0000798081-95-000012.txt : 19950920 0000798081-95-000012.hdr.sgml : 19950920 ACCESSION NUMBER: 0000798081-95-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950912 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAKELAND INDUSTRIES INC CENTRAL INDEX KEY: 0000798081 STANDARD INDUSTRIAL CLASSIFICATION: 3842 IRS NUMBER: 133115216 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15535 FILM NUMBER: 95572977 BUSINESS ADDRESS: STREET 1: 711-2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 BUSINESS PHONE: 5169819700 MAIL ADDRESS: STREET 2: 711- 2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 10-Q 1 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. 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. 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. 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. 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. 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. _________________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) EX-27 2
5 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]. 1 6-MOS JAN-31-1995 FEB-01-1995 JUL-31-1995 169,003 0 4,612,541 0 10,094,642 15,648,752 950,775 0 17,484,345 8,394,507 0 25,500 0 0 5,981,226 8,503,423 21,417,848 21,417,848 18,058,011 18,058,011 2,613,946 0 239,866 542,327 214,000 328,327 0 0 0 328,327 .12 .12
EX-10 3 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: SCHEDULES Schedule 1(A) - Permitted Liens Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights Schedule 12(l) - Inventory Locations Schedule 12(m) - Permitted Indebtedness