UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): May 2, 2008
Lakeland
Industries, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
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0-15535
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13-3115216
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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701 Koehler Avenue, Suite 7,
Ronkonkoma, New York 11779-7410
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (631)
981-9700
Not Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
£
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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£
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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£
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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£
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 1.01
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Entry into a Material
Definitive Agreement.
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On May 2,
2008, Lakeland Industries, Inc., a Delaware corporation (the “Registrant,”
“Lakeland” or the “Company”), and its subsidiary, Lakeland do Brasil
Empreendimentos e Participações Ltda, a limited liability company (sociedade
limitada) organized under the laws of the nation of Brazil (the “Purchaser”),
entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with
Miguel Antonio dos Guimarães Bastos, Elder Marcos Vieira da Conceição, and
Márcia Cristina Vieira da Conscição Antunes, together the (“Sellers”), Nordeste
Empreendedor Fundo Mútuo de Investimento em Empresas Emergentes, and Qualytextil
S.A., a corporation (sociedade por ações) organized under the laws of the nation
of Brazil (“Qualytextil”), pursuant to which Lakeland agreed to acquire
Qualytextil (the “Acquisition”) for an initial purchase price of
approximately USD$13.3 million (the “Purchase Price”).
Pursuant
to the terms of the Stock Purchase Agreement, the Purchase Price is derived as
the multiple of seven times the 2007 EBITDA of Qualytextil, less all outstanding
debts at closing. The 2007 EBITDA was R$3,118,000 and the total
amount paid at closing, including the repayment of such outstanding debts, is
R$21,826,000 (or approximately USD$13.3 million).
The Stock
Purchase Agreement provides for an adjustment of the Purchase Price, based on
results of a post-closing audit of the April 30, 2008 Balance Sheet and also
based on results of 2008 EBITDA. In addition, the Stock Purchase
Agreement provides for a Supplementary Purchase Price (as defined
below). Subject to Qualytextil’s EBITDA in 2010 being equal to or
greater than R$4,449,200, the Purchaser shall then pay to the Sellers the
difference between six (6) times Qualytextil’s EBITDA in 2010 and seven (7)
times the 2007 EBITDA (R$21,826,000.00), less any unpaid disclosed or
undisclosed contingencies (other than Outstanding Debts) from pre-closing which
exceeds R$100,000.00 ("Supplementary Purchase Price"). The Supplementary
Purchase Price in no event shall be greater than R$27,750,000.00. For the
purposes of determining Qualytextil’s EBITDA in 2010, within up to ninety (90)
days after December 31, 2010, the Purchaser shall cause Qualytextil to provide
the Sellers with a written and audited statement describing Qualytextil’s EBITDA
in 2010, prepared in accordance with Brazilian GAAP and in a manner consistent
with the manner in which the 2007 EBITDA was determined by the Parties. Should
the Purchaser and the Sellers agree on the amounts so presented as Qualytextil’s
EBITDA in 2010, then the Supplementary Purchase Price shall, within 30 (thirty)
Business Days after the presentation of the mentioned statement by Qualytextil,
be paid by the Purchaser to the Sellers. Should the Purchaser and the Sellers
disagree with the amounts presented by Qualytextil as Qualytextil’s EBITDA in
2010, and should the parties and their respective external auditors not be able
to reach an agreement upon such values within thirty (30) business days as from
the presentation of referred original statement, then the parties shall jointly
appoint (and equally bear the costs of) another auditing firm. The retained
third auditing firm shall, within fifteen (15) business days following its
engagement, issue a final and binding statement contemplating Qualytextil’s
EBITDA in 2010 (the third auditing firm shall prepare and issue its final
statement in accordance with Brazilian GAAP and in a manner consistent with the
manner in which the 2007 EBITDA was determined by the Parties). The payment of
the Supplementary Purchase Price, if any, derived from the final statement by
the
third
auditing firm shall be made within five (5) business days as from the issuance
of such final statement. To the extent that Qualytextil’s EBITDA in 2010 is
greater than R$6,356,000, the Supplementary Purchase Price will be payable in
February 2011 based on a multiple of six (6) times such capped amount of
R$6,356,000 and the remaining amount of the Supplementary Purchase Price shall
be paid in February 2012, provided however that this remainder will be due only
if the actual Qualytextil’s EBITDA in 2011 corresponds to at least 90% of
Qualytextil’s EBITDA in 2010.
Pursuant
to the terms of the Stock Purchase Agreement, Sellers have been granted a right
of first refusal. If the Purchaser, at any time before the payment of
the Supplementary Purchase Price, receives an offer to sell its shares in
Qualytextil, it shall (i) give the Sellers the right to acquire those shares on
the same terms and conditions set forth in such offer (“Right of First
Refusal”), exercisable by written notice given by the Sellers to the Purchaser
within thirty (30) days after the receipt of a notice from the Purchaser
informing the terms and conditions of the offer. The Purchaser shall not be
bound to transfer shares to the Sellers as a result of the exercise of the Right
of First Refusal by the Sellers if those shares do not represent all of the
shares contemplated in the offer made by the third party. If the
Sellers elect not to exercise its Right of First Refusal or if they fail to
timely exercise the Right of First Refusal, then the Purchaser may sell the
shares to the third party offering to purchase the shares.
The
foregoing description of the Stock Purchase Agreement does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Stock Purchase Agreement, which is filed as Exhibit 10.1 to this Current
Report on From 8-K and is incorporated herein by reference in its
entirety. The Stock Purchase Agreement has been included to provide
investors with information regarding its terms. It is not intended to
provide any factual information about Lakeland, Qualytextil or any other
party. The representations, warranties and covenants contained in the
Stock Purchase Agreement are made only for purposes of that agreement and as of
the specific dates set forth therein, are solely for the benefit of the parties
thereto, and may be subject to limitations agreed upon by the contracting
parties. The representations and warranties may have been made for
the purposes of allocating contractual risk between the parties instead of
establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those
applicable to investors. Investors are not third-party beneficiaries
of the Stock Purchase Agreement, and should not rely on the representations,
warranties and covenants or any descriptions thereof as characterizations of the
actual state of facts or conditions of Lakeland, Qualytextil or any other
party. Moreover, information concerning the subject matter of the
representations and warranties may change after the date of this agreement,
which subsequent information may or may not be fully reflected in any of
Lakeland’s public disclosures.
In
connection with the execution of the Stock Purchase Agreement, all of the
Sellers have executed employment agreements with Qualytextil with terms expiring
December 31, 2011. Each of these employment agreements contain a
non-compete provision extending seven (7) years from termination of
employment. Copies of these employment agreements have been
filed
as
Exhibits 10.5 to 10.8 to this Current Report on From 8-K and are incorporated
herein by reference in their entirety.
Amendment
to Revolving Line of Credit
The
acquisition of Qualytextil is being financed through Lakeland’s existing
revolving credit facility with Wachovia Bank, N.A (“Wachovia”). On
May 13, 2008, Wachovia agreed to amend several negative covenants contained in
Lakeland’s $25,000,000 Revolving Line of Credit dated July 7, 2005, as
previously amended on September 1,
2005,
December 7,
2007 and
February 15,
2008,
to allow Lakeland to enter into the Stock Purchase Agreement and
thereafter consummate the Qualytextil acquisition. In addition, the
amount of funds available to Lakeland under the Revolving Line of Credit have
been increased from $25,000,000 to $30,000,000. The foregoing brief
summary of the amendment to Lakeland’s revolving credit facility with Wachovia
does not purport to be complete and is qualified by reference to the complete
text of such amendment which is filed as Exhibit 10.10 to this Current Report on
Form 8-K and is incorporated herein by reference in its entirety.
Item 2.01
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Completion of
Acquisition or Disposition of
Assets.
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On May
13, 2008, Lakeland completed the acquisition of Qualytextil and the other
transactions contemplated by the Stock Purchase Agreement. In
connection with the closing of such acquisition, a total of R$6.3 million
(USD$3.9 million) was used to repay outstanding debts of Qualytextil, R$7.8
million (USD$4.8 million) was retained in the various escrow funds as described,
and the balance of R$7.7 million (USD$4.7 million) was paid to the Sellers at
closing. In accordance with the Stock Purchase Agreement, the funds
from the Purchase Price, after the repayment of the outstanding debts of
Qualytextil have been funded, will then have several “retained amounts” held in
escrow for varying periods. For purposes of the Stock Purchase
Agreement, “retained amounts” mean the aggregate of: (i) up to R$649,000 to
satisfy indemnification obligations under the Stock Purchase Agreement regarding
certain contingencies of Qualytextil, which funds will remain in escrow for five
(5) years or upon expiration of the statute of limitations applicable to such
contingencies (whichever occurs first) and will only be released by mutual
agreement between the parties to the Stock Purchase Agreement (the “Parties”);
(ii) the amounts of R$355,369 corresponding to 10% of the receivables and
R$268,874, corresponding to 10% of the stocks of Qualytextil both on December
31, 2007, to satisfy indemnification regarding contingencies of Qualytextil,
which funds will remain in escrow for a period of (a) six (6) months with
respect to the receivables, and (b) one (1) year with respect to the stocks, and
will only be released by mutual agreement between the Parties; (iii) 10% of the
Purchase Price to satisfy indemnifications for unknown contingencies,
representations and warranties, including but not limited to any tax issues,
which funds will remain in escrow for the period of two (2) years from the
Closing Date, and will only be released by mutual agreement between the Parties;
and (iv) 20% of the Purchase Price, which funds shall remain in escrow until the
2008 EBITDA is determined, in order to satisfy the payment of eventual 2008
Adjusted Purchase Price.
Item
7.01
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Regulation FD
Disclosure.
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On May
14, 2008, Lakeland issued a press release announcing the completion of the
acquisition of Qualytextil. A copy of the press release is attached
as Exhibit 99.1 to this Current Report on Form 8-K. The information
in this Current Report on Form 8-K under this Item 7.01 (including Exhibit 99.1)
is being furnished pursuant to Item 7.01 and shall not be deemed to be “filed”
for purposes of Section 11 and 12(a)(2) of the Securities Act of 1933, as
amended (the “Securities Act”), or Section 18 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities
of that section. Furthermore, the information contained in Exhibit
99.1 shall not be deemed to be incorporated by reference into Lakeland’s filings
under the Securities Act or the Exchange Act.
Item
9.01
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Financial
Statements and Exhibits.
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(a)
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Financial
Statements of Business Acquired.
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The
financial statements required by this Item, with respect to the acquisition
described in this Current Report on Form 8-K, will be filed as soon as
practicable, and in any event not later than 71 days after the date on which
this Current Report on Form 8-K is required to be filed pursuant to Item
2.01.
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(b)
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Pro
Forma Financial Information.
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The pro
forma financial information required by this Item, with respect to the
acquisition described in this Current Report on Form 8-K, will be filed as soon
as practicable, and in any event not later than 71 days after the date on which
this Current Report on Form 8-K is required to be filed pursuant to Item
2.01.
10.1
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Stock
Purchase Agreement dated May 2, 2008 among Lakeland do Brasil
Empreendimentos e Participacoes Ltda. and Lakeland Industries, Inc.
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10.2
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Escrow
Agreement, dated May 9, 2008, between Elder Marcos Vieira da Conceicao, as
holder of the escrow account and Lakeland do Brasil Empreendimentos e
Participacoes Ltda, as the escrow account beneficiary, and Banco UBS
Pactual S.A., as escrow agent.
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10.3
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Escrow
Agreement, dated May 9, 2008, between Marcia Cristina Vieira da Conceicao
Antunes, as holder of the escrow account and Lakeland do Brasil
Empreendimentos e Participacoes Ltda, as the escrow account beneficiary,
and Banco UBS Pactual S.A., as escrow
agent.
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10.4
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Escrow
Agreement, dated May 9, 2008, between Miguel Antonio Dos Guimaraes Bastos,
as holder of the escrow account and Lakeland do Brasil Empreendimentos e
Participacoes Ltda, as the escrow account beneficiary, and Banco UBS
Pactual S.A., as escrow agent.
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10.5
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Management
Agreement between Elder Marcos Vieira da Conceicao and Qualytextil, S.A.
‡
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10.6
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Management
Agreement between Marcia Cristina Vieira da Conceicao Antunes and
Qualytextil, S.A. ‡
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10.7
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Management
Agreement between Elton de Carvalho Antunes and Qualytextil, S.A.
‡
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10.8
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Management
Agreement between Miguel Antonio dos Guimaraes Bastos and Qualytextil,
S.A. ‡
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10.9
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Second
Amended and Restated Note between Lakeland Industries, Inc. and Wachovia,
N.A.
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10.10
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Third
Modification to Note and Loan Agreement and Reaffirmation of
Guaranty.
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10.11
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Unconditional
Guaranty between Lakeland do Brasil Empreendimentos e Participacoes Ltda.,
Lakeland Industries, Inc., and Wachovia Bank, N.A.
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10.12
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Unconditional
Guaranty between Qualytextil, S.A., Lakeland Industries, Inc., and
Wachovia Bank, N.A.
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10.13
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Quota
Pledge Agreement among Lakeland Industries, Inc., Christopher J. Ryan,
Wachovia Bank, N.A., Qualytextil S.A. and Lakeland do Brasil
Empreendimentos e Participacoes Ltda.
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10.14
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Share
Pledge Agreement among Lakeland do Brasil Empreendimentos e Participacoes
Ltda., Lakeland Industries, Inc., Wachovia Bank, N.A. and Qualytextil
S.A.
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10.15
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Equipment
Pledge and Security Agreement among Wachovia Bank, N.A., Qualytextil S.A.,
Lakeland do Brasil Empreendimentos e Participacoes Ltda., and Lakeland
Industries, Inc.
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10.16
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Power
of Attorney, Qualytextil, S.A. appointing Wachovia Bank, N.A. to the
powers granted by the Bank in the Equipment Pledge and Security
Agreement.
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10.17
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Power
of Attorney, Qualytextil, S.A. appointing Wachovia Bank, N.A. to the
powers granted by the Bank in the Inventory Pledge and Security
Agreement.
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10.18
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Inventory
Pledge and Security Agreement among Wachovia Bank, N.A., Qualytextil S.A.,
Lakeland do Brasil Empreendimentos e Participacoes Ltda., and Lakeland
Industries, Inc.
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10.19
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Accounts
Receivable and Bank Account Pledge Agreement By and Between Qualytextil,
S.A., as Pledgor and Wachovia Bank National Association, as
Pledgee.
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10.20
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Accounts
Receivable Pledge Agreement By and Between Qualytextil, S.A., as Pledgor
and Wachovia Bank National Association, as Pledgee.
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10.21
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Debt
Subordination Agreement for Lakeland do Brasil Empreendimentos e
Participacoes Ltda.
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10.22
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Debt
Subordination Agreement for Qualytextil, S.A.
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99.1
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Press
Release issued by Lakeland Industries, Inc. on May 14, 2008, titled
“Lakeland Industries Completes Acquisition of Brazilian Protective Apparel
Supplier Qualytextil, S.A.”
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†
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All
schedules and similar attachments to the Stock Purchase Agreement have
been omitted. Copies of such schedules and similar attachments
will be furnished supplementally to the SEC upon
request.
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‡
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Management
compensatory plan or
arrangement.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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LAKELAND INDUSTRIES,
INC.
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Date May
14, 2008
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/s/ Christopher J.
Ryan
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Christopher
J. Ryan
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President
& CEO
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EXHIBIT
INDEX
Exhibit Number
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Description of
Exhibit
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10.1
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Stock
Purchase Agreement dated May 2, 2008 among Lakeland do Brasil
Empreendimentos e Participacoes Ltda. and Lakeland Industries, Inc.
†
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10.2
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Escrow
Agreement, dated May 9, 2008, between Elder Marcos Vieira da Conceicao, as
holder of the escrow account and Lakeland do Brasil Empreendimentos e
Participacoes Ltda, as the escrow account beneficiary, and Banco UBS
Pactual S.A., as escrow agent.
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10.3
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Escrow
Agreement, dated May 9, 2008, between Marcia Cristina Vieira da Conceicao
Antunes, as holder of the escrow account and Lakeland do Brasil
Empreendimentos e Participacoes Ltda, as the escrow account beneficiary,
and Banco UBS Pactual S.A., as escrow agent.
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10.4
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Escrow
Agreement, dated May 9, 2008, between Miguel Antonio Dos Guimaraes Bastos,
as holder of the escrow account and Lakeland do Brasil Empreendimentos e
Participacoes Ltda, as the escrow account beneficiary, and Banco UBS
Pactual S.A., as escrow agent.
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10.5
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Management
Agreement between Elder Marcos Vieira da Conceicao and Qualytextil,
S.A.‡
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10.6
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Management
Agreement between Marcia Cristina Vieira da Conceicao Antunes and
Qualytextil, S.A. ‡
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10.7
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Management
Agreement between Elton de Carvalho Antunes and Qualytextil, S.A.
‡
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10.8
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Management
Agreement between Miguel Antonio dos Guimaraes Bastos and Qualytextil,
S.A. ‡
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10.9
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Second
Amended and Restated Note between Lakeland Industries, Inc. and Wachovia,
N.A.
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10.10
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Third
Modification to Note and Loan Agreement and Reaffirmation of
Guaranty.
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10.11
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Unconditional
Guaranty between Lakeland do Brasil Empreendimentos e Participacoes Ltda.,
Lakeland Industries, Inc., and Wachovia Bank, N.A.
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10.12
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Unconditional
Guaranty between Qualytextil, S.A., Lakeland Industries, Inc., and
Wachovia Bank, N.A.
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10.13
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Quota
Pledge Agreement among Lakeland Industries, Inc., Christopher J. Ryan,
Wachovia Bank, N.A., Qualytextil S.A. and Lakeland do Brasil
Empreendimentos e Participacoes Ltda.
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10.14
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Share
Pledge Agreement among Lakeland do Brasil Empreendimentos e Participacoes
Ltda., Lakeland Industries, Inc., Wachovia Bank, N.A. and Qualytextil
S.A.
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10.15
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Equipment
Pledge and Security Agreement among Wachovia Bank, N.A., Qualytextil S.A.,
Lakeland do Brasil Empreendimentos e Participacoes Ltda., and Lakeland
Industries, Inc.
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10.16
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Power
of Attorney, Qualytextil, S.A. appointing Wachovia Bank, N.A. to the
powers granted by the Bank in the Equipment Pledge and Security
Agreement.
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10.17
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Power
of Attorney, Qualytextil, S.A. appointing Wachovia Bank, N.A. to the
powers granted by the Bank in the Inventory Pledge and Security
Agreement.
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10.18
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Inventory
Pledge and Security Agreement among Wachovia Bank, N.A., Qualytextil S.A.,
Lakeland do Brasil Empreendimentos e Participacoes Ltda., and Lakeland
Industries, Inc.
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10.19
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Accounts
Receivable and Bank Account Pledge Agreement By and Between Qualytextil,
S.A., as Pledgor and Wachovia Bank National Association, as
Pledgee.
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10.20
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Accounts
Receivable Pledge Agreement By and Between Qualytextil, S.A., as Pledgor
and Wachovia Bank National Association, as Pledgee.
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10.21
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Debt
Subordination Agreement for Lakeland do Brasil Empreendimentos e
Participacoes Ltda.
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10.22
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Debt
Subordination Agreement for Qualytextil, S.A.
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99.1
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Press
Release issued by Lakeland Industries, Inc. on May 14, 2008, titled
“Lakeland Industries Completes Acquisition of Brazilian Protective Apparel
Supplier Qualytextil, S.A.”
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†
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All
schedules and similar attachments to the Stock Purchase Agreement have
been omitted. Copies of such schedules and similar attachments
will be furnished supplementally to the SEC upon
request.
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‡
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Management
compensatory plan or
arrangement.
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