LAKELAND INDUSTRIES INC (Form: 8-K, Received: 02/25/2013 06:01:58)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 20, 2013

Lakeland Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	0-15535	13-3115216
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

701 Koehler Avenue, Suite 7, Ronkonkoma, New York 11779-7410

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (631) 981-9700

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement

On February 20, 2013 Lakeland Industries, Inc. (the “Company”) and its UK subsidiary along with HSBC Invoice Finance (UK), Ltd. (“HIF”) completed an agreement to obtain accounts receivable financing in the amount £1,000,000 (approximately USD $1,500,000 at current exchange rates). Below is a summary of the terms of the loan facility:

· Prepayment percentage (Loan Advance Rate)	80% of eligible debts
· Prepayment currency(s)	£GBP and €Euros
· Facility Limit (see note below)	£1,000,000
· *Concentration percentage	30%
· Automatic Funding Limit per customer	£50,000

* At any time, the maximum value of outstanding Debts of a single Customer that HIF will consider to be Eligible Debts calculated by applying the Concentration Percentage to the aggregate value of all outstanding Eligible Debts.

Credit protection (customers located within the United Kingdom, Ireland, Isle of Man and the Channel Islands)

· 100% protection within the credit protection limits set for each of your customers.
· First loss	£1,000
· Automatic Credit Protection Limit	£3,000

Credit protection (customers located outside the United Kingdom, Ireland, Isle of Man and the Channel Islands)

· 90% protection within the credit protection limits we set for each of your customers.
· First loss	£1,000

If the Company’s customer has not already paid, HIF would pay the rest of the credit protected balance of an eligible, undisputed debt upon the earlier of:

a) the date on which the customer’s insolvency is confirmed to HIF, or

b) 120 days after the invoice’s due date (does not include debts outstanding at commencement)

HIF Fees and Charges

· Discounting margin (annual interest rate)	3.46% over HSBC Bank plc base rate
· Discounting margin for €Euros	3.46% over the currency base rate quoted to us by
	HSBC plc
· Service charge (on gross sales)	0.935% for customers in the United Kingdom,
	Ireland, Isle of Man and the Channel Islands
	including debts in existence when you start with us
· Service charge (on gross sales)	0.935% for customers in Group 1 (per attached Exhibit) including debts in
	existence when you start with us
· Minimum annual service charge	£42,500 calculated quarterly
· Arrangement fee	£5,500

On January 31, 2013, the agreement relating to the loan was executed by HIF, but was subject to completion of a number of contingencies which were resolved and drawdown became available on February 20, 2013 and therefore February 20, 2013 is the date this transaction was properly completed for reporting purposes..

Reference is made to the Agreement for the Purchase of Debts, Fixed Charge on non-vesting debts and floating charge and Standard Terms & Conditions, attached hereto as Exhibits 10.1, 10.2, and 10.3, respectively, for a complete description of the loan transaction, which Exhibits are incorporated herein by reference.

Item 9.01

Financial Statements and Exhibits.

Exhibits. The following exhibit is being furnished herewith:

10.1.

Agreement for the Purchase of Debts, dated January 29, 2013

	10.2	Fixed Charge on non-vesting debts and floating Charge, dated January 29, 2013
	10.3	Standard Terms & Conditions

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	LAKELAND INDUSTRIES, INC.

Date: February 22, 2013

	/ s/ Gary Pokrassa
	Gary Pokrassa
	CFO

EXHIBIT INDEX

	Exhibit Number	Description

	10.1	Agreement for the Purchase of Debts, dated January 29, 2013
	10.2	Fixed Charge on non-vesting debts and floating Charge, dated January 29, 2013
	10.3	Standard Terms & Conditions

Exhibit 10.1

AGREEMENT FOR THE PURCHASE OF DEBTS

Date: January 29, 2013

HSBC Invoice Finance (UK) Limited ( HIF ) will provide Lakeland Industries Europe Limited 04500660 (the Client ) with the product selected below on the terms of this Agreement (as defined below) and the Standard Terms & Conditions.

This Agreement for the Purchase of Debts, its Schedule and the Standard Terms & Conditions comprise the entire agreement between the parties (as amended from time to time) (the "Agreement").

An additional copy of the Standard Terms & Conditions can be obtained from the Client's relationship manager. The Standard Terms & Conditions may be changed by a notice sent to the Client.

HIF recommends that the Client seeks independent legal advice before entering into this Agreement.

PRODUCT SELECTED

The Client accepts the provision of the product(s) selected in the Schedule by HIF from the Commencement Date for the purposes of providing the Client with working capital, upon the terms set out in this Agreement.

ASSIGNMENT

2.1

On the Commencement Date, the Client (as beneficial owner in relation to Northern Irish Debts) assigns to HIF (i) all Existing Debts and Future Debts and (ii) all Non-Notifiable Debts.

2.2

Each Debt created after the Commencement Date shall automatically belong to HIF the moment it is created.

2.3

HIF is not obliged to reassign a Debt to the Client.

2.4

HIF will confirm the Commencement Date to the Client when all the relevant conditions have been satisfied and HIF will complete the Commencement Date in the Schedule.

POWER OF ATTORNEY

3.1

The Client, by way of security, irrevocably appoints HIF, and any person to whom HIF transfers rights and/or obligations under this Agreement (with full power of substitution and delegation), to act on the Client's behalf to (a) sign any deeds and documents, (b) complete or endorse any instruments, (c) conduct or defend any proceedings and (d) take such other steps that HIF may consider necessary or appropriate to:

(i)

obtain payment of, or perfect HIF's ownership of, any Debt;

(ii)

secure performance of any of the Client's obligations to HIF or to any Customer.

HIF APD 04/2012

Page 1

3.2 Where the Client is acting as trustee under any Scottish Trust then the words "on its own account and as trustee under any Scottish Trust" are inserted after the word "security" in clause 3.1.

IN WITNESS of which this Agreement has been executed and, on the date set out above, delivered as a deed.

Executed as a deed, but not delivered until the	)
first date specified on page 1, by:	)
	)
	)
	)
as Attorney of	)
HSBC INVOICE FINANCE (UK) LIMITED	)
in the presence of a witness:	)	Signature	/s/ Philip Jeffrey Albbores
			Attorney

Witness signature	……………………….......

Witness name	……………………….......

Witness address	HSBC Invoice Finance (UK) Limited,
	Farncombe Road,
	Worthing,
	West Sussex BN11 2BW

Address for service:	HSBC Invoice Finance (UK) Limited,
	Farncombe Road,
	Worthing,
	West Sussex BN11 2BW

HIF APD 04/2012

Page 2

Executed as a deed, but not delivered until the	)
first date specified on page 1, by	)
Lakeland Industries Europe Limited	)
by two directors or by	)
one director and the secretary	)

:	Signature	/s/ Christopher J. Ryan

	Name (block capitals)	Christopher J. Ryan

		Director

	Signature	/s/ Martin Lill

	Name (block capitals)	Martin Lill

		Director/Secretary

COPY RESOLUTION

(to be certified by the signature of the Chairman of the meeting of the directors at which the resolution was passed)

Company No. 04500660

Lakeland Industries Europe Limited ("Company")

The Chairman reported that notice of the meeting had been given to all those persons entitled to receive notice and, a quorum being present, the Chairman declared the meeting open.

There was produced to the meeting a form of agreement for the purchase of debts together with its schedule and accompanying Standard Terms and Conditions to be entered into between HSBC Invoice Finance (UK) Limited and the Company (the "Agreement for the Purchase of Debts" ).

After giving consideration to the requirements set out in sections 171 to 177 of the Companies Act 2006, it was unanimously agreed that the entry into and execution of the Agreement for the Purchase of Debts was in the commercial interest of and for the benefit of the Company and was most likely to promote the success of the Company for the benefit of its members as a whole.

After careful consideration by the directors of the terms of the Agreement for the Purchase of Debts and of the nature and scale of the liabilities undertaken by the Company under the Agreement for the Purchase of Debts, it was unanimously resolved that:

(a)

it was, in the good faith judgment of all the directors present, for the commercial benefit of the Company and was most likely to promote the success of the Company for the benefit of its members as a whole to enter into the Agreement for the Purchase of Debts;

(b)

the terms of and the transactions contemplated by the Agreement for the Purchase of Debts be approved;

HIF APD 04/2012

Page 3

(c)

the Agreement for the Purchase of Debts should be executed on behalf of the Company as a deed;

(d)

where the Company is a sole director company with no company secretary, that director (in the presence of an attesting witness) or in any other circumstances any two authorised signatories (as defined in section 44(3) of the Companies Act 2006), be authorised to execute and deliver the Agreement for the Purchase of Debts;

(e)

any one or more authorised signatory (as defined in section 44(3) of the Companies Act 2006) be authorised to approve and execute any further documents, certificates and notices to be signed and/or despatched by the Company under or in connection with the Agreement for the Purchase of Debts; and

(f)

a copy of this resolution be endorsed on the Agreement for the Purchase of Debts.

Certified a true copy of this Resolution:

/s/ Christopher J. Ryan

Signature of Chairman of board meeting

HIF APD 04/2012

Page 4

THE SCHEDULE

1.	Client particulars

	Nature of business	Wholesale of safety clothing

	Principal place of business	Jet Park 2, 244 Main Road, Newport, East Yorkshire, HU15 2RP

2.	Product(s) selected

	Finance	Yes

	Credit Management	Yes

	Credit Protection	Yes

3.	Commercial terms

	Approved Countries	(a) United Kingdom, Ireland, the Isle of Man and the Channel Islands

		(b) Abu Dhabi (UAE), Ajman (UAE), American Samoa, Andorra, Anguilla, Australia, Austria, Bahamas, Belgium, Bermuda, Brazil, British Indian Ocean Territory, Brunei, Canada, Cayman Islands, Chile, China, Cyprus, Czech Republic, Denmark, Dubai (UAE), Estonia, Falkland Isles, Faroe Islands, Finland, France, French Guiana, French Polynesia, French Southern Territories, Fujairah (UAE), Germany, Gibraltar, Greece, Greenland, Guadeloupe, Guam, Hong Kong, Israel, Italy, Japan, Kuwait, Liechtenstein, Luxembourg, Macau, Malaysia, Malta, Martinique, Mauritius, Mayotte, Mexico, Monaco, Montserrat, Netherlands, New Caledonia, New Zealand, Norway, Northern Mariana Is., Oman, Peru, Poland, Portugal (Madeira), Portugal, Puerto Rico, Qatar, Ras Al-Khaimah (UAE), Reunion, Saint Helena, Sharjah (UAE), Saudi Arabia, St Pierre & Miquelon, San Marino, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain (Canary Islands), Spain, Sweden, Switzerland, Taiwan, Trinidad & Tobago, Turks & Caicos Islands, Umm Al-Qaiwain (UAE), United Arab Emirates, United States of America, US Minor Outlying Islands, Vatican City State, Virgin Islands (US & British) and Wallis & Futuna Islands.

	Automatic Funding Limit	United Kingdom, Ireland, the Isle of Man and the Channel Islands: £ 50,000

		Other countries: £ 50,000

	Client to give notice of assignment to Customers	Yes

	Commencement Date	30 January 2013

HIF APD 04/2012

Page 5

	Concentration Percentage	30 per cent

	Debtor Currencies	Sterling and Euro

	Debt Turn Target	United Kingdom, Ireland, the Isle of Man and the Channel Islands: 90 days

		Other countries: 90 days

	Facility Limit	£ 1,000,000

	Law	English law governs this Agreement

	Minimum Period	12 Months

	Non-Notifiable Debt	The following are additional categories of Non-Notifiable Debt:

		Debts arising from contracts of sale entered into with your customer Elite Supplies Limited (registration number 06309981) and PPG Clothing Limited (SC386962)

	Notice Period	3 Months

	Prepayment Currencies	Sterling and Euro

	Prepayment Percentage	80 per cent

	Reduction Percentage	N/A

	Standard Payment Terms	United Kingdom, Ireland, the Isle of Man and the Channel Islands: Not exceeding net 60 days from date of invoice

		Other countries: Not exceeding net 90 days from date of invoice

4.	Pricing

	Allowance Margin	2.50 per cent

	Arrangement Fee	£ 5,500

	Discounting Margin	3.46 per cent

	Facility Review Fee	Nil

	Other fees	Fees will be payable for:

		(a) any variation to the terms of this Agreement;

		(b) the release of any Security Interest;

		(c) new Security Interests to be granted to HIF or any third party.

HIF APD 04/2012

Page 6

	Service Charge	For Approved Countries listed in paragraphs (a) and (b) 0.935 per cent of the Notified value of each Debt, subject to a minimum of £ 42,500 per annum calculated in respect of each period of one year starting on the first day of the month following the Commencement Date and each anniversary thereafter

5.	Credit Protection

	Automatic Credit Protection Limit	United Kingdom, Ireland, the Isle of Man and the Channel Islands: £ 3,000

		Other countries: N/A

	Credit Protection Percentage	United Kingdom, Ireland, the Isle of Man and the Channel Islands: 100 per cent

		Other countries: 90 per cent

	First Loss	United Kingdom, Ireland, the Isle of Man and the Channel Islands: £ 1,000

		Other countries: £ 1,000

	Unprotected Debts at the Commencement Date	At the Commencement Date any Debt which is unpaid 60 days or more after the due date for payment and any other Debts of the same Customer

6.	Covenants

	Debt Turn Covenant	N/A

	Dilution Percentage	N/A

	Dispute Percentage	N/A

	Tangible Net Worth	N/A

	Covenant

	The covenants listed above shall be tested at the following times:

		Testing Day

	Debt Turn	Final day of each calendar month

	Dilution Percentage	Final day of each calendar month

	Dispute Percentage	Final day of each calendar month

HIF APD 04/2012

Page 7

Special terms

(a)

In addition to the undertakings given by the Client in Condition 17, the Client also undertakes:

(i)

To ensure that:

(A)

where necessary, the Client and/or the Customer possess all licences required to export/import the relevant goods; and

(B)

the Client and the Customer comply with all laws and/or regulations applicable to the import or export of the relevant goods including, but not limited to, any exchange control regulations; and

(ii)

To provide HIF, each year, with a declaration (“Annual Declaration”) of the Client’s total sales to Customers located in each Approved Country in a form specified by HIF, for the period of 12 months (or part thereof) ending 31 March (or for such other period as HIF may specify from time to time). Such declaration to be supplied to HIF within 30 days of the end of the relevant period.

(b)

Where a Credit Protection Limit is expressed in a currency other than that in which the Debt payable by the relevant Customer is expressed and/or the currency in which the purchase price is payable, then for the purposes of calculating any amount payable by HIF to the Client under the provisions of Condition 11.6, the Spot Rate of Exchange on the date of payment shall be used. Any gains or losses, resulting from fluctuation in exchange rates will be for the account of the Client.

(c)

HIF will not provide Credit Protection in respect of any particular Debt if:

(i)

the Debt arose after any expiry date notified by HIF to the Client in respect of the relevant Credit Protection Limit; or

(ii)

there has been any breach by the Client of any term specified by HIF as being a condition of its approval of the relevant Credit Protection Limit

The provisions of this special term are in addition to, and not in replacement of, the provisions of Condition 11.4.

(d)

For the purposes of Condition 11.4 (f) events of “force majeure” shall include

(i)

the ionising, radioactive, toxic, explosive or other hazardous or contaminating properties or effects of any explosive nuclear assembly or component thereto, nuclear fuel, combustion or waste; and

(ii)

where goods are to be despatched to, or payment is to be made from, a country other than that in which the Customer is located, any event preventing or delaying the issue of a remittance from such third country.

HIF APD 04/2012

Page 8

Exhibit 10.2

(1) LAKELAND INDUSTRIES EUROPE LIMITED

as the Client

- and -

(2) HSBC INVOICE FINANCE (UK) LTD

as HIF

FIXED CHARGE ON NON-VESTING DEBTS AND FLOATING CHARGE

(for use with Agreement for the Purchase of Debts)

THIS DEED is made on 29 ^th January 2013

BETWEEN

(1)

HSBC INVOICE FINANCE (UK) LIMITED registered in England and Wales with the number 00759657 ( "HIF" ); and

(2)

THE COMPANY LISTED IN THE SCHEDULE ATTACHED TO AND FORMING PART OF THIS DEED (the "Client" ).

IT IS AGREED:

Definitions and interpretation

1.1

Definitions

In this Deed:

(a)

terms defined in, or construed for the purposes of, the Debt Purchase Agreement (as defined below) have the same meanings when used in this Deed (unless the same are otherwise defined in this Deed); and

(b)

the following terms have the following meanings:

"Act" means the Law of Property Act 1925;

"Debt Purchase Agreement" means the agreement for the purchase of debts dated on or before the date of this Deed and made between (1) the Client and (2) HIF pursuant to which HIF has agreed to make certain receivables purchase facilities available to the Client;

"Default Rate" means, at any time, a rate of interest equivalent to the then prevailing rate used to calculate the Discounting Charge;

"Excluded Proceeds" means all and any monies paid to a Trust Account which are not the proceeds of Debts;

"Non-Vesting Debts" means those Debts which fail to vest effectively and absolutely in HIF pursuant to the Debt Purchase Agreement;

"Party" means a party to this Deed;

"Purchased Debt" a Debt purchased or purported to be purchased by HIF pursuant to the Debt Purchase Agreement;

"Real Property" means all estates and interests in freehold, leasehold and other immovable property (wherever situated) now or in future belonging to the Client, or in which the Client has an interest at any time, together with:

(a)

all buildings and fixtures (including trade fixtures) and fixed plant and machinery at any time thereon;

(b)

all easements, rights and agreements in respect thereof; and

(c)

the benefit of all covenants given in respect thereof;

"Receiver" means any receiver, receiver and manager or administrative receiver appointed by HIF under this Deed;

"Secured Obligations" means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or alone or in any other capacity whatsoever) of the Client to HIF (including those arising under or pursuant to the Debt Purchase Agreement and including all monies covenanted to be paid under this Deed), provided that no obligation or liability shall be included in the definition of "Secured Obligations" to the extent that, if it were so included, this Deed (or any part of it) would constitute unlawful financial assistance within the meaning of sections 677 to 680 of the Companies Act 2006;

"Security" means the Security Interests created by or pursuant to this Deed;

"Security Assets" means all property and assets from time to time mortgaged, charged or assigned (or expressed to be mortgaged, charged or assigned) by or pursuant to this Deed;

"Security Interest" means any mortgage, charge, trust, option, security assignment, assignation in security, pledge, hypothecation, lien, retention of title, set-off right, tracing right or any other security interest in favour of any person or any equitable right, agreement or arrangement having the effect of conferring security;

"Security Period" means the period beginning on the date of this Deed and ending on the date on which:

(a)

all the Secured Obligations have been unconditionally and irrevocably paid and discharged in full; and

(b)

the Debt Purchase Agreement has been terminated by HIF, according to its terms;

"Spot Rate of Exchange" means HSBC Bank PLC's spot rate of exchange for the purchase of a currency with the relevant currency in the London foreign exchange market at or about 11.00am on a particular day;

"Tax" any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same);

"Trust Account" means a bank account in the Client's name, held in trust for HIF, in respect of which HIF's officers are irrevocably appointed as the only signatories authorised to operate the account and to which the proceeds of Debts are paid, in accordance with the terms of the Debt Purchase Agreement;

"VAT" Value Added Tax.

1.2

Interpretation

(a)

Unless a contrary indication appears, any reference in this Deed to:

(i)

the "Client" or "HIF" shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(ii)

"this Deed" , the "Debt Purchase Agreement" , or any other agreement or instrument shall be construed as a reference to this Deed, the Debt Purchase Agreement or such other agreement or instrument as amended, supplemented, extended, restated, novated and/or replaced in any manner from time to time (however fundamentally and even if any of the same increases the obligations of the Client or provides for further advances);

(iii)

"assets" includes any present and future properties, revenues and rights of every description and includes uncalled capital;

(iv)

"including" or "includes" means including or includes without limitation;

(v)

"Secured Obligations" includes obligations and liabilities which would be treated as such but for the liquidation or dissolution of or similar event affecting the Client;

(vi)

a provision of law is a reference to that provision as amended or re-enacted; and

(vii)

the singular includes the plural and vice versa.

(b)

References to clauses, paragraphs and the schedule are to be construed, unless otherwise stated, as references to clauses, paragraphs and the schedule of this Deed and references to this Deed include the schedule.

(c)

Clause and schedule headings are for convenience only and shall not affect the construction of this Deed.

(d)

Each undertaking of the Client (other than a payment obligation) contained in this Deed must be complied with at all times during the Security Period.

(e)

If HIF reasonably considers that an amount paid by the Client to HIF under the Debt Purchase Agreement is capable of being avoided or otherwise set aside on the liquidation or administration of the Client, then that amount shall not be considered to have been irrevocably paid for the purposes of this Deed.

(f)

The Parties intend that this document shall take effect as a deed notwithstanding the fact that a Party may only execute this document under hand.

1.3

Third party rights

A person who is not a Party shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Deed.

Covenant to pay

2.1

Covenant to pay

The Client covenants in favour of HIF that it will pay and discharge the Secured Obligations from time to time when they fall due.

2.2

Default interest

(a)

Any amount which is not paid under this Deed when due shall bear interest (both before and after judgment and payable on demand) from the due date until the date on which such amount is unconditionally and irrevocably paid and discharged in full on a daily basis at the rate and in the manner agreed in the document under which such amount is payable and, in the absence of such agreement, at the Default Rate from time to time.

(b)

Default interest will accrue from day to day and will be compounded at such intervals as HIF states are appropriate.

Grant of security

3.1

Nature of security

All Security Interests and dispositions created or made by or pursuant to this Deed are created or made:

(a)

in favour of HIF;

(b)

with full title guarantee in accordance with the Law of Property (Miscellaneous Provisions) Act 1994; and

(c)

as continuing security for payment of the Secured Obligations.

3.2

Qualifying floating charge

Paragraph 14 of Schedule B1 to the Insolvency Act 1986 applies to any floating charge created by or pursuant to this Deed (and each such floating charge is a qualifying floating charge for the purposes of the Insolvency Act 1986).

Fixed security

4.1

Fixed charges

The Client charges and agrees to charge all of its present and future right, title and interest in and to the following assets which are at any time owned by the Client, or in which it from time to time has an interest:

(a)

by way of fixed equitable charge, all Purchased Debts excluding Non-Notifiable Non-Vesting Debts;

(b)

by way of fixed equitable charge, all Associated Rights relating those Purchased Debts charged to HIF in clause 4.1(a) above;

(c)

by way of fixed equitable charge, all Purchased Debts comprising Non-Notifiable Non-Vesting Debts;

(d)

by way of fixed equitable charge, all Associated Rights relating to those Purchased Debts charged to HIF in clause 4.1(c) above; and

(e)

to the extent that the Excluded Proceeds are not effectively assigned under clause 4.2 (Security assignment) , by way of first fixed charge the Excluded Proceeds.

4.2

Security assignment

The Client assigns and agrees to assign absolutely (subject to a proviso for reassignment on redemption) all its present and future right, title and interest in and to the Excluded Proceeds.

Floating charge

The Client charges and agrees to charge by way of first floating charge all of its present and future:

(a)

assets and undertaking (wherever located) not otherwise effectively charged by way of first fixed mortgage or charge or assigned pursuant to clause 4.1 (Fixed charges), clause 4.2 (Security assignment) or any other provision of this Deed; and

(b)

(whether or not effectively so charged or assigned) heritable property and all other property and assets in Scotland.

Conversion of floating charge

6.1

Conversion by notice

HIF may, by written notice to the Client, convert the floating charge created under this Deed into a fixed charge as regards all or any of the assets of the Client specified in the notice if:

(a)

a Termination Event has occurred; or

(b)

HIF (acting reasonably) considers any Security Assets (whether or not those specified in the notice) to be in danger of being seized or sold under any form of distress, attachment, execution or other legal process or to be otherwise in jeopardy.

6.2

Small companies

The floating charge created under this Deed by the Client shall not convert into a fixed charge solely by reason of a moratorium being obtained under the Insolvency Act 2000 (or anything done with a view to obtaining such a moratorium) in respect of the Client.

6.3

Automatic conversion

The floating charge created under this Deed shall (in addition to the circumstances in which the same will occur under general law) automatically convert into a fixed charge:

(a)

in relation to any Security Asset which is subject to a floating charge if:

(i)

the Client creates (or attempts or purports to create) any Security Interest (other than a Security Interest which is permitted by the Debt Purchase Agreement) on or over the relevant Security Asset without the prior written consent of HIF; or

(ii)

any third party levies or attempts to levy any distress, execution, attachment or other legal process against any such Security Asset; and

(b)

over all Security Assets which are subject to a floating charge if an administrator is appointed in respect of the Client or HIF receives notice of intention to appoint such an administrator.

6.4

Partial conversion

The giving of a notice by HIF pursuant to clause 6.1 (Conversion by notice) in relation to any class of assets of the Client shall not be construed as a waiver or abandonment of the rights of HIF to serve similar notices in respect of any other class of assets or of any other right of HIF.

Continuing security

7.1

Continuing security

The Security is continuing and will extend to the ultimate balance of the Secured Obligations regardless of any intermediate payment or discharge in whole or in part. This Deed shall remain in full force and effect as a continuing security for the duration of the Security Period.

7.2

Additional and separate security

This Deed is in addition to, without prejudice to, and shall not merge with, any other right, remedy, guarantee or Security Interest which HIF may at any time hold for any Secured Obligation.

7.3

Right to enforce

This Deed may be enforced against the Client without HIF first having recourse to any other right, remedy, guarantee or Security Interest held by or available to it.

Liability of the Client relating to Security Assets

Notwithstanding anything contained in this Deed or implied to the contrary, the Client remains liable to observe and perform all conditions and obligations assumed by it in relation to the Security Assets. HIF is under no obligation to perform or fulfil any such condition or obligation or to make any payment in respect of any such condition or obligation.

Accounts

No monies at any time standing to the credit of any account (of any type and however designated) of the Client with HIF or in which the Client has an interest (and no rights and benefits relating thereto) shall be capable of being assigned to any third party.

10.

Representations

10.1

General

The Client makes the representations and warranties set out in this clause 10 to HIF.

10.2

No Security Interests

The Security Assets are, or when acquired will be, beneficially owned by the Client free from any Security Interest other than:

(a)

as created by this Deed; and

(b)

as permitted under the Debt Purchase Agreement.

10.3

No avoidance

This Deed creates the Security Interests which it purports to create and is not liable to be avoided or otherwise set aside on the liquidation or administration of the Client or otherwise.

10.4

No proceedings pending or threatened

No litigation, arbitration or administrative proceeding has currently been started or threatened in relation to any Security Asset.

10.5

Time when representations made

(a)

All the representations and warranties in this clause 10 are made by the Client on the date of this Deed and are also deemed to be made by the Client on each date that Debts are Notified under the Debt Purchase Agreement.

(b)

Each representation or warranty deemed to be made after the date of this Deed shall be deemed to be made by reference to the facts and circumstances existing at the date the representation or warranty is deemed to be made.

11.

Undertakings by the Client

11.1

Restrictions on dealing

The Client shall not do or agree to do any of the following without the prior written consent of HIF:

(a)

create or permit to subsist any Security Interest on any Security Asset except a Security Interest which is permitted under the Debt Purchase Agreement;

(b)

sell, transfer, lease, lend or otherwise dispose of (whether by a single transaction or a number of transactions and whether related or not) the whole or any part of its interest in any Security Asset except a disposal which is permitted under the Debt Purchase Agreement and the sale at full market value of stock-in-trade in the usual course of trading as conducted by the Client at the date of this Deed.

11.2

Security Assets generally

The Client shall:

(a)

permit HIF (or its designated representatives), on reasonable written notice:

(i)

access during normal office hours to the accounting records of the Client and to any documents and records relating to the Security Assets; and

(ii)

to inspect, take extracts from, and make photocopies of, the same,

and to provide (at the expense of the Client), such clerical and other assistance which HIF may reasonably require to do this;

(b)

notify HIF within 14 days of receipt of every material notice, order, application, requirement or proposal given or made in relation to the Security Assets by any competent authority;

(c)

if required by HIF, immediately provide it with a copy of any notice, order, application, requirement or proposal referred to in clause 11.2(b) and either (A) comply with such notice, order, application, requirement or proposal or (B) make such objections to the same as HIF may require or approve;

(d)

duly and punctually pay all rates, rents, Taxes and other outgoings owed by it in respect of the Security Assets;

(e)

comply in all material respects with all obligations in relation to the Security Assets under any present or future law, regulation, order or instrument or under any bye-laws, regulations or requirements of any competent authority or other approvals, licences or consents;

(f)

comply with all covenants and obligations affecting the Security Assets (or their manner of use);

(g)

not, except with the prior written consent of HIF (such consent not to be unreasonably withheld or delayed), enter into any onerous or restrictive obligation affecting any Security Asset;

(h)

provide HIF with all information which it may reasonably request in relation to the Security Assets;

(i)

not do, cause or permit to be done anything which may in any way depreciate, jeopardise or otherwise prejudice the value or marketability of any Security Asset (or make any omission which has such an effect).

11.3

Dealings with and realisation of Non-Vesting Debts and Excluded Proceeds

(a)

The Client shall only deal with Non-Vesting Debts and the proceeds thereof and the Associated Rights thereto as if they were assigned to HIF in accordance with the Debt Purchase Agreement.

(b)

The Client agrees that the Excluded Proceeds shall be dealt with as if they were the proceeds of Debts assigned or purportedly assigned to HIF in accordance with the Debt Purchase Agreement.

12.

Power to remedy

12.1

Power to remedy

If at any time the Client does not comply with any of its obligations under this Deed, HIF (without prejudice to any other rights arising as a consequence of such non-compliance) shall be entitled (but not bound) to rectify that default. The Client irrevocably authorises HIF and its employees and agents by way of security to do all things (including entering the property of the Client) which are necessary or desirable to rectify that default.

12.2

Mortgagee in possession

The exercise of the powers of HIF under this clause 12 shall not render it liable as a mortgagee in possession.

12.3

Monies expended

The Client shall pay to HIF on demand any monies which are expended by HIF in exercising its powers under this clause 12, together with interest at the Default Rate from the date on which those monies were expended by HIF (both before and after judgment) and otherwise in accordance with clause 2.2 (Default interest).

13.

When security becomes enforceable

13.1

When enforceable

This Security shall become immediately enforceable upon the occurrence of a Termination Event.

13.2

Statutory powers

The power of sale and other powers conferred by section 101 of the Act (as amended or extended by this Deed) shall be immediately exercisable upon and at any time after the occurrence of any Termination Event.

13.3

Enforcement

After this Security has become enforceable, HIF may in its absolute discretion enforce all or any part of the Security in such manner as it sees fit.

14.

Enforcement of security

14.1

General

For the purposes of all powers implied by statute, the Secured Obligations are deemed to have become due and payable on the date of this Deed. Sections 93 and 103 of the Act shall not apply to the Security. The statutory powers of leasing conferred on HIF are extended so as to authorise HIF to lease, make agreements for leases, accept surrenders of leases and grant options as HIF may think fit and without the need to comply with section 99 or 100 of the Act.

14.2

Powers of HIF

(a)

At any time after the Security becomes enforceable (or if so requested by the Client by written notice at any time), HIF may without further notice (unless required by law):

(i)

appoint any person (or persons) to be a receiver, receiver and manager or administrative receiver of all or any part of the Security Assets and/or of the income of the Security Assets; and/or

(ii)

appoint or apply for the appointment of any person who is appropriately qualified as administrator of the Client; and/or

(iii)

exercise all or any of the powers conferred on mortgagees by the Act (as amended or extended by this Deed) and/or all or any of the powers which are conferred by this Deed on a Receiver, in each case without first appointing a Receiver or notwithstanding the appointment of any Receiver.

(b)

HIF is not entitled to appoint a Receiver in respect of any Security Assets which are subject to a charge which (as created) was a floating charge solely by reason of a moratorium being obtained under the Insolvency Act 2000 (or anything done with a view to obtaining such a moratorium) in respect of the Client.

14.3

Redemption of prior mortgages

At any time after the Security has become enforceable, HIF may:

(a)

redeem any prior Security Interest against any Security Asset; and/or

(b)

procure the transfer of that Security Interest to itself; and/or

(c)

settle and pass the accounts of the holder of any prior Security Interest and any accounts so settled and passed shall be conclusive and binding on the Client.

All principal, interest, costs, charges and expenses of and incidental to any such redemption and/or transfer shall be paid by the Client to HIF on demand.

14.4

Privileges

(a)

Each Receiver and HIF is entitled to all the rights, powers, privileges and immunities conferred by the Act on mortgagees and receivers when such receivers have been duly appointed under the Act, except that section 103 of the Act does not apply.

(b)

To the extent that the Security Assets constitute " financial collateral " and this Deed and the obligations of the Client under this Deed constitute a " security financial collateral arrangement " (in each case for the purpose of and as defined in the Financial Collateral Arrangements (No. 2) Regulations 2003 (SI 2003 No. 3226)) each Receiver and HIF shall have the right after this Security has become enforceable to appropriate all or any part of that financial collateral in or towards the satisfaction of the Secured Obligations.

(c)

For the purpose of clause 14.4(b) above, the value of the financial collateral appropriated shall be such amount as the Receiver or HIF reasonably determines having taken into account advice obtained by it from an independent investment or accountancy firm of national standing selected by it.

14.5

No liability

(a)

Neither HIF nor any Receiver shall be liable (A) in respect of all or any part of the Security Assets or (B) for any loss or damage which arises out of the exercise or the attempted or purported exercise of, or the failure to exercise any of, its or his respective powers (unless such loss or damage is caused by its or his gross negligence or wilful misconduct).

(b)

Without prejudice to the generality of clause 14.5(a), neither HIF nor any Receiver shall be liable, by reason of entering into possession of a Security Asset, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable.

14.6

Protection of third parties

No person (including a purchaser) dealing with HIF or any Receiver or its or his agents will be concerned to enquire:

(a)

whether the Secured Obligations have become payable; or

(b)

whether any power which HIF or the Receiver is purporting to exercise has become exercisable; or

(c)

whether any money remains due under any document entered into between the Parties; or

(d)

how any money paid to HIF or to the Receiver is to be applied.

15.

Receiver

15.1

Removal and replacement

HIF may from time to time remove any Receiver appointed by it (subject, in the case of an administrative receivership, to section 45 of the Insolvency Act 1986) and, whenever it may deem appropriate, may appoint a new Receiver in the place of any Receiver whose appointment has terminated.

15.2

Multiple Receivers

If at any time there is more than one Receiver of all or any part of the Security Assets and/or the income of the Security Assets, each Receiver shall have the power to act individually (unless otherwise stated in the appointment document).

15.3

Remuneration

Any Receiver shall be entitled to remuneration for his services at a rate to be fixed by agreement between him and HIF (or, failing such agreement, to be fixed by HIF).

15.4

Payment by Receiver

Only monies actually paid by a Receiver to HIF in relation to the Secured Obligations shall be capable of being applied by HIF in discharge of the Secured Obligations.

15.5

Agent of Client

Any Receiver shall be the agent of the Client. The Client shall (subject to the Companies Act 1985 and the Insolvency Act 1986) be solely responsible for his acts and defaults and for the payment of his remuneration. HIF shall incur no liability (either to the Client or to any other person) by reason of the appointment of a Receiver or for any other reason.

16.

Powers of Receiver

16.1

General powers

Any Receiver shall have:

(a)

all the powers which are conferred by the Act on mortgagees in possession and receivers appointed under the Act;

(b)

(whether or not he is an administrative receiver) all the powers which are listed in schedule 1 of the Insolvency Act 1986; and

(c)

all powers which are conferred by any other law conferring power on receivers.

16.2

Additional powers

In addition to the powers referred to in clause 16.1 (General powers) , a Receiver shall have the following powers:

(a)

to take possession of, collect and get in all or any part of the Security Assets and/or income in respect of which he was appointed;

(b)

to manage the Security Assets and the business of the Client as he thinks fit;

(c)

to redeem any security and to borrow or raise any money and secure the payment of any money in priority to the Secured Obligations for the purpose of the exercise of his powers and/or defraying any costs or liabilities incurred by him in such exercise;

(d)

to sell or concur in selling, leasing or otherwise disposing of all or any part of the Security Assets in respect of which he was appointed without the need to observe the restrictions imposed by section 103 of the Act. Fixtures may be severed and sold separately from the Real Property containing them, without the consent of the Client. The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration (and the amount of such consideration may be dependent upon profit or turnover or be determined by a third party). Any such consideration may be payable in a lump sum or by instalments spread over such period as he thinks fit;

(e)

to alter, improve, develop, complete, construct, modify, refurbish or repair any building or land and to complete or undertake or concur in the completion or undertaking (with or without modification) of any project in which the Client was concerned or interested before his appointment (being a project for the alteration, improvement, development, completion, construction, modification, refurbishment or repair of any building or land);

(f)

to carry out any sale, lease or other disposal of all or any part of the Security Assets by conveying, transferring, assigning or leasing the same in the name of the Client and, for that purpose, to enter into covenants and other contractual obligations in the name of, and so as to bind, the Client;

(g)

to take any such proceedings (in the name of the Client or otherwise) as he shall think fit in respect of the Security Assets and/or income in respect of which he was appointed (including proceedings for recovery of rent or other monies in arrears at the date of his appointment);

(h)

to enter into or make any such agreement, arrangement or compromise as he shall think fit;

(i)

to insure, and to renew any insurances in respect of, the Security Assets as he shall think fit (or as HIF shall direct);

(j)

to appoint and employ such managers, officers and workmen and engage such professional advisers as he shall think fit (including, without prejudice to the generality of the foregoing power, to employ his partners and firm);

(k)

to form one or more Subsidiaries of the Client, and to transfer to any such subsidiary all or any part of the Security Assets;

(l)

to operate any rent review clause in respect of any Real Property in respect of which he was appointed (or any part thereof) and to apply for any new or extended lease; and

(m)

to:

(i)

give valid receipts for all monies and to do all such other things as may seem to him to be incidental or conducive to any other power vested in him or necessary or desirable for the realisation of any Security Asset;

(ii)

exercise in relation to each Security Asset all such powers and rights as he would be capable of exercising if he were the absolute beneficial owner of the Security Assets; and

(iii)

use the name of the Client for any of the above purposes.

17.

Application of proceeds

17.1

Application

All monies received by HIF or any Receiver after the Security has become enforceable shall (subject to the rights and claims of any person having a security ranking in priority to the Security) be applied in the following order:

(a)

first , in satisfaction of, or provision for, all costs, charges and expenses incurred, and payments made by HIF or any Receiver and of all remuneration due to the Receiver in connection with this Deed or the Security Assets;

(b)

secondly , in or towards satisfaction of the remaining Secured Obligations; and

(c)

thirdly , in payment of any surplus to the Client or other person entitled to it.

17.2

Contingencies

If the Security is enforced at a time when no amounts are due under the any document entered into between the Parties (including the Debt Purchase Agreement) (but at a time when amounts may become so due), HIF or a Receiver may pay the proceeds of any recoveries effected by it into a blocked suspense account.

18.

Set-off

(a)

HIF may (but shall not be obliged to) set off any obligation (present, future, actual, contingent, liquidated, unliquidated or unascertained) which is due and payable by the Client to HIF (including under the Debt Purchase Agreement) and unpaid against any obligation (whether or not matured) owed by HIF to the Client, regardless of the place of payment, booking branch or currency of either obligation.

(b)

If the obligations are in different currencies, HIF may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set off.

(c)

If either obligation is unliquidated or unascertained, HIF may set off in an amount estimated by it in good faith to be the amount of that obligation.

19.

Delegation

HIF and any Receiver may delegate, by power of attorney (or in any other manner) to any person, any right, power or discretion exercisable by it under this Deed upon any terms (including power to sub-delegate) which it may think fit. Neither HIF nor any Receiver shall be in any way liable or responsible to the Client for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate.

20.

Further assurances

20.1

Further action

The Client shall, at its own expense, promptly take whatever action HIF or a Receiver may require for:

(a)

creating, perfecting or protecting the Security Interests intended to be created by this Deed; and

(b)

facilitating the realisation of any Security Asset or the exercise of any right, power or discretion exercisable by HIF or any Receiver or any of its or his delegates or sub-delegates in respect of any Security Asset,

including the execution of any transfer, conveyance, assignment or assurance of any property whether to HIF or to its nominees, the giving of any notice, order or direction and the making of any registration, which, in any such case, HIF may think expedient.

20.2

Specific security

Without prejudice to the generality of clause 20.1 (Further action) , the Client shall forthwith at the request of HIF execute a legal mortgage, charge, assignment, assignation or other security over any Security Asset which is subject to or intended to be subject to any fixed security created by this Deed in favour of HIF (including any arising or intended to arise pursuant to clause 6 (Conversion of floating charge) in such form as HIF may require.

21.

Power of attorney

The Client, by way of security, irrevocably and severally appoints HIF, each Receiver and any of its or his delegates or sub-delegates to be its attorney to take any action which the Client is obliged to take under this Deed, including under clause 20 (Further assurances) . The Client ratifies and confirms whatever any attorney does or purports to do pursuant to its appointment under this clause.

22.

Payments

22.1

Payments

Subject to clause 22.2 (Gross-up) , all payments to be made by the Client in respect of this Deed shall be made:

(a)

in immediately available funds to the credit of such account as HIF may designate; and

(b)

without (and free and clear of, and without any deduction for, or on account of):

(i)

any set-off or counterclaim; or

(ii)

except to the extent compelled by law, any deduction or withholding for or on account of Tax.

22.2

Gross-up

If the Client is compelled by law to make any deduction or withholding from any sum payable under this Deed to HIF, the sum so payable by the Client shall be increased so as to result in the receipt by HIF of a net amount equal to the full amount expressed to be payable under this Deed.

23.

Stamp duty

The Client shall:

(a)

pay all present and future stamp, registration and similar Taxes or charges which may be payable, or determined to be payable, in connection with the execution, delivery, performance or enforcement of this Deed, or any judgment given in connection therewith; and

(b)

indemnify HIF and any Receiver on demand against any and all costs, losses or liabilities (including, without limitation, penalties) with respect to, or resulting from, its delay or omission to pay any such stamp, registration and similar Taxes or charges.

24.

Costs and expenses

24.1

Transaction and amendment expenses

The Client shall promptly on demand pay to HIF the amount of all costs, charges and expenses (including, without limitation, legal fees, valuation, accountancy and consultancy fees (and any VAT or similar Tax thereon)) incurred by HIF in connection with:

(a)

the negotiation, preparation, printing, execution, registration, perfection and completion of this Deed, the Security or any document referred to in this Deed; or

(b)

any actual or proposed amendment or extension of, or any waiver or consent under, this Deed.

24.2

Enforcement and preservation costs

The Client shall promptly on demand pay to HIF and any Receiver the amount of all costs, charges and expenses (including, (without limitation) legal fees (and any VAT or similar Tax thereon)) incurred by it in connection with the enforcement, exercise or preservation (or the attempted enforcement, exercise or preservation) of any of its rights under this Deed or the Security or any document referred to in this Deed (including all remuneration of the Receiver).

24.3

Default interest

Any amount demanded under clause 24.1 (Transaction and amendment expenses) or 24.2 (Enforcement and preservation costs) shall bear interest at the Default Rate (both before and after judgment) from the day on which those costs, charges or expenses were paid, incurred or charged by the relevant person and otherwise in accordance with clause 2.2 (Default interest) .

25.

Currencies

25.1

Conversion

All monies received or held by HIF or any Receiver under this Deed may be converted from their existing currency into such other currency as HIF or the Receiver considers necessary or desirable to cover the obligations and liabilities comprised in the Secured Obligations in that other currency at the Spot Rate of Exchange. The Client shall indemnify HIF against all costs, charges and expenses incurred in relation to such conversion. Neither HIF nor any Receiver shall have any liability to the Client in respect of any loss resulting from any fluctuation in exchange rates after any such conversion.

25.2

Currency indemnity

No payment to HIF (whether under any judgment or court order or in the liquidation, administration or dissolution of the Client or otherwise) shall discharge the obligation or liability of the Client in respect of which it was made, unless and until HIF shall have received payment in full in the currency in which the obligation or liability was incurred and, to the extent that the amount of any such payment shall on actual conversion into such currency fall short of such obligation or liability expressed in that currency, HIF shall have a further separate cause of action against the Client and shall be entitled to enforce the Security to recover the amount of the shortfall.

26.

INDEMNITY

The Client shall indemnify HIF, any Receiver and any attorney, agent or other person appointed by HIF under this Deed and HIF's officers and employees (each an "Indemnified Party" ) on demand against any cost, loss, liability or expense (however arising) incurred by any Indemnified Party as a result of or in connection with:

(a)

anything done or omitted in the exercise or purported exercise of the powers contained in this Deed;

(b)

the Security Assets or the use or occupation of them by any person (including any environmental claim); or

(c)

any breach by the Client of any of its obligations under this Deed.

27.

Miscellaneous

27.1

Appropriation and suspense account

(a)

HIF may apply all payments received in respect of the Secured Obligations in reduction of any part of the Secured Obligations as it thinks fit. Any such appropriation shall override any appropriation by the Client.

(b)

All monies received, recovered or realised by HIF under, or in connection with, this Deed may at the discretion of HIF be credited to a separate interest bearing suspense account for so long as HIF determines (with interest accruing thereon at such rate, if any, as HIF may determine for the account of the Client) without HIF having any obligation to apply such monies and interest or any part thereof in or towards the discharge of any of the Secured Obligations.

27.2

New accounts

If HIF receives, or is deemed to be affected by, notice, whether actual or constructive, of any subsequent Security Interest affecting any Security Asset and/or the proceeds of sale of any Security Asset, it may open a new account or accounts for the Client. If it does not open a new account, it shall nevertheless be treated as if it had done so at the time when it received or was deemed to have received such notice. As from that time all payments made to HIF will be credited or be treated as having been credited to the new account and will not operate to reduce any amount of the Secured Obligations.

27.3

Changes to the Parties

(a)

The Client may not assign any of its rights under this Deed.

(b)

HIF may assign or transfer or grant participations in all or any part of its rights under this Deed in accordance with the Debt Purchase Agreement. The Client shall, immediately upon being requested to do so by HIF, enter into such documents as may be necessary or desirable to effect such assignment or transfer.

27.4

Memorandum and articles

The Client certifies that the Security does not contravene any of the provisions of the memorandum or articles of association of the Client.

27.5

Tacking

(a)

HIF shall perform its obligations under the Debt Purchase Agreement (including any obligation to make available further advances).

(b)

This Deed secures advances already made and further advances to be made.

27.6

Amendments and waivers

Any provision of this Deed may be amended only if HIF and the Client so agree in writing and any breach of this Deed may be waived before or after it occurs only if HIF so agrees in writing. A waiver given or consent granted by HIF under this Deed will be effective only if given in writing and then only in the instance and for the purpose for which it is given.

27.7

Calculations and certificates

A certificate of HIF specifying the amount of any Secured Obligation due from the Client (including details of any relevant calculation thereof) shall be prima facie evidence of such amount against the Client in the absence of manifest error.

27.8

Waiver, rights and remedies

No failure to exercise, nor any delay in exercising, on the part of HIF, any right or remedy under this Deed shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise, or the exercise of any other right or remedy. The rights and remedies provided are cumulative and not exclusive of any rights or remedies provided by law.

28.

Notices

28.1

Serving notice on the Client

(a)

Any notice in writing by HIF to the Client under this Deed or any legal proceedings issued in HIF's name which have to be served on the Client shall be given or served if delivered or posted to the Client at:

(i)

the Client's registered office; or

(ii)

any address at which the Client carries on, or was last known to carry on, business.

Such notice may also be given by facsimile transmission to the Client's number or address notified to HIF for communication by such means. It may also be handed personally to any officer of the Client.

(b)

Any such notice or proceedings shall be considered served:

(i)

if delivered, at the time of delivery; or

(ii)

if sent by post, on the second day following the date of posting; or

(iii)

if sent by facsimile transmission, at the time of transmission.

28.2

Serving notice on HIF

Any notice in writing by the Client to HIF under this Deed shall take effect at the time it is received by HIF at HIF's registered office or at such other address as HIF may give to the Client in writing for this purpose, and then only if marked for the attention of the department or officer identified with HIF's name below (or any substitute department or officer as HIF shall specify for this purpose).

29.

Electronic communications

Save any notice given by HIF by facsimile transmission, no communication to be made under this Deed shall be made electronically.

30.

Partial invalidity

All the provisions of this Deed are severable and distinct from one another and if at any time any provision is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of any of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

31.

Release

31.1

Upon the expiry of the Security Period (but not otherwise) HIF shall, at the request and cost of the Client, take whatever action is necessary to release or re-assign (without recourse or warranty) the Security Assets from the Security.

31.2

Where any discharge (whether in respect of the obligations of the Client or any security for those obligations or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise (without limitation), the liability of the Client under this Deed shall continue as if the discharge or arrangement had not occurred. HIF may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.

32.

Counterparts

This Deed may be executed in any number of counterparts, and this has the same effect as if the signatures (and seals, if any) on the counterparts were on a single copy of this Deed.

33.

Governing law

This Deed is governed by English law.

IN WITNESS of which this Deed has been duly executed by the Client as a deed and duly executed by HIF and has been delivered on the first date specified on page 1 of this Deed.

SCHEDULE

THE CLIENT

LAKELAND INDUSTRIES EUROPE LIMITED

a company registered in England and Wales with the number

04500660

Executed as a deed, but not delivered until the	)
first date specified on page 2, by	)
LAKELAND INDUSTRIES EUROPE	)
LIMITED	)
by two directors or by	)
one director and the secretary	)
:		Signature	/s/ Christopher J. Ryan

		Name (block capitals)	Christopher J. Ryan
			Director

		Signature	/s/ Martin Lill

		Name (block capitals)	Martin Lill
			Director/Secretary

Pursuant to a Resolution of the Board of Directors of LAKELAND INDUSTRIES EUROPE LIMITED

COPY RESOLUTION

(To be certified by the signature of the Chairman of the meeting of the Directors at which the Resolution was passed).

There was produced to the Board a form of Fixed Charge on Non-Vesting Debts and Floating Charge between the Client and HSBC Invoice Finance (UK) Ltd. The terms were approved. It was agreed that entering into the Fixed Charge on Non-Vesting Debts and Floating Charge by the Client would be of benefit to and in the best interests of the Client.

After giving consideration to the requirements of sections 171 to 177 of the Companies Act 2006 it was resolved that the Client do enter into the said Fixed Charge on Non-Vesting Debts and Floating Charge and that it be signed as a deed on behalf of the Client (i) if the Client is a sole director company with no company secretary, by that director whose signature shall be witnessed or (ii) in any other circumstances by a Director and the Client Secretary or by two Directors and that a copy of this resolution be endorsed on the Fixed Charge on Non-Vesting Debts and Floating Charge.

Certified a true copy of this Resolution:

/s/ Christopher J. Ryan
Signature of Chairman of Meeting

Signed as a Deed	)
by	)
	)
	)
	)
	)
	)
as Attorney of	)
HSBC INVOICE FINANCE (UK) LIMITED	)
in the presence of:	)	/s/ Philip Jeffrey Alboses
		Attorney

Witness signature:	…………………………………………

Name:	………………………………………….

Occupation:	Invoice Finance Official

Witness Address:	Farncombe Road
	Worthing, West Sussex
	BN11 2BW

Exhibit 10.5

STANDARD TERMS & CONDITIONS

These standard terms & conditions apply to agreements for the purchase of debts provided by HSBC Invoice Finance (UK) Limited ( "HIF" ). They form part of the agreement between the Client and HIF, which refers to them.

TERM OF THE AGREEMENT

The Agreement begins on the Commencement Date and continues for the Minimum Period and afterwards until ended by either party giving written notice at any time following expiry of the Minimum Period, of not less than the Notice Period.

NOTIFICATION

The Client will Notify all Existing Debts on the Commencement Date and will then Notify Debts at least every 7 days or as otherwise agreed with HIF.

PURCHASE PRICE

3.1

If the Agreement states that the Client has Finance and it has not been withdrawn, HIF will, subject to Availability and on request from the Client, pay Prepayments for Eligible Debts and the balance of the purchase price of each Debt (after deduction of any Prepayment) by allowing the Client to make a withdrawal from a Current Account.

3.2

If the Client does not have Credit Protection, the purchase price of each Debt is the amount received by HIF in discharge of the Debt less accrued Discounting Charge applicable to the Debt and Conversion Costs.

3.3

If the Client has Credit Protection, the purchase price of each Debt is the amount received by HIF in discharge of the Debt and/or any amount credited to the Client under Condition 11.6, less accrued Discounting Charge applicable to the Debt and Conversion Costs.

FUNDING LIMITS

4.1

HIF may establish Funding Limits at HIF's discretion. HIF may immediately increase, reduce or cancel any Funding Limit by notice to the Client. The Automatic Funding Limits do not apply to any Customer which HIF deems ineligible for a Funding Limit.

4.2

HIF will provide an Automatic Funding Limit for an existing or a new Customer in the amount specified in the Agreement, provided that neither the Client nor HIF is aware of any adverse information in respect of that Customer, reasonable enquiries having been made by the Client.

4.3

If a Funding Limit is lower than the Automatic Funding Limit, the Funding Limit will apply.

4.4

Debts first due for payment will be the first Debts to be included within a Funding Limit.

4.5

HIF may determine the value of the Retention from time to time.

COVENANTS

5.1

The Client covenants that:

(a)

on the Testing Day, Debt Turn will not exceed the Debt Turn Covenant;

(b)

on the Testing Day, the aggregate value of Dilutions expressed as a percentage of Debts Notified during that the immediately preceding period of 60 days will not exceed the Dilution Percentage;

HIF ST&C 09/2012

Page 1

(c)

on the Testing Day, the aggregate value of Disputed Debts expressed as a percentage of outstanding Debts will not exceed the Dispute Percentage; and

(d)

Tangible Net Worth will not be less than the Tangible Net Worth Covenant.

5.2

In addition to any other remedies HIF may have under the Agreement, HIF may reduce the Prepayment Percentage on the Testing Day by the Reduction Percentage for each day that Debt Turn exceeds the Debt Turn Covenant and for each per cent (or part thereof) the aggregate of Dilutions exceeds the Dilution Percentage.

NON-NOTIFIABLE DEBTS

Notwithstanding any other term of the Agreement:

6.1

HIF is not obliged to make any Prepayment in respect of any Non-Notifiable Debt;

6.2

the provisions of Condition 13 ( Trust ) do not apply to Non-Notifiable Debts;

6.3

HIF will only manage sales ledgers in relation to Non-Notifiable Debts if HIF wishes to do so;

6.4

the Client may retain (as a payment against the purchase price of the Debt) any Remittance relating to a Non-Notifiable Debt unless HIF had told the Client to Notify the Debt prior to receipt of the Remittance;

6.5

the Client will not Notify HIF of any Non-Notifiable Debt until HIF tells the Client to do so, at which time the Client will hold the Non-Notifiable Debts and their proceeds on trust for HIF and, upon HIF's request, collect such Non-Notifiable Debts as HIF may specify as agent for HIF; and

6.6

if HIF makes a Prepayment in relation to a Non-Notifiable Debt the Non-Notifiable Debt shall automatically be a Debt for the purposes of the Agreement and HIF may designate it as an Ineligible Debt.

ACCOUNTS

7.1

HIF will operate a Current Account and a Discounting Account and any other accounts HIF deems appropriate.

7.2

HIF will credit a Current Account with the purchase price of Debts, which for administrative convenience will be their Notified value, and any necessary adjustments will be made by HIF later on.

7.3

HIF will credit the Discounting Allowance to a Current Account and Discounting Account and debit the Discounting Charge to a Current Account and Discounting Account. No Discounting Allowance will be credited if the Base Rate means that the Discounting Allowance would be zero or less. For administrative convenience, the Discounting Allowance and the Discounting Charge will be applied to the relevant account on the last working day of the calendar month in which they accrued.

7.4

Any payment made by HIF to the Client will be debited to a Current Account and Discounting Account:

(a)

if the payment is made into an account held with the Bank and is not for same-day value, two working days after the date on which HIF instructs its bankers to effect the transfer; or

(b)

in respect of all other payments, on the date that HIF instructs its bankers to effect the transfer.

7.5

Remittances received by HIF will be credited to a Discounting Account at the following times:

(a)

cheques capable of routine collection through the Automated Clearing System, subject to being honoured on first presentation, two working days following the date on which the Remittance is received by HIF or, if post-dated, the date of its presentation for payment;

HIF ST&C 09/2012

Page 2

(b)

cheques which are not capable of routine collection through the Automated Clearing System, within 1 working day of the date on which HIF receives notice that the Remittance has been cleared for value;

(c)

payments by electronic transfer, the date on which HIF is given value by the Bank; and

(d)

any other form of payment, or if HIF is prevented from carrying out HIF's normal procedures for handling Remittances for any reason, the date on which HIF receives notice that the relevant Remittance has been cleared for value.

7.6

If any cheque sent to a clearing system is returned after HIF has given value for the Remittance, the value of the Remittance will be debited to a Discounting Account.

7.7

Each calendar month, HIF will provide the Client with statements of each Current Account and Discounting Account. Certificates signed by an official of HIF as to Liabilities are conclusive, except in the case of obvious error or on any question of law.

7.8

HIF may (a) allocate Remittances and credit notes as HIF deems appropriate (which will for the avoidance of doubt be against Credit Protected Debts before Unprotected Debts) and (b) pay Customers credit balances on their accounts and (c) convert any sum to a Prepayment Currency at the Spot Rate of Exchange.

CURRENCIES

8.1

If the Client has Credit Management:

(a)

Debts must be Notified in the currency for payment specified on the Invoice;

(b)

payments of the purchase price of Debts will be made in the currency for payment specified on the Invoice where such currency is also a Prepayment Currency. In all other cases those payments will be made in sterling;

(c)

where Prepayments are to be made in sterling and not the currency for payment specified on the Invoice, Debts will be converted at the Spot Rate of Exchange on the date of Notification.

8.2

If the Client does not have Credit Management:

(a)

Debts must be Notified in the currency for payment specified on the Invoice unless such currency is not a Prepayment Currency, in which case the Notification must be made in sterling following conversion at the Client's Exchange Rate;

(b)

payments of the purchase price of Debts will be made in the Prepayment Currency in which Debts are Notified.

8.3

Where relevant, to calculate:

(a)

a purchase price of a Debt, a Remittance or Credit Protection Payment conversion will be at the Spot Rate of Exchange when it is credited to a Discounting Account; and

(b)

a Repurchase Price, Debts will be converted at the Spot Rate of Exchange when HIF exercises Recourse.

8.4

All gains and losses resulting from fluctuations in exchange rates will be for the Client's account.

HIF ST&C 09/2012

Page 3

IIF

9.1

The Client agrees to the IIF Applicable Rules and Terms published by HIF from time to time.

9.2

If the Client does not have Credit Management by the 15th day of each calendar month (or such other day as HIF may determine) the Client will provide the following in a form approved by HIF, together with any other information that HIF may require:

(a)

an aged analysis of all unpaid Notified Debts by reference to each Customer; and

(b)

the Client's sales ledger control account,

in each case made up to the last day of the preceding calendar month.

10.

FEES AND CHARGES

10.1

The Client will pay the fees and charges detailed in the Agreement.

10.2

The Arrangement Fee is payable on or around the Commencement Date and is charged to the Client to set up the arrangements described in the Agreement.

10.3

The Facility Review Fee is payable on each anniversary of the Commencement Date and is charged to the Client for HIF undertaking an annual review of the facilities which HIF provides to the Client.

10.4

The Client will pay the Service Charge in the applicable Prepayment Currency. The Service Charge is payable for HIF providing IIF, administering the Client's Current Account and Discounting Account, calculating Availability, establishing Funding Limits and Credit Protection Limits, managing the Clients facilities, providing Credit Management (where that Product has been selected) and providing reports and conducting routine audits. If the Service Charge is calculated as a percentage of the value of Notified Debts, HIF may increase the amount of Service Charge payable at any time to ensure that the minimum annual Service Charge payment is made.

10.5

Unless expressly provided to the contrary in the Agreement, the Client will pay all bank commissions incurred by HIF for which HIF considers it to be liable in maintaining any Collection Account, collecting Remittances and any taxes incurred, and the costs of any action taken under or in relation to the Agreement.

10.6

If HIF agrees to a request from the Client to terminate the Agreement within the Minimum Period or Notice Period (without any obligation upon HIF to do so), HIF will be entitled to the charges and/or fees that would have been payable to HIF had the Minimum Period or Notice Period been served, and those charges and/or fees include:

(a)

any Service Charge which, if expressed as a percentage of Notified Debts, shall be calculated by reference to the average monthly turnover of Notified Debts for the 12 full calendar months before termination or, otherwise, for each full calendar month that the Agreement has been in operation; and

(b)

Discounting Margin calculated at a daily rate based on the average balance on each Discounting Account over the 12 full calendar months before termination or, otherwise, the average balance on the Discounting Account for each full calendar month that the Agreement has been in operation.

10.7

If the Client fails to make payment of any credit insurance premium by its due date for payment or fails to produce any premium receipt to HIF on demand, HIF may at the Client's expense make any such payment to the relevant insurer, or effect or renew such credit insurance policy as HIF may consider necessary, and any sums paid by HIF in this regard will be debited to a Current Account and Discounting Account until repaid promptly by the Client upon HIF's request, together with the Discounting Charge accrued at two percentage points above the then applicable Discounting Margin.

HIF ST&C 09/2012

Page 4

10.8

If in the opinion of HIF there has been a material deterioration in the Client's financial condition or operating performance, HIF may charge the Client a monthly monitoring fee for additional work undertaken by HIF monitoring and reviewing the Client and its ledgers.

10.9

Unless HIF advises otherwise, VAT will be payable by the Client on all fees and charges payable to HIF under or in connection with the Agreement other than the Discounting Charge.

11.

CREDIT PROTECTION

If the Client has Credit Protection (which is only available in conjunction with at least one other product provided by HIF):

11.1

HIF will provide an Automatic Credit Protection Limit for an existing or a new Customer domiciled in the United Kingdom, Ireland, the Isle of Man and the Channel Islands in the amount specified in the Agreement, provided that neither the Client nor HIF is aware of any adverse information in respect of that Customer, reasonable enquiries having been made by the Client.

11.2

HIF may, at HIF's discretion, establish a Credit Protection Limit following a request by the Client. If a Credit Protection Limit is lower than the Automatic Credit Protection Limit, the Credit Protection Limit will apply.

11.3

HIF may, by notice to the Client, increase, reduce or cancel a Credit Protection Limit with immediate effect, but the reduction or cancellation of a Credit Protection Limit will be without prejudice to existing Credit Protected Debts.

11.4

A Debt will not be a Credit Protected Debt if:

(a)

its Notification causes the Credit Protection Limit to be exceeded (and for the purpose of determining the Debts which are Credit Protected, the Debts due from the relevant Customer will be taken in the order they become due for payment); or

(b)

the Client is in breach of any warranty or undertaking relating to it; or

(c)

it is in respect of interest; or

(d)

it is within First Loss; or

(e)

it is an Existing Debt which is 60 days or more past Due Date; or

(f)

payment does not arise due to Force Majeure; or

(g)

the Client has failed to comply with its obligations under Condition 11.5; or

(h)

it is outstanding on the Termination Date (even if previously a Credit Protected Debt and a Credit Protection Payment has been made by HIF to the Client); or

(i)

it is that part of the Debt applicable to VAT; or

(j)

it has been created on payment terms not approved by HIF in writing or otherwise agreed by HIF in writing.

11.5

This Condition is applicable if the Client does not have Credit Management.

If a Credit Protected Debt remains unpaid on the earliest of (i) 60 days past Due Date (ii) 120 days from the date of the Invoice and (iii) such other time as HIF may specify in writing, the Client will:

(a)

within 7 days notify the relevant Customer that all its Debts have been assigned to HIF; and

HIF ST&C 09/2012

Page 5

(b)

within 15 days submit to HIF instructions to collect in the form determined by HIF and provide HIF with all records (in whatever form) relating to its attempted collection of the Debt, such evidence as is required by HIF of the Client's performance of the Contract of Sale and any other information HIF may require,

and if, for any reason, the Client fails to comply with these obligations, all Credit Protected Debts of the relevant Customer will automatically become Unprotected Debts with immediate effect.

11.6

If a Credit Protected Debt:

(a)

other than an Existing Debt, remains unpaid 120 days past Due Date, or such other period as HIF may determine and notify to the Client; or

(b)

is payable by a Customer which HIF is advised is Insolvent,

HIF will credit the relevant Discounting Account with a sum equal to the Credit Protected Debt less VAT if applicable, provided that the Client:

(i)

is in compliance with its obligations under the Agreement; and

(ii)

has kept HIF apprised of all information which HIF might reasonably be expected to require concerning non-payment of the Credit Protected Debt.

11.7

If a Credit Protected Debt is later determined by HIF to be an Unprotected Debt, any credit to a Discounting Account will be reversed by HIF.

11.8

The Client may not, without HIF's prior written consent, contract on any terms (including cash payment or proforma terms) with a Customer (or any successor business of the Customer) if a Credit Protected Debt applicable to that Customer remains outstanding 120 days past Due Date, until the Credit Protected Debt is fully discharged.

11.9

If the VAT Bad Debt Scheme applies to a Credit Protected Debt, HIF will reassign the Debt and/or prove in the Customer's Insolvency Proceedings in the Client's name.

11.10

Any dividend received by the Client following the Customer becoming Insolvent will be allocated between HIF and the Client pro rata to the value of Credit Protected Debts and Unprotected Debts owing by the Customer at the date the Customer became Insolvent.

11.11

The aggregate value of all costs incurred in relation to the collection of Debts which have not been recovered from the Customer upon HIF concluding its collection activity will, in respect of those Debts, be allocated between HIF and the Client pro rata to the value of Credit Protected Debts and Unprotected Debts.

11.12

For the avoidance of doubt, any Debts that are outside the Credit Protection Limit specified for the relevant Customer, including those within the Funding Limit (if a Funding Limit has been agreed), will be treated as Unprotected Debts.

12.

CREDIT MANAGEMENT

12.1

HIF will provide Credit Management if:

(a)

the Agreement confirms that this product is to be provided; or

(b)

the Client's agency to collect Debts has been terminated.

12.2

If the Client has Credit Management:

(a)

HIF will collect Debts and manage the Client's sales ledger accounts in such manner and upon such terms as it may in its absolute discretion think fit;

HIF ST&C 09/2012

Page 6

(b)

the Client will ensure that notice of assignment of each Debt is given to each Customer in any way HIF requests; and

(c)

the Client will provide HIF with all information HIF may require to enable it to provide Credit Management.

13.

TRUST

13.1

Immediately on receiving a Remittance the Client will deliver the original Remittance to HIF or pay it to a Collection Account.

13.2

Before delivery of a Remittance to HIF, the Client will hold it on trust for HIF and separately from the Client's own monies.

13.3

The Client will hold on trust for HIF any Debt and its proceeds which fails to be transferred effectively to HIF.

14.

COLLECTION OF DEBTS

14.1

If the Client does not have Credit Management, the Client is appointed as HIF's agent for the collection of Debts and it will, at the Client's expense, collect and enforce payment of all Debts.

14.2

HIF may at any time give the Client notice to terminate its agency to collect all or any Debts. After termination of the agency the Client will not claim to be or otherwise hold itself out as being HIF's agent for any purpose.

14.3

HIF and not the Client has the sole right to enforce payment of and collect any Debt, so long as HIF is the owner of it, and to compromise any Debt and to institute, defend or compromise proceedings relating to any such Debt in such manner and on such terms as it may in its absolute discretion think fit.

14.4

The Client will provide HIF with all assistance and co-operation that HIF may require to enable HIF to collect, settle and enforce payment of Debts.

15.

RETURNED GOODS

15.1

All Returned Goods belong to HIF and may be dealt with as HIF deems appropriate. The proceeds arising from such dealings will be treated as Remittances.

15.2

HIF may take possession of Returned Goods at any time by (if necessary) entering premises under the Client's control.

15.3

All Returned Goods will be (a) notified to HIF, marked with HIF's name as owner and, upon request, delivered to HIF or as HIF directs and (b) kept separate from the Client's assets.

15.4

This Condition 15 does not affect HIF's rights resulting from any breach of Condition 16 ( Warranties ).

16.

WARRANTIES

16.1

The Client warrants that (a) it has disclosed and will disclose to HIF every fact which might influence HIF's decision to enter into or continue the Agreement, purchase a Debt or to accept any person as a Guarantor and (b) all facts and information disclosed to HIF by the Client were true and accurate at the time provided.

16.2

The inclusion of a Debt in a Notification is a warranty by the Client to HIF that:

(a)

the goods or services have been Delivered and the Contract of Sale has been performed so that the Debt is an undisputed and enforceable payment obligation of the relevant Customer;

HIF ST&C 09/2012

Page 7

(b)

the Debt is payable within the Standard Payment Terms or such other terms as agreed by HIF in writing;

(c)

the Debt is owned by the Client and not subject to any Security Interest in favour of a third party;

(d)

the Debt has not been previously Notified to HIF;

(e)

the Debt is not a Non-Notifiable Debt (unless HIF has told the Client to Notify the relevant Debt under Condition 6.5);

(f)

the relevant Customer is not Insolvent;

(g)

the Debt is payable in a Debtor Currency and without retention, set-off, deduction or counterclaim except for any prompt settlement discount not exceeding five per cent of the Notified value of the Debt or such other percentage confirmed by HIF in writing ;

(h)

the Debt is freely assignable and is payable under a Contract of Sale governed by (i) English, Scots or Northern Irish law, provided that either the Client or the Customer is located in the jurisdiction whose law governs the contract or (ii) any other law approved by HIF in writing;

(i)

if a Customer is located outside the United Kingdom, Ireland, the Isle of Man and the Channel Islands, the relevant Contract of Sale includes the relevant Incoterms and is in writing;

(j)

the correct details of the Customer appear on documents evidencing the Debt;

(k)

all details contained in the Notification are correct and complete; and

(l)

the person signing or delivering the Notification has the authority to do so.

17.

UNDERTAKINGS

17.1

The Client undertakes to:

(a)

pay to HIF immediately on demand:

(i)

any debit balance on all or any of the Current Accounts plus all other Liabilities;

(ii)

any amount by which a Retention exceeds a Current Account credit balance at any time;

(iii)

any payment made to the Client in error;

(b)

immediately inform HIF of:

(i)

a change in the management, ownership or control of the Client or a Guarantor;

(ii)

a change to the Client's trading style or the Client adopting a new trading style;

(iii)

the Client, its Associate, a Guarantor or a Customer becoming Insolvent;

(iv)

any information it knows about a Customer which might adversely impact the recovery of a Debt, including but not limited to a dispute with a Customer or any change in a Customer's status, address or creditworthiness; and

(v)

a Customer claiming or being entitled to exercise any retention, set-off, deduction or counterclaim;

HIF ST&C 09/2012

Page 8

(c)

immediately upon HIF's request (or such other time limit as HIF may specify):

(i)

provide the Debt Records, evidence of the performance of a Contract of Sale and any information (certified if required) relating to a Customer, the Client or their operations;

(ii)

procure that the Client's auditors report directly to HIF;

(iii)

do anything HIF requires to carry out the purposes of the Agreement;

(iv)

exercise any retention of title rights under a Contract of Sale;

(v)

not issue any credit note without HIF's prior approval;

(d)

maintain full accounting records consistently and in accordance with generally accepted accounting standards, and deliver them to HIF on request;

(e)

provide HIF with details (in a form acceptable to HIF) of all credit notes issued to Customers in the immediately following Notification and in any event within 7 days of the credit note being issued;

(f)

ensure that all Invoices and similar documents contain payment terms and, if applicable, the relevant Incoterm;

(g)

protect the Associated Rights and deliver them to HIF on request;

(h)

hold insurances appropriate to the Client's business;

(i)

pay all and any credit insurance premiums and provide evidence to HIF of any such payment immediately upon HIF's request;

(j)

comply with the User Guides, HIF's procedures relating to the Agreement and any request of HIF intended to preserve HIF's interest in Debts and/or mitigate any Liabilities, including signing additional documents, and allow any employee or agent of HIF to enter the Client's premises, to check Debt Records and to copy them, at the Client's expense;

(k)

comply with the Data Protection Act and allow HIF to fulfil its obligations set out in the Data Protection Statement;

(l)

at all times comply with all laws, regulations and practices relating to the protection of the environment from pollution relevant to the Client or its business, and notify HIF of any circumstances which may prevent full compliance in the future; and

(m)

endeavour to immediately resolve any dispute.

17.2

The Client undertakes that it will not, without HIF's prior written consent:

(a)

raise Invoices which state that payment must be made in any currency other than a Debtor Currency;

(b)

other than to HIF, grant any Security Interest which could affect the Debts or enter into any agreement for the financing of Debts or any other debt or allow any Associate of the Client to do the same;

(c)

subcontract to another person the performance of any of the Client's obligations to HIF;

(d)

disclose any information from HIF relating to Customers or the Agreement;

(e)

cancel or vary any terms of a Contract of Sale which have been approved by HIF;

HIF ST&C 09/2012

Page 9

(f)

change the nature of the Client's business; or

(g)

create Debts in relation to goods or services which are Delivered over a period which exceeds 60 days or where payment is due or an Invoice is issued 6 Months or more after delivery or over a period longer than permitted by any currency exchange control or other applicable regulations.

17.3

Following a notice from HIF, the Client undertakes that it will not, without HIF's prior written consent, appoint any person as the Client's agent for the delivery of goods.

18.

TERMINATION EVENTS

HIF may immediately terminate the Agreement at any time after the happening of any of the following events:

18.1

a breach of a Finance Document or an agreement between HSBC and either the Client or an Associate of the Client;

18.2

a breach of any agreement, representation or undertaking, given by a third party, in reliance upon which HIF has entered into the Agreement or made any payment under it;

18.3

the Client's or a Guarantor's repayment obligation to a third party being declared due prior to its stated maturity date or if the Client or Guarantor does not pay it when due;

18.4

in the opinion of HIF a material deterioration in the Client's financial condition or operating performance;

18.5

a change, whether direct or indirect, in the Client's ownership, control or constitution without HIF's prior written consent and which HIF considers significant;

18.6

the Client, an Associate of the Client or a Guarantor becoming Insolvent;

18.7

the service of a notice to discontinue a Guarantee or the death of a Guarantor;

18.8

the termination of any waiver, consent or priority arrangement given in favour of HIF;

18.9

a change of the Client's or Guarantor's domicile to a country outside the country in which it was incorporated on the date of the Agreement;

18.10

any criminal conviction (other than for motoring offences) of the Client or any of its Senior Management or any Guarantor.

18.11

a Participating Member State which is a Client Jurisdiction ceases to be a Participating Member State and/or otherwise takes steps to redenominate payments in Euro into another substitute currency.

19.

RIGHTS FOLLOWING A TERMINATION EVENT

19.1

Following a Termination Event or HIF's reasonable belief that a Termination Event may have occurred or may occur, HIF may:

(a)

without notice reduce the Prepayment Percentage (including to zero) or increase the Retention on all or any Current Accounts;

(b)

withdraw all or any of the products selected in the Agreement;

(c)

demand repayment of any Prepayments made in respect of unpaid Debts;

(d)

withdraw or reduce any Limit (including to zero);

HIF ST&C 09/2012

Page 10

(e)

designate all or any Debts as Ineligible Debts;

(f)

increase the Discounting Margin by 2 per cent;

(g)

to the extent not already debited to a Current Account, net off Liabilities against sums due by HIF to the Client and/or demand payment of any debit balance on all or any Discounting Accounts from the Client;

(h)

designate all Credit Protected Debts as Unprotected Debts;

(i)

terminate the Agreement;

(j)

withdraw the Clients' ability to use IIF; and

(k)

without notice apply Additional Retentions on all or any Current Accounts.

19.2

The Client's right to draw from any Current Account will be treated as ceasing immediately prior to any attachment or third party debt order against monies due by HIF to the Client.

19.3

At any time after the occurrence of a Termination Event other than a breach of the Agreement, or if the Client has been HIF's agent to collect Debts and that agency has terminated, the Client will pay to HIF an additional service charge to cover HIF's costs of managing the sales ledger and collecting Debts, of up to 10 per cent of (i) the value of unpaid Debts at the date of the occurrence of the Termination Event or termination of the agency (giving credit for any Service Charge previously charged on the unpaid Debts) and (ii) all Debts subsequently Notified to HIF.

19.4

At any time after a breach of the Agreement which HIF considers to be material, the Client will indemnify HIF for all additional costs incurred by HIF in consequence of the breach, including the additional costs of collecting Debts. HIF may estimate the amount of its claim and debit the relevant sum to a Current Account and Discounting Account at any time on or after the date of the occurrence of the breach of the Agreement. The Client agrees that a reasonable estimate of the anticipated costs will be equivalent to 10 per cent of the Notified value of unpaid Debts on the date HIF becomes aware that the material breach has occurred. If HIF's estimate exceeds the amount to which HIF is entitled under this indemnity, HIF will credit the excess to a Current Account and Discounting Account when the collection of all Debts has been completed.

20.

TERMINATION RIGHTS

The termination of the Agreement will not affect rights and obligations in respect of any Debts which were created before the Termination Date, including the accrual of the Discounting Charge and HIF's rights to set off monies or consolidate accounts. These rights and obligations will continue until all monies due under the Agreement have been paid.

21.

RECOURSE AND REASSIGNMENT

21.1

HIF may exercise Recourse in respect of (i) an Ineligible Debt or (ii) (save for any amount due to the Client under Condition 11.6) the balance of an unpaid Debt at any time, and in respect of all Debts on or following the occurrence of a Termination Event or the Termination Date.

21.2

When the Client has paid the Repurchase Price for any unpaid Debt, the relevant Debt will become the property of the Client.

21.3

When a Customer becomes an Excluded Customer, any Debts which become Excluded Debts are automatically reassigned to the Client by HIF. The Repurchase Price for those Excluded Debts will be debited to a Current Account.

22.

PAYMENTS AND SET-OFF

22.1

All payments to HIF must be made without set-off and without any deduction on account of any tax, duty or other charge, unless a deduction is required by law. If a deduction is required by law, the Client will increase the payment so that HIF receives the amount due to it before the deduction.

HIF ST&C 09/2012

Page 11

22.2

HIF may set off any Liabilities against any amount owing by HIF to the Client or combine any accounts relating to the Client. HIF may exercise these rights, without prior notice, both before and after demand, and to do so may convert any amount in a different currency to sterling at the Spot Rate of Exchange.

23.

INDEMNITY

Unless expressly provided to the contrary in the Agreement, the Client indemnifies HIF against Liabilities incurred in relation to any Finance Document, including the costs of establishing title to and collecting Debts.

24.

COMMUNICATION WITH CUSTOMERS AND THIRD PARTIES

24.1

The Client authorises HIF to communicate with HSBC and the Client's Customers, Guarantors, credit insurers, bank, auditors, accountants and other professional advisers in relation to any Finance Document as HIF considers necessary.

24.2

While the Client is HIF's agent to collect Debts, any communication by HIF with Customers will be for the purpose of confirming that Notified Debts comply with the warranties and undertakings given by the Client in relation to those Debts or any other purpose authorised by the Client.

25.

PARTNERSHIPS AND SOLE TRADERS

Conditions 25.1 to 25.4 will apply if the Client is a partnership other than an LLP.

25.1

Under the Finance Documents, all undertakings and warranties to HIF are given by each partner, and the obligations of each partner to HIF are joint and several.

25.2

The Client represents that all of its partners signed the Agreement.

25.3

The Client will notify HIF in writing if any partner ceases to be a partner ( Former Partner ) or a new partner joins the partnership, and will sign additional documentation required by HIF and permit HIF, at the Client's expense, to effect, renew or vary any registration in the Register of Assignment of Book Debts. A Former Partner will have no obligation to HIF for matters occurring after the later of the date of retirement or the date HIF receives notice of retirement but will remain fully liable to HIF for all matters occurring prior to that date.

25.4

HIF may:

(a)

release or conclude an agreement with any partner(s), without affecting its rights against the others;

(b)

treat a notice or demand by (i) HIF, as a notice or demand given to all partners, and (ii) any partner, as a notice or demand given by all partners;

(c)

treat the Agreement as binding upon any executor, administrator or personal representative of any partner and upon any committee, receiver, trustee or other persons acting on behalf of any partner; and

(d)

account to the Client and/or exercise all rights of set-off against the Client, despite any change in the partnership.

25.5

If the Client is a sole trader it will seek HIF's consent before becoming a partnership and then permit HIF to effect, renew or vary any registration in the Register of Assignment of Book Debts, at the Client's expense.

HIF ST&C 09/2012

Page 12

26.

CONNECTED CLIENTS

26.1

If the Agreement refers to Connected Clients the provisions of this Condition 26 shall apply.

26.2

The following definitions replace those in Condition 34:

Concentration Limit at any time, the maximum value of all outstanding Debts payable by a single Customer to all Connected Clients that HIF will consider to be Eligible Debts calculated by applying the Concentration Percentage to the aggregate value of all outstanding Eligible Debts of all Connected Clients

Facility Limit: the maximum aggregate value of Prepayments that the Connected Clients may take from HIF at any time, being the amount specified as such in each Connected Agreement.

26.3

After the Commencement Date HIF may in its discretion:

(a)

agree to enter into an agreement for the purchase of debts with a person and add that Associate as a Connected Client; and

(b)

agree to terminate an agreement for the purchase of debts with a Connected Client.

26.4

An Associate will become or cease to be a Connected Client on the date that HIF confirms the names of the Connected Clients to the Client and the other Connected Clients.

26.5

HIF may, at its discretion treat the occurrence of a Termination Event under a Connected Agreement as a Termination Event under the Agreement.

27.

SCOTTISH DEBTS

27.1

If the Client assigns Scottish Debts to HIF, the provisions of this Condition 27 shall apply.

27.2

The Client is constituted a trustee for HIF to hold all Scottish Debts in trust for HIF until:

(a)

HIF receives payment in full for the Scottish Debts or HIF completes its title to the Scottish Debts; or

(b)

HIF receives payment of other money or property relating to the Scottish Debts or completes title to that property.

27.3

HIF acknowledges intimation of the creation of the trust described above. If requested by HIF the Client will at its own expense give notice to any person of the trust and that any payment is to be made to HIF.

27.4

HIF may at any time require the Client, as trustee, or any other person who may have become trustee, to transfer to HIF absolutely the whole or any part of the property of the trust and to perform any other acts as HIF considers necessary to protect HIF's interests.

28.

SERVICE OF NOTICE

28.1

HIF may deliver a notice, in writing, in person or by post, fax or email, to the Client at:

(a)

the contact details last known to HIF; or

(b)

the Client's registered office,

or through IIF.

HIF ST&C 09/2012

Page 13

28.2

A notice by HIF will be deemed given:

(a)

if delivered in person, at the time of delivery; or

(b)

if by post, on the day after posting; or

(c)

if by IIF or by fax or email, at the time of sending.

28.3

The Client must serve notice in writing to HIF's address which is detailed with its execution at the end of the Agreement or the address subsequently notified to the Client for this purpose.

29.

VARIATIONS

29.1

HIF may change any term of the Agreement. HIF will tell the Client when the change comes into effect.

29.2

Without affecting HIF's rights under Condition 20 ( Termination rights ), if any change under Condition 29.1 to the terms of the Schedule to the Agreement is to the Client's detriment, then HIF will give at least 30 days’ notice of the changes. At any time before the effective date of such change, the Client may give notice to terminate the Agreement of not less than the Notice Period and:

(a)

the proposed change to the Schedule will not take effect; and

(b)

if termination is within the Minimum Period, HIF will be entitled to the charges and/or fees described in Condition 10.6 that would have been payable had the Minimum Period been served.

29.3

If the Debtor Currencies and/or Prepayment Currencies include Euro, HIF may change any term of the Agreement that HIF considers to be necessary if at any time:

(a)

any currently Participating Member State ceases to be a Participating Member State; or

(b)

any currently Participating Member State takes steps to redenominate all or any monetary obligations in Euro into another substituted currency; or

(c)

the Euro ceases to exist as a currency.

HIF will tell the Client when such changes take effect but may make such changes immediately effective without any requirement for notice to be given under Condition 29.2 or otherwise. Such changes may include HIF’s right to substitute sterling or any other currency HIF deems necessary for the Euro.

30.

NOVATION AND ASSIGNMENT

30.1

The Client must not assign or delegate all or any of its rights, benefits or duties under the Agreement without HIF's prior written consent.

30.2

Subject to HIF agreeing an appropriate confidentiality undertaking with anyone outside HSBC, HIF may give to anyone any information about the Client or any Finance Document in connection with any proposed transfer of, or financial arrangement relating to, any Finance Document. HIF may allow another person to take over any of its rights and duties under any Finance Document. The Client will execute any documents HIF may require in this regard.

31.

PARTIAL INVALIDITY

If, at any time, any provision of the Agreement is or becomes illegal, invalid or unenforceable in any respect, the legality, validity or enforceability of the remaining provisions will not in any way be affected or impaired.

HIF ST&C 09/2012

Page 14

32.

OTHER

32.1

A reference to a person will be construed as a reference to any person, firm, company, state body or organisation (whether or not having separate legal personality).

32.2

A reference to a document is to the document as varied, restated, replaced or novated.

32.3

The singular includes the plural and vice versa.

32.4

A reference to a statute is to it as re-enacted, amended or replaced from time to time.

32.5

A reference to HIF or HSBC includes its successors.

32.6

HIF may rely on any signature, act or communication sent by a person purporting to be authorised to act on behalf of the Client even if that person lacked the relevant authority.

32.7

The definition of:

(a)

Agreed Customer is not used in the Agreement. It is a defined term because it may be cross referred to in ancillary documentation relating to the Client; and

(b)

Prepayment Currency is used for the purpose of effecting currency conversions only, where the Client does not draw Prepayments.

33.

LAW

33.1

The Agreement is governed by the law of the country referred to in the Schedule and the courts of that country will have exclusive jurisdiction to determine any dispute or claims relating to the Agreement or its formation (including non-contractual disputes or claims).

33.2

For the benefit of HIF, the Client irrevocably submits to the jurisdiction of the relevant courts and irrevocably agrees that a judgment in any proceedings in connection with the Agreement by those courts will be conclusive and binding on the Client and may be enforced against the Client in the courts of any other jurisdiction.

33.3

Where the Agreement is governed by Scots law the Client consents to registration of the Agreement and of any certificate issued under Condition 7.7 for execution.

34.

DEFINITIONS

Terms defined in the Agreement will have the meanings ascribed to those terms in the Agreement, its Schedule and these Standard Terms & Conditions.

Additional Retentions an amount equal to the aggregate value of (a) all and any payments that have fallen due and not been paid in respect of any Finance Document or any agreement between HSBC and the Client and (b) in respect of any Finance Document or any agreement between HSBC and the Client requiring periodic loan, hiring, leasing or other payments an amount equal to the next payment instalment falling due.

Agreed Customer has the same meaning as Customer

Agreement has the meaning given in the agreement for the purchase of debts which refers to these Standard Terms and Conditions

Associate has the meaning given to it in section 1152 Companies Act 2006 and section 184 Consumer Credit Act 1974

Associated Rights all rights relating to a Debt or Contract of Sale including (a) the Client's rights as an unpaid seller (b) title to Returned Goods (c) the benefit of insurances (d) all Remittances, Security Interests, bonds, guarantees and indemnities (e) accounting records (f) any Debt Records and (g) interest

HIF ST&C 09/2012

Page 15

Availability the maximum aggregate amount available to be paid by HIF to the Client at any time, being any credit balance on a Current Account less the Retention, which does not exceed the Facility Limit

Bank HSBC Bank plc (company number 00014259)

Base Rate for sterling, the Bank's base rate, and for each other Prepayment Currency, the rate quoted to HIF, from time to time, by the Bank

Client's Exchange Rate on the date that a Debt is Notified, the rate quoted to the Client by its bankers for the exchange of the currency in which the Debt is Notified to another currency

Client Jurisdiction (i) the jurisdiction of incorporation of the Client, (ii) the jurisdiction of the centre of main interest of the Client, or (iii) a jurisdiction where a substantial proportion of the Client’s assets are located

Collection Account any bank account to which HIF agrees the proceeds of Debts may be paid

Concentration Limit at any time, the maximum value of outstanding Debts of a single Customer that HIF will consider to be Eligible Debts calculated by applying the Concentration Percentage to the aggregate value of all outstanding Eligible Debts

Connected Agreement any agreement for the purchase of debts entered into between HIF and a Connected Client

Contract of Sale a contract between the Client and a Customer for the hiring and/or supply of goods and/or the provision of services

Conversion Costs bank charges incurred by HIF in collecting and/or converting into a Prepayment Currency any Debt or Remittance payable in another Prepayment Currency or a currency other than a Prepayment Currency

Covenant the covenants described at Condition 5 ( Covenants )

Credit Management HIF's management of sales ledgers relating to Debts and providing related information to the Client

Credit Protected Debt a Debt designated by HIF as being subject to Credit Protection, which is not subject to any of the features detailed in Condition 11.4

Credit Protection the purchase of a Debt without Recourse subject to the Credit Protection Limit and Credit Protection Percentage

Credit Protection Limit the monetary limit set by HIF which, in relation to a Customer (being the legal person named by HIF), is the maximum aggregate value of its unpaid Debts which may be Credit Protected Debts, the value of which is the Automatic Credit Protection Limit unless otherwise changed by HIF

Credit Protection Payment a payment made pursuant to Condition 11.6

Credit Protection Percentage the percentage used by HIF to calculate a Credit Protection Payment, being the percentage specified as such in the Agreement

Current Account an account maintained by HIF in the Client's name to record dealings between the parties

Customer a person carrying on business to whom goods and/or services are or may be supplied under a Contract of Sale

Data Protection Act the Data Protection Act 1998, any Act of Parliament which comes into effect after the date of the Agreement in relation to data protection or any related subordinate legislation

HIF ST&C 09/2012

Page 16

Data Protection Statement the data protection statement published by HIF from time to time

Debt any monetary claim or other obligation (including any tax, duty or interest), present, future or contingent, of any Customer under a Contract of Sale and all Associated Rights other than an Excluded Debt

Debt Records any document evidencing a Contract of Sale including (without limitation) any quotation, purchase order, invoice, sales acknowledgement, delivery note, completion certificate, books, accounts, computer and other records, any correspondence and any other documents relating to Debts that HIF may designate a Debt Record

Debt Turn is the number of days between the Relevant Day and the End Day inclusive, where:

(a)

Relevant Day is the last day of each calendar month

(b)

End Day is the day on which OD is equal to ND

(c)

OD is the aggregate value of all Notified Debts outstanding on the Relevant Day

(d)

ND is the aggregate value of Notified Debts net of Dilutions Notified on days which immediately precede the Relevant Day

Delivered (a) in relation to goods, unless otherwise specified by HIF in writing, either (i) dispatched in the United Kingdom, Ireland, the Isle of Man or the Channel Islands ( Local Territory ) to the order of a Customer located in a Local Territory, or (ii) received by the Customer, and (b) in relation to services, the provision of the services has completed

Dilutions (a) the value of any credit note or debit note issued to or by Customers (b) the amount of any other deduction, discount or allowance taken or claimed by Customers, and (c) the value of all claims from or defences by Customers which have arisen or may arise

Discounting Account a memorandum account for the purpose of calculating Discounting Allowances and Discounting Charges

Discounting Allowance an allowance paid by HIF to the Client which is calculated daily by applying the Base Rate less the Allowance Margin to the credit balance on a Discounting Account

Discounting Charge the charge for HIF making Prepayments to the Client which is deducted from the purchase price of Debts, and calculated daily by applying the Discounting Margin plus the Base Rate to the debit balance on a Discounting Account

Disputed Debt a Debt which is disputed by the Customer, where the dispute could affect HIF's ability to collect the Debt

Due Date the date that a Debt is due for payment as stated in an Invoice

Eligible Debt any Debt which is not a Non-Notifiable Debt or an Ineligible Debt

Euro the single currency unit of the Participating Member States

Excluded Customer a Customer (or an Associate of such Customer) listed, or whose registered office is located in a country listed, as subject to sanction by HM Treasury or the US Treasury's Office from time to time.

Excluded Debt any monetary claim or other obligation of any Excluded Customer

Existing Debt a Debt which is not a Non-Notifiable Debt and is wholly or partly unpaid at the Commencement Date

Facility Limit the maximum aggregate value of Prepayments that the Client may take from HIF at any time, being the amount specified as such in the Agreement

HIF ST&C 09/2012

Page 17

Finance Document the Agreement, the Security Documents and any other agreement or ancillary documentation entered into between the Client and HIF

Finance the arrangements for the sale and purchase of debts at a discount provided under the terms of the Agreement and entitling the Client to receive Prepayments

First Loss the fixed amount of a Credit Protected Debt which is not subject to Credit Protection despite being within the Credit Protection Limit, being the amount set out in the Schedule to the Agreement

Force Majeure any event or circumstance, whether arising from natural causes, human intervention or otherwise that is beyond HIF’s control or the control of the Customer including: (a) strikes, lockouts, labour disputes, riot, civil commotion, war, fire, flood or act of god and (b) laws, acts or direction of any government, government agency or other legislative authority (including, but not limited to, any such law, act or direction prohibiting or limiting the Customer’s ability to make payment of a Debt or redenominating a Debt into another currency)

Funding Limit the monetary limit set by HIF which, in relation to a Customer (being the legal person named by HIF), is the maximum aggregate value of its unpaid Debts which may be Eligible Debts, the value of which is the Automatic Funding Limit unless otherwise specified by HIF

Future Debt a Debt which is not a Non-Notifiable Debt and is created after the Commencement Date

Guarantor any person who has given a guarantee and/or indemnity of the Liabilities and Guarantee means either of these

HSBC HSBC Holdings plc and/or its subsidiaries and/or associated companies and/or any of its or their agents

IIF Internet Invoice Finance or any other internet platform through which HIF and the Client exchange information relating to operation of facilities provided by HIF under the Agreement

Incoterms the international rules for the interpretation of trade terms of the International Chamber of Commerce in force when the relevant Contract of Sale was made

Ineligible Debt a Debt which (a) is subject to breach of any warranty or undertaking given to HIF (b) following calculation of the Concentration Limit, is in excess of the Concentration Limit (c) is in excess of a Funding Limit (d) HIF considers to be materially overdue for payment (unless a Credit Protected Debt) (e) cannot be paid by the Customer due to Force Majeure or (f) HIF deems to be ineligible for a Prepayment until HIF has received sufficient evidence that it is not subject to breach of any warranty or undertaking given to HIF, and HIF may also (i) designate any Debt in respect of interest an Ineligible Debt and (ii) save for any Debts which are Credit Protected Debts, designate all Debts of a particular customer as Ineligible Debts if HIF considers that a material proportion of that Customer's unpaid Debts are overdue for payment

Insolvency Proceedings in relation to any person (a) the exercise of any distress, execution, injunction, sequestration, attachment or other legal process against assets (b) any proposal or convening of a meeting with a view to a composition, assignment or arrangement with or the granting of a trust deed for creditors (c) the convening of a meeting for the purpose of considering or passing of any resolution for winding-up or administration (d) the service of a notice of intention to appoint or the appointment of an administrator or a receiver or manager over any assets (e) the service of a statutory demand (f) the presentation of a petition for or application for administration, winding-up or bankruptcy (g) the making of an order for winding-up or administration or the appointment of a provisional liquidator or court appointed receiver or judicial factor, or (h) the taking of steps towards or the coming into force of a statutory moratorium

Insolvent in relation to any person (a) the inability to pay debts as they fall due (b) intending or actually ceasing to trade or (c) if there are any Insolvency Proceedings

Invoice an invoice issued by the Client

HIF ST&C 09/2012

Page 18

Liabilities any sum (present, contingent or future) payable by the Client in any capacity (including as a Client and as a guarantor) to HIF whether or not under the Agreement and any losses, damages, costs and expenses (including legal expenses on a full indemnity basis) incurred by HIF

Limit any limit, percentage, value or threshold referred to in a Finance Document

LLP a limited liability partnership under the Limited Liability Partnership Act 2000

Month a period starting on one day in a calendar month and ending on the day before the numerically corresponding day in the next calendar month, except that (a) if the day before the numerically corresponding day is not a working day, that period will end on the next working day in that calendar month in which that period is to end if there is one or, if there is not, on the immediately preceding working day; and (b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period will end on the last working day in that calendar month

Non-Notifiable Debt any Debt existing at the Commencement Date and which is more than 12 Months old, or payable by an Insolvent Customer or disputed in any way and any other Debt which (a) is payable by an Associate (b) is due by a Customer to whom the Client is or may be indebted (c) relates to tooling which remains under the Client's control (d) is payable in cash or relates to a proforma sale (e) is payable by a Customer located in or operating from a country which is not an Approved Country or (f) relates to goods supplied direct to a customer of a Customer where the Customer is located other than in a Local Territory (excluding Ireland) or (g) relates to goods supplied on (i) approval or (ii) sale or return or (iii) constructive delivery or (iv) consignment or, in each case, similar terms, or any other Debt HIF may specify

Notification , Notified and Notify the method by which the Client advises HIF of the creation of Debts and Dilutions, being in the form and by the method as HIF may from time to time require

Participating Member State any member state of the European Union that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union as at the date of this Agreement

Prepayment an advance payment by HIF to the Client on account of the purchase price of a Debt not exceeding the Prepayment Percentage of its Notified value

Recourse HIF's right to require the Client to repurchase a Debt or Debts

Remittance cash, cheques, bills of exchange, negotiable and non-negotiable instruments, letters of credit, orders, drafts, promissory notes, electronic payments and any other form of payment received by HIF, the Client or any agent or representative of a Client in payment of a Debt, including monies recovered under any credit insurance policy, a refund of the VAT element of the Debt or a dividend payable in respect of the Debt

Repurchase Price in relation to an unpaid Debt, the value of the Debt remaining unpaid when HIF exercises Recourse and, in relation to all unpaid Debts, the debit balance on all Discounting Accounts plus Liabilities

Retention an amount equal to the aggregate value of (a) outstanding Notified Debts which exceed the Prepayment Percentage of the Notified value of the Debts (b) the Notified value of outstanding Ineligible Debts (c) Liabilities and (d) the value of all claims from or defences by Customers which have arisen or may arise

Returned Goods goods which relate to an outstanding Notified Debt and which have been returned to the Client's possession

Scottish Debts (a) a Debt arising under a Contract of Sale governed by Scots law and/or (b) an Invoice addressed to a Customer in Scotland

Security Documents any Guarantee or Security Interest in favour of HIF

Security Interest any mortgage, charge, trust, option, security assignment, assignation in security, pledge, hypothecation, lien, retention of title, set-off right, tracing right or any other security interest in favour of any person

HIF ST&C 09/2012

Page 19

Senior Management any director of a Client where the Client is a company, partner of a Client which is a partnership, member of a Client which is an LLP and other person involved in the operation of the Agreement or the management or direction of the Client

Spot Rate of Exchange on any day, the Bank rate or rates used by HIF for the exchange of one currency to another currency

Tangible Net Worth the aggregate value of the Client's issued share capital, retained profits (after tax) and reserves less intangible assets, as shown in the Client's annual audited accounts or other such financial information that HIF agrees in writing to accept as evidence of the Client's tangible net worth

Termination Date the date on which the Agreement is validly terminated

Termination Event any event listed as a Termination Event in Condition 18 ( Termination Events )

Testing Day the testing day for the particular Covenant specified in the Agreement

Unprotected Debt a Debt which is not the subject of Credit Protection

User Guide means any user or operational guide published by HIF from time to time

VAT Bad Debt Scheme at any time, the HM Revenue & Customs scheme and procedures, which enable suppliers of goods and services to reclaim the VAT element of debts which become bad or doubtful

HIF ST&C 09/2012

Page 20