemplated by this Agreement
should at any time be false or misleading in any material respect;
(f) an attachment or levy is made upon any of
Borrower's assets having an aggregate value in excess of $50,000,
or a judgment is rendered against Borrower or any of Borrower's
property involving a liability of more than $50,000, which shall
not have been vacated, discharged, stayed or bonded pending appeal
within thirty (30) days from the entry thereof;
(g) any change in Borrower's condition or affairs
(financial or otherwise) which in Lender's good faith opinion
materially impairs the Collateral or the ability of Borrower to
perform its Obligations;
(h) any lien created hereunder or under any Ancillary
Agreement for any reason ceases to be or is not a valid and
perfected lien having a first priority interest;
(i) if Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment
for the benefit of creditors, (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv)
be adjudicated a bankrupt or insolvent, (v) file a petition seeking
to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within
thirty (30) days, any petition filed against it in any involuntary
case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
(j) Borrower shall admit in writing its inability, or
be generally unable to pay its debts as they become due or cease
operations of its present business;
(k) any Affiliate (other than C.J. Ryan, J.P. Gordon
and J.J. Collins) or any Subsidiary or any Guarantor shall (i)
apply for or consent to the appointment of, or the taking
possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) admit
in writing its inability, or be generally unable, to pay its debts
as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv)
commence a voluntary case under the federal bankruptcy laws (as now
or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to,
or fail to have dismissed, within thirty (30) days, any petition
filed against it in any involuntary case under such bankruptcy
laws, (viii) take any action for the purpose of effecting any of
the foregoing;
(l) Borrower directly or indirectly sells, assigns,
transfers, conveys, or suffers or permits to occur any sale,
assignment, transfer or conveyance of any assets of Borrower or any
interest therein, except (i) as permitted herein or (ii) sales of
Equipment in excess of $50,000 during any fiscal year;
(m) Borrower fails to operate in the ordinary course
of business;
(n) Lender shall in good faith deem itself insecure or
unsafe or shall fear diminution in value, removal or waste of the
Collateral;
(o) a default by Borrower in the payment, when due, of
any principal of or interest on any indebtedness for money
borrowed;
(p) if any Guarantor attempts to terminate, challenges
the validity of, or its liability under any Guaranty Agreement;
(q) should any Guarantor default in its obligations
under any Guaranty Agreement or if any proceeding shall be brought
to challenge the validity, binding effect of any Guaranty
Agreement, or should any Guarantor breach any representation,
warranty or covenant contained in any Guaranty Agreement or should
any Guaranty Agreement cease to be a valid, binding and enforceable
obligation; or
(r) any Change of Control.
19. Remedies. (a) Upon the occurrence of an Event of
Default pursuant to paragraph 18(i) herein, all Obligations shall
be immediately due and payable and this Agreement shall be deemed
terminated; upon the occurrence and continuation of any other of
the Events of Default, Lender shall have the right to demand
repayment in full of all Obligations, whether or not otherwise due.
Until all Obligations have been fully satisfied, Lender shall
retain its security interest in all Collateral. Lender shall have,
in addition to all other rights provided herein, the rights and
remedies of a secured party under the Uniform Commercial Code, and
under other applicable law, all other legal and equitable rights to
which Lender may be entitled, including without limitation, the
right to take immediate possession of the Collateral, to require
Borrower to assemble the Collateral, at Borrower's expense, and to
make it available to Lender at a place designated by Lender which
is reasonably convenient to both parties and to enter any of the
premises of Borrower or wherever the Collateral shall be located,
with or without force or process of law, and to keep and store the
same on said premises until sold (and if said premises be the
property of Borrower, Borrower agrees not to charge Lender for
storage thereof for a period up to at least sixty (60) days after
sale or disposition of said Collateral). Further, Lender may, at
any time or times after default by Borrower, sell and deliver all
Collateral held by or for Lender at public or private sale for
cash, upon credit or otherwise, at such prices and upon such terms
as Lender, in Lender's sole discretion, deems advisable or Lender
may otherwise recover upon the Collateral in any commercially
reasonable manner as Lender, in its sole discretion, deems
advisable. Except as to that part of the Collateral which is
perishable or threatens to decline speedily in nature or is of a
type customarily sold on a recognized market, the requirement of
reasonable notice shall be met if such notice is mailed postage
prepaid to Borrower at Borrower's address as shown in Lender's
records, at least ten (10) days before the time of the event of
which notice is being given. Lender may be the purchaser at any
sale, if it is public. In connection with the exercise of the
foregoing remedies, Lender is granted permission to use all of
Borrower's trademarks, tradenames, tradestyles, patents, patent
applications, licenses, franchises and other proprietary rights
which are used in connection with (a) Inventory for the purpose of
disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds of
sale shall be applied first to all costs and expenses of sale,
including attorneys' fees, and second to the payment (in whatever
order Lender elects) of all Obligations. Lender will return any
excess to Borrower and Borrower shall remain liable to Lender for
any deficiency.
20. Waiver; Cumulative Remedies. Failure by Lender to
exercise any right, remedy or option under this Agreement or any
supplement hereto or any other agreement between Borrower and
Lender or delay by Lender in exercising the same, will not operate
as a waiver; no waiver by Lender will be effective unless it is in
writing and then only to the extent specifically stated. Lender's
rights and remedies under this Agreement will be cumulative and not
exclusive of any other right or remedy which Lender may have.
21. Application of Payments. Borrower irrevocably
waives the right to direct the application of any and all payments
at any time or times hereafter received by Lender from or on
Borrower's behalf and Borrower hereby irrevocably agrees that
Lender shall have the continuing exclusive right to apply and
reapply any and all payments received at any time or times
hereafter against Borrower's Obligations hereunder in such manner
as Lender may deem advisable notwithstanding any entry by Lender
upon any of Lender's books and records.
22. Revival. Borrower further agrees that to the
extent Borrower makes a payment or payments to Lender, which
payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy act, state or federal law, common law or
equitable cause, then, to the extent of such payment or repayment,
the obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if said payment
had not been made.
23. Notices. Any notice or request hereunder may be
given to Borrower or Lender at the respective addresses set forth
below or as may hereafter be specified in a notice designated as a
change of address under this paragraph. Any notice or request
hereunder shall be given by registered or certified mail, return
receipt requested, or by overnight mail or by telecopy (confirmed
by mail). Notices and requests shall be, in the case of those by
mail or overnight mail, deemed to have been given when deposited in
the mail or with the overnight mail carrier, and, in the case of a
telecopy, when confirmed.
Notices shall be provided as follows:
If to the Lender: The Bank of New York
1100 Old Country Road
Plainview, New York 11803
Attention: Gerry Waters
Telephone: (516) 681-6300
Telecopier: (516) 933-7692
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Linda C. Berman, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
If to the Borrower: Lakeland Industries, Inc.
711-2 Koehler Avenue
Ronkonkoma, New York 11779
Attention: Christopher Ryan
Telephone: (516) 981-9700
Telecopier: (516) 981-9751
with a copy to: Alan Fischl, Esq.
1010 Northern Boulevard
Great Neck, New York 11021
Telephone: (516) 487-6002
Telecopier: (516) 487-5327
24. Governing Law and Waiver of Jury Trial. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. LENDER SHALL
HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER APPLICABLE
LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL CODE OF
NEW YORK. BORROWER AGREES THAT ALL ACTIONS AND PROCEEDINGS
RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT OR ANY OTHER OBLIGATIONS SHALL BE LITIGATED IN THE
FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK OR, AT
LENDER'S OPTION, IN ANY OTHER COURTS LOCATED IN NEW YORK STATE OR
ELSEWHERE AS LENDER MAY SELECT AND THAT SUCH COURTS ARE CONVENIENT
FORUMS AND BORROWER SUBMITS TO THE PERSONAL JURISDICTION OF SUCH
COURTS. BORROWER WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS
THAT SERVICE OF PROCESS UPON BORROWER MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER AT
BORROWER'S ADDRESS APPEARING ON LENDER'S RECORDS, AND SERVICE SO
MADE SHALL BE DEEMED COMPLETED TWO (2) DAYS AFTER THE SAME SHALL
HAVE BEEN SO MAILED. BOTH PARTIES HERETO WAIVE THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN BORROWER AND
LENDER AND BORROWER WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR
PROCEEDING INSTITUTED BY LENDER WITH REGARD TO THIS AGREEMENT OR
ANY OF THE OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS WHICH IT MAY
HAVE.
25. Limitation of Liability. Borrower acknowledges
and understands that in order to assure repayment of the
Obligations hereunder Lender may be required to exercise any and
all of Lender's rights and remedies hereunder and agrees that
neither Lender nor any of Lender's agents shall be liable for acts
taken or omissions made in connection herewith or therewith except
for actual bad faith.
26. Entire Understanding. This Agreement and the
Ancillary Agreements contain the entire understanding between
Borrower and Lender and any promises, representations, warranties
or guarantees not herein contained shall have no force and effect
unless in writing, signed by the Borrower's and Lender's respective
officers. Neither this Agreement, the Ancillary Agreements, nor
any portion or provisions thereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated
orally or by any course of dealing, or in any manner other than by
an agreement in writing, signed by the party to be charged.
27. Modification. This Agreement and the Ancillary
Agreements constitute the complete agreement between the parties
with respect to the subject matter hereof and thereof and may not
be modified, altered or amended except by an agreement in writing
signed by the parties hereto and thereto.
28. Severability. Wherever possible each provision of
this Agreement or the Ancillary Agreements shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Agreement or the Ancillary Agreements
shall be prohibited by or invalid under applicable law such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or
the remaining provisions thereof.
29. Captions. All captions are and shall be without
substantive meaning or content of any kind whatsoever.
30. Counterparts. This Agreement may be executed in
one or more counterparts, each of which taken together shall
constitute one and the same instrument.
31. Construction. The parties acknowledge that each
party and its counsel have reviewed this Agreement and that the
normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in
the interpretation of this Agreement or any amendments, schedules
or exhibits thereto.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
ATTEST: LAKELAND INDUSTRIES, INC.
By:__________________________
Name:
Title:
[CORPORATE SEAL]
THE BANK OF NEW YORK
By:__________________________
Name:
Title:
<PAGE>
SCHEDULES
Schedule 1(A) - Permitted Liens
Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights
Schedule 12(l) - Inventory Locations
Schedule 12(m) - Permitted Indebtedness
