May 7, 2004
Dear Stockholder,
I am pleased to extend to you my personal invitation to attend the 2004 Annual
Meeting of Stockholders of Lakeland Industries, Inc. (the "Company") on
Wednesday, June 16, 2004 at 9:30 a.m. at the Holiday Inn, 3845 Veterans Memorial
Highway, Ronkonkoma, NY 11779.
The accompanying Notice of Annual Meeting and Proxy Statement contain a
description of the formal business to be acted upon by the stockholders. At the
meeting, I intend to discuss our performance for the fiscal year ended January
31, 2004 and our plans for the current fiscal year. Certain members of the
Company's Board of Directors and officers of the Company, as well as a
representative of PricewaterhouseCoopers LLP, our independent auditors, will be
available to answer any questions you may have, or to make a statement if they
wish to.
While I am looking forward to seeing you at the meeting, it is very important
that those of you who cannot personally attend assure your shares are
represented. I urge you therefore to sign and date the enclosed form of proxy
and return it promptly in the accompanying envelope. If you attend the meeting,
you may, if you wish, withdraw any proxy previously given and vote your shares
in person.
Sincerely,
Raymond J. Smith
Chairman of the Board
LAKELAND INDUSTRIES, INC.
NOTICE OF
2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
June 16, 2004
TO THE STOCKHOLDERS OF LAKELAND INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Lakeland
Industries, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, June 16, 2004 at 9:30 a.m. at the Holiday Inn, 3845 Veterans Memorial
Highway, Ronkonkoma, NY 11779 for the following purposes:
1. To elect two Class III members, and
2. To ratify the appointment of PricewaterhouseCoopers LLP, as the Company's
independent public accountants for fiscal year 2005, and
3. To transact such other business as properly may come before the meeting or
any adjournment thereof.
Each share of the Company's Common Stock will be entitled to one vote upon all
matters described above. Stockholders of record at the close of business on
April 23, 2004 will be entitled to notice and to vote at the meeting. Only
stockholders of record at the close of business on the date above will be
entitled to notice of and to vote at the Annual Meeting of Stockholders and any
adjournment thereof. A list of all stockholders entitled to vote at the Annual
Meeting of Stockholders will be open for examination by any stockholder for any
purpose germane to the Meeting during ordinary business hours for a period of
ten (10) days before the Meeting at the offices of the Company located at 711-2
Koehler Ave., Ronkonkoma, NY 11779.
May 7, 2004
BY ORDER OF THE BOARD OF DIRECTORS
Christopher J. Ryan, Secretary
Whether or not you plan to attend the Annual Meeting, please complete,
date and sign the enclosed proxy card and return it promptly in the enclosed
postage prepaid envelope. If you sign and return your proxy card without
specifying a choice, your shares will be voted in accordance with the
recommendations of the Board of Directors. You may, if you wish, revoke your
proxy at any time prior to the time it is voted by filing with the Secretary of
the Company a written revocation or a duly executed proxy bearing a later date
or by attending the Annual Meeting and voting in person.
LAKELAND INDUSTRIES, INC.
711-2 Koehler Ave.
Ronkonkoma, New York 11779
(631) 981-9700
PROXY STATEMENT
2004 Annual Meeting of Stockholders
June 16, 2004
GENERAL INFORMATION
----------
This Proxy Statement and the accompanying Proxy Card are furnished in connection
with the solicitation by the Board of Directors of Lakeland Industries, Inc.
(the "Company") of proxies from the holders of the Company's $.01 par value
Common Stock (the "Common Stock") for use at the 2004 Annual Meeting of
Stockholders to be held on June 16, 2004, and at any adjournment thereof (the
"Annual Meeting").
This Proxy Statement, the Notice of Annual Meeting of Stockholders, the Proxy
Card and the Company's 2004 Form 10-K (which includes the Company's Annual
Report to Stockholders) are first being sent to the Company's stockholders on or
about May 7, 2004.
About the Annual Meeting
What is the purpose of the Annual Meeting?
At the Annual Meeting, stockholders will act upon the matters outlined in the
accompanying notice of meeting, including the election of directors. In
addition, the Company's management will report on the performance of the Company
during fiscal 2004 and respond to appropriate questions from stockholders.
Who is entitled to vote?
Only stockholders of record at the close of business on the record dated, April
23, 2004, are entitled to receive notice of the annual meeting and to vote the
shares of common shares that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
Please note that if you hold your shares in "street name" (that is, through a
broker or other nominee), you will need to bring appropriate documentation from
your broker or nominee to vote personally at the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority
of the shares of common stock outstanding on the record date will constitute a
quorum, permitting the meeting to conduct its business. As of the record date,
3,273,925 shares of common stock of the Company were outstanding. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting for
purposes of determining the presence of a
2
quorum. A "broker non-vote" occurs when a broker or other nominee indicates on
the proxy card that it does not have discretionary authority to vote on a
particular matter.
How do I vote?
If you complete and properly sign the accompanying proxy card and return it to
the Company, it will be voted as you direct. If you are a registered stockholder
and attend the meeting, you may deliver your completed proxy card in person.
"Street name" stockholders who wish to vote at the meeting will need to obtain
and vote a proxy from the institution that holds their shares. The Company has
made proxy statements, proxies and annual reports available to the nominee
institutions for delivery to "street name" stockholders.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at any
time before the proxy is exercised by filing with the secretary of the Company
either a notice of revocation or a duly executed proxy, bearing a later date.
The powers of the proxy holders will be suspended if you attend the meeting in
person and so request, although attendance at the meeting will not by itself
revoke a previously granted proxy.
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. The Board recommends a
vote:
for election of the nominated slate of 2 Class III directors (see page 4),
and to ratify the appointment of PricewaterhouseCoopers LLP, as the
Company's independent public accountants for the fiscal year ending
January 31, 2005.
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
What vote is required to approve each item?
Election of Directors. The affirmative vote of a plurality of the votes cast at
the meeting is required for the election of directors. A properly executed proxy
marked "WITHHOLD AUTHORITY" with respect to the election of one or more
directors will not be voted with respect to the director or directors indicated
although it will be counted for purposes of determining whether there is a
quorum. Abstentions and broker non-votes will have no legal effect on the
election of directors. The Certificate of Incorporation does not provide for
cumulative voting in the election of directors.
Is my vote confidential?
Yes. It is our policy that all stockholder meeting proxies, ballots, and voting
records that identify the vote of a particular stockholder are confidential. The
vote of any stockholder will not be disclosed to any third party before the
final vote count at the annual stockholders' meeting except: (i) to meet legal
requirements; (ii) to assert claims for or defend claims against the Company;
(iii) to allow the inspectors of election to certify the results of the
stockholder vote; (iv) if a proxy solicitation in opposition to the
3
Board of Directors takes place; or (v) to respond to stockholders who have
written comments on proxy cards or who have requested disclosure.
ANNUAL REPORT AND FORM 10-K
Will I receive a copy of the Company's Annual Report?
We have mailed you the Annual Report and 10-K for the fiscal year ended January
31, 2004, with this Proxy Statement. The Annual Report includes the Company's
audited financial statements, along with other financial and product
information. We urge you to read it carefully.
How can I receive a copy of our Annual Report and Form 10-K?
You can obtain, free of charge, a copy of our Annual Report and Form 10-K for
the fiscal year ended January 31, 2004, which we recently filed with the
Securities and Exchange Commission, by writing to:
Corporate Secretary
Lakeland Industries, Inc.
711-2 Koehler Avenue
Ronkonkoma, NY 11779
You can also obtain a copy of our Annual Report, Form 10-K and other periodic
filings with the Securities and Exchange Commission (SEC) on our Internet site
at www.lakeland.com at the Financial Information heading then the subheading
"All SEC Filings". Our Form 10-K and other SEC filings mentioned above are also
available from the SEC's EDGAR database at www.sec.gov.
Who will bear the costs of soliciting proxies for the Annual Meeting?
The Cost of soliciting proxies for the Annual Meeting will be borne by us. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by officers and employees of the Company who will not receive any
additional compensation for their services. Proxies and proxy material will also
be distributed at our expense by brokers, nominees, custodians, and other
similar parties.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
How much stock do our directors and officers own?
The following table sets forth information as of April 26, 2004, with respect to
beneficial ownership of our Common Stock by all persons known by us to own
beneficially more than 5% of the Common Stock, each director and nominee for
director of the Company and all directors and officers of the Company as a
group. All persons listed have sole voting and investment power with respect to
their shares of Common Stock. All share amounts have been adjusted for the 1 for
10 stock distributions to shareholders of record on July 31, 2003 and 2002.
Name and Address Number of Common Percent
Beneficial Owner Shares Beneficially Owned of Class Title
---------------- ------------------------- -------- -----
Raymond J. Smith 535,903 16.37% Chairman of the Board
711-2 Koehler Ave. of Directors
Ronkonkoma, NY 11779
Christopher J. Ryan 285,807(5) 8.73% Chief Executive Officer,
711-2 Koehler Ave. President, Secretary,
Ronkonkoma, NY 11779 General Counsel and
Director
John J. Collins, Jr. 99,290(1) 3.03% Director
Eric O. Hallman 51,960(1) 1.59% Director
Walter J. Raleigh 9,680(2) .3% Director
Michael E. Cirenza 5,500(3) .17% Director
All officers and directors 988,140(5)(4) 30.18%
As a group (9 persons)
Mr. & Mrs. Luis Hernandez 206,000 6.29%
and Anthony Hernandez
3069 Misty Harbor
Las Vegas, NV 89117
(The Hernandez' are neither directors, officers nor employees of Lakeland)
----------
Included in the above are fully exercisable options to purchase the Company's
common stock, as follows:
(1) 1,100 shares granted on June 18, 2003 and 1,210 shares granted on June 21,
2000 to each of Mr. Hallman and Mr. Collins;
(2) 1,210 shares granted on June 17, 1998 and 1,210 shares granted June 20,
2001;
(3) 5,500 shares granted on June 18, 2003;
(4) 12,540 shares granted between June 17, 1998 and June 18, 2003;
(5) Mr. Ryan disclaims beneficial ownership of 13,310 shares owned by his
wife.
5
CORPORATE GOVERNANCE
We operate within a comprehensive plan of corporate governance for the
purpose of defining responsibilities, setting high standards of professional and
personal conduct, and assuring compliance with such responsibilities and
standards. We regularly monitor developments in the area of corporate governance
and have done so since the year 2000. In July 2002, Congress passed the
Sarbanes-Oxley Act of 2002, which, among other things, establishes or provides
the basis for a number of new corporate governance standards and disclosure
requirements. In addition, the Nasdaq Stock Market ("Nasdaq") has recently
adopted changes to its corporate governance and listing requirements.
Codes
o We have adopted a "Code of Ethics" (Please refer to Appendix B in
this Proxy Statement). This Code applies to all directors, officers,
and employees of our Company. Information concerning any alleged
violations are to be reported in writing to Michael Cirenza, CFO
Country-Life, 180 Vanderbilt Motor Parkway, Hauppauge, NY 11788. Mr.
Cirenza is an independent director and member of the Audit
Committee. Additional copies of our "Code of Ethics" for Directors,
Officers, and Employees and our "Audit Committee Charter" can be
obtained by writing to Secretary, Lakeland Industries, Inc. 711-2
Koehler Avenue, Ronkonkoma, NY 11743, or visit our website at
www.lakeland.com under "Corporate Governance".
Shareholder Communication with Members of the Board of Directors
o You can contact any of our directors by writing them: Board of
Directors, c/o Corporate Secretary's Office, Lakeland Industries,
Inc., 711-2 Koehler Avenue, Ronkonkoma, NY 11779. Employees and
others who wish to contact the Board or any member of the Audit
Committee may do so anonymously, if they wish, by using this
address. Such correspondence will not be screened and will be
forwarded in its entirety.
Personal Loans to Executive Officers and Directors
o The Company has never made loans to our directors or officers and
complies with and will operate in a manner consistent with an act of
legislation outlawing extensions of credit in the form of personal
loans to or for its directors and executive officers.
Director and Executive Officer Stock Transactions
o Under the regulations of the Securities and Exchange Commission
("SEC"), directors and executive officers are required to file
notice with the SEC within two (2) business days of any purchase or
sale of the Company's stock. Information on filings made by any of
our directors or executive officers can be found on the Company's
web site at http://www.lakeland.com under "Financial Information"
then "Insiders."
Board Attendance
o Each member of the Board of Directors is expected to make a
reasonable effort to attend all meetings of the Board of Directors,
all applicable committee meetings, and each annual meeting of
shareholders. While no formal policy with respect to attendance has
been adopted, attendance at these meetings is encouraged and
expected. All members of the Board of Directors attended
6
the June, 2003 Annual Meeting of Shareholders and each of the
current members of the Board of Directors is expected to attend the
June 16, 2004 Annual Meeting of Shareholders. During fiscal 2004,
the Board of Directors met on three occasions. All directors
attended at least seventy-five percent of the aggregate number of
meetings of the Board and Board committees on which they served.
Proposal 1
ELECTION OF DIRECTORS
The majority of the members of our Board of Directors qualify as "independent
directors" as determined in accordance with the current listing standards of the
Nasdaq National Market ("Nasdaq"). Based upon current Nasdaq listing standards
our Board of Directors has identified and affirmatively determined the following
individuals as being independent directors: Michael E. Cirenza, Walter J.
Raleigh, Eric O. Hallman and John J. Collins, Jr.
Our Certificate of Incorporation provides for three classes of directors with
staggered terms of office and provides that upon the expiration of the term of
office for a class of directors, nominees for each class shall be elected for a
term of three years to serve until the election and qualification of their
successors or until their earlier resignation, death or removal from office. Our
Certificate of Incorporation and our By-Laws also provide that each class of
directors shall be nearly equal in number as possible and consistent with this
rule that the Board shall allocate each newly created directorship to that of
the available classes whose term of office is due to expire at the earliest date
following such allocation. We currently have two Class I directors, two Class II
directors and two Class III directors. At the 2004 Annual Meeting there are two
nominees for director in Class III. The incumbent Class I and Class II directors
have one year and two years, respectively, remaining on their terms of office.
We have no reason to believe that the nominees will be disqualified or unable to
serve, or will refuse to serve if elected. However, if a nominee is unable or
unwilling to accept election, the proxies will be voted for such substitute as
our Board of Directors may select. It is intended that the shares represented by
proxies will be voted, in the absence of contrary instructions, for the nominees
listed in Class III in the following table. The Board of Directors has nominated
and Management recommends the election of the persons listed in the following
table as Class III directors. The table also sets forth the names of the two
directors in Class I and the two directors in Class II whose terms of office
have not expired, their ages, their positions with the Company and the period
each has served as a director of the Company. There are no family relationships
among the Board members.
Position
With the Director
Name Age Company Since
---------------------------------------------------------------------------------------------------------
NOMINEES FOR DIRECTOR - CLASS III
Nominees for Three Year Term Expiring in June, 2007
---------------------------------
Raymond J. Smith 65 Chairman of the Board 1982
of Directors
Walter J. Raleigh 76 Director 1991
7
INCUMBENT DIRECTORS CLASS I
One year remaining on Term Expiring in June 2005
----------
Christopher J. Ryan 52 Chief Executive Officer, 1986
President, General Counsel,
Secretary and Director
Michael E. Cirenza 48 Director 2003
INCUMBENT DIRECTORS - CLASS II
Two years remaining on Term Expiring in June 2006
----------
John J. Collins, Jr. 61 Director 1986
Eric O. Hallman 60 Director 1982
The principal occupations and employment of the nominees for director and
for the directors continuing in office are set forth below:
Raymond J. Smith, one of our co-founders, has been Chairman of our board
of directors since our incorporation in 1982 and was President from 1982 to
January 31, 2004. Mr. Smith's term as a director will expire at our annual
meeting of stockholders in June 2004.
Walter J. Raleigh is a director of CMI Industries, Inc., the successor
company to Clinton Mills, Inc., and was president of Clinton Mills Sales, Co.
Division, N.Y. from 1974 to 1995. Clinton Mills was a textile manufacturer of
woven fabrics. Mr. Raleigh retired from Clinton Mills in 1995 and was a Senior
Adviser to CMI Industries, Inc. between 1995 and 2000. Mr. Raleigh has served as
one of our directors since 1991 and his term as a director will expire at our
annual meeting of stockholders in June 2004.
Christopher J. Ryan has served as our Chief Executive Officer and
President since February 1, 2004, Secretary since April 1991, General Counsel
since February 2000 and a director since May 1986. Mr. Ryan was our Executive
Vice President - Finance from May 1986 until becoming our President on February
1, 2004. From October 1989 until February 1991, Mr. Ryan was employed by Sands
Brothers and Rodman & Renshaw, Inc., both investment banking firms. Prior to
that, he was an independent consultant with Laidlaw Holding Co., Inc., an
investment banking firm, from January 1989 until September 1989. From February
1987 to January 1989, Mr. Ryan was employed as the Managing Director of
Corporate Finance for Brean Murray, Foster Securities, Inc. He was employed from
June 1985 to December 1986 as a Senior Vice President with the investment
banking firm of Laidlaw Adams Peck, Inc., a predecessor firm to Laidlaw
Holdings, Inc. Mr. Ryan has served as one of our directors since 1986 and his
term as a director will expire at our annual meeting of stockholders in June
2005.
Michael E. Cirenza has been the Executive Vice President and Chief
Financial Officer of Consac Industries, Inc., a manufacturer and distributor of
vitamins and nutritional supplements, since September 2002. Mr. Cirenza was the
Chief Financial Officer and Chief Operating Officer of Resilien, Inc., an
independent distributor of computers, components and peripherals from January
2000 to September 2002. He was an Audit Partner with the international
accounting firm of Grant Thornton LLP from August 1993 to January 2000 and an
Audit Manager with Grant
8
Thornton LLP from May 1989 to August 1993. Mr. Cirenza was employed by the
international accounting firm of Price Waterhouse from July 1980 to May 1989.
Mr. Cirenza is a Certified Public Accountant in the State of New York and a
member of the American Institute of Certified Public Accountants and the New
York State Society of Certified Public Accountants. Mr. Cirenza has served as
one of our directors since June 18, 2003 and his term as a director will expire
at our annual meeting of stockholders in 2005.
John J. Collins, Jr. was Executive Vice President of Chapdelaine GSI, a
government securities firm, from 1977 to January 1987. He was Senior Vice
President of Liberty Brokerage, a government securities firm, between January
1987 and November 1998. Presently, Mr. Collins is self-employed, managing a
direct investment portfolio of small business enterprises for his own accounts.
Mr. Collins has served as one of our directors since 1986 and his term as a
director will expire at our annual meeting of stockholders in June 2006.
Eric O. Hallman was President of Naess Hallman Inc., a ship brokering
firm, from 1974 to 1991. Mr. Hallman was also affiliated between 1991 and 1992
with Finanshuset (U.S.A.), Inc., a ship brokering and international financial
services and consulting concern, and was an officer of Sylvan Lawrence, a real
estate development company, between 1992 and 1998. Between 1998 and 2000, Mr.
Hallman was President of PREMCO, a real estate management company, and currently
is Comptroller of the law firm Murphy, Bartol & O'Brien, LLP. Mr. Hallman has
served as one of our directors since our incorporation in 1982 and his term as a
director will expire at our annual meeting of stockholders in June 2006.
Potential Anti-Takeover Effect
The Board of Directors has the authority, without further approval of our
shareholders, to issue preferred shares (the "Preferred Shares") having such
rights, preferences and privileges as the Board of Directors may determine. Any
such issuance of Preferred Shares could, under certain circumstances, have the
effect of delaying or preventing a change in control of the Company and may
adversely affect the rights of holders of Common Stock. In addition, we are
subject to Delaware statutes regulating business combinations, takeovers and
control share acquisitions which might hinder or delay a change in control of
the Company. Anti-takeover provisions that could be included in the Preferred
Shares when issued and the Delaware statutes regulating business combinations,
takeovers and control share acquisitions can have a depressive effect on the
market price of our securities and can limit shareholders' ability to receive a
premium on their shares by discouraging takeover and tender offer bids.
The Directors of the Company serve staggered three-year terms. Our Restated
Certificate of Incorporation sets forth a provision that requires certain
business combinations to be approved by at least two-thirds of the Company's
voting securities, unless two-thirds of the members of the Board of Directors
have approved the transaction, and further requires approval of holders of
two-thirds of the Company's voting shares to amend these provisions. In
addition, the shareholders have authorized an Employee Stock Ownership Plan
("ESOP"). In the past, other companies have used similar plans to hinder or
prevent a takeover situation. The Company has also entered into employment
contracts with certain executive officers providing for lump sum payments of
contracted salaries pursuant to various formulas, should there be a change in
control of the Company. These factors could have an anti-takeover effect by
making it more difficult to acquire the Company by means of a tender offer, a
proxy contest or otherwise or the removal of incumbent officers and directors.
These provisions could delay, deter or prevent a tender offer or takeover
attempt that a shareholder might consider in his or her best interest, including
those attempts that might result in a premium over the market price for the
Common Stock held by our shareholders.
Committees of the Board of Directors are as follows:
1- The Audit Committee was formed in September, 1987 and is responsible
for recommending to the Board of Directors the appointment of independent
auditors for the fiscal year, reviewing with the independent auditors the scope
of their proposed and completed audits, reviewing our financial
9
management, its independent auditors and other matters relating to audits and
the adequacy of our internal control structure. The committee members are:
Michael Cirenza, John J. Collins, Jr., Eric O. Hallman, and Walter J. Raleigh.
2- The Stock Option and Compensation Committee is responsible for
evaluating the performance of our management, fixing or determining the method
of fixing compensation of our salaried employees, administering our Stock Option
and 401K Plans, and reviewing significant amendments to a subsidiary's employee
pension benefit plan. The Committee also, in conjunction with the Chief
Executive Officer, considered the qualifications of prospective directors of the
Company and, as vacancies occurrred, recommended nominees to the Board of
Directors.
3- Nominating Committee. Effective April 6, 2004 the Board of Directors
established a separate nominating committee consisting of Mssrs. Collins,
Hallman, Raleigh and Cirenza, all of whom are independent outside directors. The
Nominating Committee makes recommendations to the Board regarding the size and
composition of the Board. The Nominating Committee is responsible for reviewing
with the Board from time to time the appropriate skills and characteristics
required of Board members in the context of the current size and make-up of the
Board. This assessment includes issues of understanding of and achievements in
manufacturing, finance, accounting, and marketing, and international experience
and culture. These factors, and any other qualifications considered useful by
the Committee are reviewed in the context of an assessment of the perceived
needs of the Board at a particular point in time. As a result, the priorities
and emphasis of the Nominating Committee and of the Board may change from time
to time to take into account changes in business and other trends, and the
portfolio of skills and experience of current and prospective Board members.
Therefore, while focused on the achievement and the ability of potential
candidates to make a positive contribution with repect to such factors, the
Nominating Committee has not established any specific minimum criteria or
qualification that a nominee must possess. The Nominating Committee establishes
procedures for the nomination process, recommends candidates for election to the
Board and also nominates officers for election by the Board. The Nominating
Committee will consider nominees to the Board recommended by stock holders. Such
recommendations must be in writing and sent to our Secretary no later than
January 31st of the year in which the Annual Meeting is to be held, accompanied
by a detailed description of the proposed nominee's principal occupation and his
or her other qualifications which, in the stockholder's opinion, make such a
person a suitable candidate for nomination to the Board. The former Nominating
Committee, prior to April 6, 2004 which consisted of Msses. Hallman, Collins and
Raleigh met three times during the year ended January 31, 2004.
Compensation Committee Interlocks and Insider Participation
Members of the Stock Option and Compensation Committee are independent outside
directors who do not serve in any other capacity with respect to the Company or
any of its subsidiaries. The members of the Stock Option and Compensation
Committee are Eric O. Hallman, John J. Collins, Jr. and Walter J. Raleigh. No
Lakeland executive officer has ever served or presently serves on the
compensation committee (or equivalent), or board of directors of another entity
whose executive officers(s) served on Lakeland's Stock Option and Compensation
Committee Board. Messrs. Collins and Hallman are partners of POMS Holding Co.
and Messrs. Collins, Hallman and Raleigh are partners of River Group Holding
Co., LLP, and An Qiu Holding Co., LLC. See "Certain Relationships and Related
Transactions".
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any of
our filings under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that we specifically incorporate this Report by
reference therein.
During fiscal 2001, the Audit Committee of the Board of Directors
developed a charter for the Committee, which was approved by the full Board of
Directors on June 21, 2000. The complete text of this charter, which reflects
standards set forth in the regulations of the Securities and Exchange Commission
("SEC") and NASDAQ rules, is for your information reproduced in Appendix A to
this Proxy Statement.
As set forth in more detail in the charter, the Audit Committee's primary
duties and responsibilities fall into three broad categories:
first the Committee will serve as an independent and objective party to monitor
our financial reporting process and internal control system;
10
second, the Committee is responsible for reviewing and appraising the audit
efforts of our independent accountants and internal auditing department; this
includes matters concerning the relationship between the Company and its outside
auditors, including recommending their appointment or removal; reviewing the
scope of their audit services and related fees, as well as any other services
being provided to us and determining whether the outside auditors are
independent (based in part on the annual letter provided to us pursuant to
Independence Standards Board Standard No. 1); and
third, to provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of Directors.
The Committee has implemented procedures to ensure that during the course
of each fiscal year it devotes the attention that it deems necessary or
appropriate to each of the matters assigned to it under the Committee's charter.
To carry out its responsibilities, the Committee met seven times during fiscal
2004.
In overseeing the preparation of our financial statements, the Committee
met with both management who has the primary responsibility for the financial
statements, the reporting process and the systems of internal control, and our
outside auditors who are responsible for expressing an opinion on the conformity
of our audited financial statements under generally accepted auditing standards,
to review and discuss all financial statements under generally accepted auditing
standards, to review and discuss all financial statements prior to their
issuance and to discuss significant accounting issues. Management advised the
Committee that all financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee discussed the
statements with both management and the outside auditors. The Committee's review
included discussion with the outside auditors of matters required to be
discussed pursuant to Statement on Auditing Standards Nos. 61 and 90,
"Communication With Audit Committees".
With respect to our outside auditors, the Committee, among other things,
discussed with PricewaterhouseCoopers LLP matters relating to its independence,
including the disclosures made to the Committee and received written disclosure
and the letter from the independent auditors as required by the Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees". The current members of the Audit Committee meet the independence
and experience requirements set forth in Rule 4200 (a) (15) of the listing
standards of the National Association of Securities Dealers, Inc.
The Audit Committee includes at least one independent director who is
determined by the Board to meet the qualifications of an "audit committee
financial expert" in accordance with SEC Rules. Michael E. Cirenza is the
independent director who has been determined to be an audit committee financial
expert. Stockholders should understand that this designation is an SEC
disclosure requirement related to Mr. Cirenza's experience and understanding
with respect to certain accounting and auditing matters. The designation does
not impose on Mr. Cirenza any duties, obligations or liability that are greater
than are generally imposed on him as a member of the Audit Committee and the
Board, and his designation as an audit committee financial expert pursuant to
this SEC requirement does not affect the duties, obligations or liability of any
other member of the Audit Committee of the Board.
On the basis of these reviews and discussions, the Committee recommended
to the Board of Directors that the Board approve the inclusion of our audited
financial statements in the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 2004, for filing with the Securities and Exchange
Commission. The Committee and the Board have also recommended the selection of
our independent auditors.
11
THE AUDIT COMMITTEE:
Michael E. Cirenza
John J. Collins, Jr.
Eric O. Hallman
Walter J. Raleigh
Fees billed to the Company by PricewaterhouseCoopers LLP for the year ended
January 31, 2004 and 2003:
The Company incurred the fees shown in the following table for
professional services provided by PWC for 2004 and 2003:
2004 2003
-------- --------
Audit Fees (1) $116,000 $ 89,000
Audit-Related Fees (2) 6,000 0
Tax Fees (3) 24,000 24,000
All Other Fees (4) 15,803 6,140
-------- --------
Total (5) $161,803 $119,140
======== ========
Audit Fees:
1) Audit fees include audit of the Company's financial statements and
the review of the Company's quarterly financial statements included
in the Quarterly Reports on Form 10-Q.
2) Audit-related fees primarily involve transfer pricing issues.
3) Tax fees relate to the preparation of tax returns and other tax
compliance activities.
4) All other fees consist of regulatory advisory services and expense
reimbursement.
5) Aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP in connection with its audit of our
consolidated financial statements as of and for the years ended
January 31, 2004 and 2003 and its limited reviews of our unaudited
condensed consolidated interim financial statements were $116,200
and $89,000, of which an aggregate amount of $52,200 and $37,000 had
been billed through January 31, 2004 and 2003 respectively.
Financial Information Systems Design and Implementation Fees:
During the years ended January 31, 2004 and 2003, PricewaterhouseCoopers LLP
rendered no professional services to us in connection with the design and
implementation of financial information systems.
Respectfully submitted,
AUDIT COMMITTEE
12
RATIFICATION OF AUDITORS
(Item 2 on Proxy Card)
The Board of Directors, on the recommendation of the Audit Committee, has
appointed the firm PricewaterhouseCoopers LLP (hereinafter referred to as "PWC")
as our independent public accountants for the fiscal year ending January 31,
2005 and recommends that the stockholders vote `FOR" ratification of such
appointment. It is expected that a representative of PWC will be present at the
Meeting and will have the opportunity to make a statement and will be available
to respond to appropriate questions.
Stockholder ratification of the appointment of PWC as our independent
public accountants is not required by our bylaws or other applicable legal
requirement. However, the Board is submitting the appointment of PWC to the
stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the appointment, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the appointment is
ratified, the Board may direct the appointment of a different independent
accounting firm at any time during the year if it determines that such a change
would be in our best interests and in the best interests of our stockholders.
Ratification of the appointment of auditors requires a majority of the
votes cast thereon. Abstentions with respect to this proposal have the same
effect as a vote against the proposal. Broker non-votes with respect to this
proposal will not be counted with regard to this proposal.
The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of PWC as our independent public accountants.
COMPENSATION OF EXECUTIVE OFFICERS
----------
The table below sets forth all salary, bonus and all other compensation paid to
our chief executive officer and each of our other executive officers (who earned
more than $100,000 per year in salary and bonus) for the years ended January 31,
2004, 2003 and 2002:
Long -term
Annual Compensation Compensation Awards
------------------------------------ --------------------------------
(a) (b) (c) (d) (e) (g)
----------------------------------------------------------------------------------------------------------------
Securities
Name and All Other Underlying
Principal Position Year Salary Bonus Compensation Options/SARs (#)
------------------ ---- -------- -------- ------------ ----------------
Raymond J. Smith, 2004 $276,000 $132,500 $ 30,041 0
Chairman (Former President) 2003 262,500 82,500 22,242 0
2002 262,500 0 7,289 0
Christopher J. Ryan, President 2004 $241,000 $ 27,300 $ 9,453 0
(Former Executive V.P.), 2003 215,000 40,300 8,927 4,455
General Counsel and Secretary 2002 215,000 0 8,548 4,050
Harvey Pride, Jr 2004 $152,000 $ 16,800 $ 4,799 0
Vice President, 2003 135,000 24,800 4,503 0
Manufacturing 2002 135,000 0 3,606 0
James M. McCormick 2004 $152,000 $ 21,000 $ 12,037 0
Treasurer 2003 135,000 31,000 5,259 0
2002 135,000 0 4,372 9,850
13
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
There are four executive officers with salary and bonus individually
exceeding $100,000. There were no pension or retirement plans or other benefits,
payable or accrued, for such persons during fiscal year 2004. We have entered
into employment contracts with all executive officers providing for fiscal 2005
annual compensation of $250,000 for Mr. Smith and $295,000 for Mr. Ryan,
$170,000 for Mr. Pride, and $170,000 for Mr. McCormick. Messrs. Smith and Pride
each have a three year contract which expires on January 31, 2007; Mr. Ryan has
a two year contract expiring February 1, 2006 and Mr. McCormick has a one year
contract expiring January 31, 2005. In addition we have entered into an
employment contract with Paul C. Smith the son of Raymond J. Smith, commencing
February 1, 2004. This contract provides for annual compensation of $130,000 and
expires on January 31, 2007. All contracts are automatically renewable for two,
one year terms, unless in various instances 30 to 120 days notice is given by
either party. The above named executives participate in the Company's 401-K Plan
which commenced on January 1, 1995. The Company made a contribution to this plan
totaling $100,033, during the plan year ended December 31, 2003.
These employment contracts are similar in nature and include disability
benefits, vacation time, non- compete and confidentiality clauses. There are no
provisions for retirement. Messrs. Smith, Ryan, Pride and McCormick's contracts
have an additional provision for annual bonus based on the Company's performance
and based upon earnings per share formulas determined by the Stock Option and
Compensation Committee of the Board of Directors of the Company. Accordingly,
the annual bonus accrued at January 31, 2004 (for payment in May 2004) were
Messrs. Smith $200,000, Ryan $44,950, Pride $31,000 and McCormick $31,000. All
contracts provide for lump sum payments of contracted salaries pursuant to
various formulas should there be a change in control of the Company. Messrs.
Smith and Ryan have minimum bonus provisions contained in their contracts of
$25,000 and $20,000, respectively.
How does the Company pay its executive officers?
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board oversees the administration of the
Company's executive compensation programs. The Committee is responsible for
establishing and interpreting the Company's compensation policies and approving
all compensation paid to executive officers, including the Named Executive
Officers listed in the Compensation of Executive Officers Table of this Proxy
Statement.
Each member of the Committee is an independent director as defined by the
National Association of Securities Dealers rules.
Compensation Philosophy
The Company's executive compensation program consists of three principle
elements: a base salary, a performance-based annual incentive plan based upon
the Company's earnings per share and long-term incentives. The purpose of the
program is to attract, motivate and retain high quality key executives and
managers.
When setting the base and incentive compensation levels for executives,
the Committee normally compares such compensation levels primarily with those of
peer companies and other companies of similar size in revenues and market
capitalization. The Committee normally makes such comparison
14
because it believes that it is with these companies that the Company must
compete for qualified and experienced executives.
The Committee recognizes that a variety of circumstances may influence the
performance of an individual or the Company at any given time. Accordingly, the
Committee uses its judgment to make discretionary awards or adjustments under
compensation plans when it believes that doing so serves the long-term interests
of the Company's shareholders.
In fiscal year 2004, the Committee initiated an extensive review of the
Company's executive compensation strategy and programs. The Committee believes
it was necessary to focus on the overall cost and competitiveness of executive
compensation, while rewarding and retaining the management team in a period of
challenging business conditions. Accordingly, the Committee adopted a executive
compensation strategy for 2004 and beyond. Going forward, overall executive pay
will be positioned at the 65th percentile of the median of the market in both
the mix of direct pay elements and total direct compensation value. Individuals
could also earn compensation above or below the median based on the Company's
financial performance and their individual contributions. With respect to
long-term incentive awards, in the future the Company will issue stock options
at its discretion.
The Compensation Committee's responsibilities include overseeing the
Company's compensation policies, supervising compensation for management and
employee benefits and administering our stock option and other employee benefit
plans.
The Compensation Committee also develops and negotiates employment
agreements with key executive officers. These employment agreements include base
salaries and incentive compensation arrangements designed to reward management
for achieving certain earnings or performance levels. The Compensation Committee
is also responsible for developing or reviewing incentive compensation
arrangements which the Company enters into with executive officers and key
individuals, other than those senior executives who have written employment
agreements. See "Compensation of Executive Officers".
In order to determine appropriate levels of executive compensation, the
Compensation Committee reviews various factors, including individual
performance, and evaluates the progress of the Company towards attaining its
long-term profit and return on equity goals. Compensation packages for senior
executive officers have been structured to attempt to compensate them to a
substantial extent based on the profitability of the Company as a whole.
Base Salary
In addition to market competitiveness, the Committee also considers
certain qualitative factors in determining base salaries. Such factors can
include the executive's (1) past performance and contributions to the Company's
success, (2) additional responsibilities arising from internal and external
factors impacting the Company, (3) expected future position and contributions,
(4) tenure in the executive's current position, and (5) vulnerability to
recruitment by other companies.
Annual Incentive Awards
Each year, the Committee establishes earnings-related goals for the
Executive Officers for the fiscal year. The Executive Officers are eligible to
receive a cash award based primarily on the extent to which the Company
increases its earnings per share from the prior year, which may be modified by
other measures related to service, quality and ethics.
15
Long- Term Incentives
The Committee's objective for long-term compensation will be to provide
executives with an interest in common with that of the Company's shareholders
and an incentive to enhance the Company's long-term financial performance, and
thus shareholder value. The Committee's policy with respect to setting long-term
compensation awards is to consider the practices of peer companies and other
companies of similar size and market capitalization value. This is because the
Company must compete with such other companies in order to attract and retain
qualified executives and because shareholders consider investing not only in
other companies but also other companies generally when evaluating where best to
invest their capital. Grant guidelines are established for each executive
position based on the median competitive aggregate grant value for peer
companies with similar market capitalization.
In fiscal 2004, the Company made no stock option grants to executive management.
Compensation for the Executive Officers
Messrs. Smith, Ryan, Pride, McCormick and Smith have been awarded base
compensation of $250,000, $335,000, $190,000,$190,000 and $130,000,
respectively, for fiscal 2006. In addition, the Committee reviewed what was
normally paid the Chairman in Mr. Smith's case and President, Secretary and
General Counsel in Mr. Ryan's case, the Chief Manufacturing Executive in Mr.
Pride's, Treasurer in Mr. McCormick's case, and Vice President in Mr. Smith's
case in public companies of Lakeland's size and concluded that the compensation
package represented close to the median of officer compensation in like public
companies of comparable size after reviewing 2003 Officer Compensation Report, A
Panel Publication, Aspen Publishers Inc.
These contracts also provide for bonuses in addition to salary based upon
the Company's increase in earnings. (See Directors and Principal Stockholders.)
The Stock Option and Compensation Committee believes that the contracts covering
Messrs. Smith, Pride and Ryan are appropriately tied to their respective levels
of expertise, were constructed at or below industry norms, and any increases in
compensation were and will be tied to increases in the Company's earnings. The
Stock Option and Compensation Committee also took into consideration that since
the inception of the Company 22 years ago there have been no executive pension
plans, deferred compensation plans, or other compensation or benefit plans for
executives of the Company other than the Company's Stock Option Plan and the
401-K Plan, the latter of which did not go into effect until January 1, 1995.
The Board Compensation Committee Report on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate this information by reference, and shall not otherwise
be deemed filed under such Acts.
Members of the Compensation Committee
Eric. O Hallman
John J. Collins, Jr.
Walter J. Raleigh
16
Performance Graph
The following Corporate Performance Graph, obtained from Media General Financial
Services of Virginia, compares the five year cumulative total return of our
common stock with that of a broad equity market index, including dividend
reinvestment, and with that of a peer group:
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG LAKELAND INDUSTRIES, INC.,
S&P COMPOSITE INDEX AND PEER GROUP INDEX
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
(DOLLARS)
--------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004
--------------------------------------------------------------------------------
LAKELAND INDUSTRIES, INC 100.00 67.65 74.02 143.53 120.45 278.68
--------------------------------------------------------------------------------
PEER GROUP INDEX 100.00 62.75 65.05 83.91 128.27 154.84
--------------------------------------------------------------------------------
S&P COMPOSITE INDEX 100.00 110.35 109.35 91.70 70.59 95.00
--------------------------------------------------------------------------------
ASSUMES $100 INVESTED ON FEB. 01, 1999
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JAN. 31, 2004
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We currently grant stock options under two plans both of which were
approved by our shareholders in 1994. The first is our Employee Incentive Stock
Option Plan and the second is our Non-Employee Directors' Option Plan. There are
currently 250,000 option shares available for future grant under the Employee
Incentive Stock Option Plan and 29,000 option shares available for future grant
under the our Non-Employee Directors' Option Plan. Employee Incentive Stock
Option awards are made at the discretion of the Compensation Committee of the
Board of Directors. No Employee Incentive Stock Options were awarded for the
fiscal years ending January 31, 2004, 2003, 2003, 2002 and 2001. The Director's
Option Plan stipulates that upon an independent director's initial election to
the Board of Directors that director is to receive 5,000 options and upon each
re-election (a period of three years) a director is to receive 1,000 options.
This plan only covers independent directors who are neither officers nor
employees.
17
Equity Compensation Plan Information
Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance under
of outstanding options, outstanding options, equity compensation plans
warrants and rights warrants and rights (excluding securities reflected in
column (a))
Plan category (a) (b) (c)
---------------------------- ----------------------- -------------------- -----------------------------------
Equity compensation
plans approved by 12,540 $7.70 279,000
security holders
Equity compensation None 0 0
plans not approved by
security holders
Total 12,540 $7.70 279,000
Option/SAR Grants in Last Fiscal Year - No stock options were granted to any
employee in fiscal 2004 and no SAR grants have been made since inception of the
Stock Option Plan, see "Directors' Compensation".
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values.
Messrs. Smith, Ryan, Pride and McCormick participate in the Company's
Incentive Stock Option Plan (common stock). There are no outstanding incentive
stock options as of January 31, 2004.
There are currently 250,000 option shares available for future grant under
this plan. During the year ended January 31, 2004, no stock options were granted
and the following options were exercised:
Shares Value Number of Securities Underlying Value of Unexercised In-the-Money
Name of Acquired on Realized Unexercised Options/SARSs at Fiscal Options/SARSs at Fiscal Year-End ($)
Executive Exercise # $ Year-End ($) Uxercisable/Unexercisable Exercisable/Unexercisable
--------- ----------- -------- -------------------------------------- ------------------------------------
Christopher J. Ryan 4,900 $71,932 0 0
* Share amount, option price, and exercise price have been adjusted for the
1 for 10 stock distributions to shareholders of record on July 31, 2003
and 2002.
18
DIRECTORS' COMPENSATION
----------
Members of the Board of Directors, in their capacity as directors, are
reimbursed for all travel expenses to and from meetings of the Board. Outside
Directors received $3,000 quarterly as compensation for serving on the Board and
its committees. There are no charitable award or director legacy programs.
Messrs. Collins, Hallman, Raleigh, and Cirenza participate in our Non-Employee
Directors' Option Plan as follows:
Value of Unexer-
cised In-the-Money
# of Option Date of Expiration Options/SARS at
Director Shares* Price* Grant Date FY-End ($)
Exercisable
------------ ------- --------- --------- ---------- ------------------
Mr. Collins: 1,100 $ 8.73636 6/18/03** 6/18/2009 $16,148
1,210 $ 4.90744 6/21/00 6/21/2006 $17,763
Mr. Hallman: 1,100 $ 8.73636 6/18/03** 6/18/2009 $16,148
1,210 $ 4.90744 6/21/00 6/21/2006 $17,763
Mr. Raleigh: 1,210 $ 8.8843 6/17/98 6/17/2004 $17,763
1,210 $ 5.5289 6/20/01 6/21/2007 $17,763
Mr. Cirenza 5,500 $ 8.73636 6/18/03** 6/18/2009 $80,740
------
12,540
* Share amounts exercise and option price have been adjusted for the 1 for
10 stock distributions to shareholders of record on July 31, 2003 and
2002.
** Granted during the fiscal year ended January 31, 2004 upon election or
re-election to the Board of Directors.
There are currently 29,000 option shares available for future grant under
this plan. During the year ended January 31, 2004, the following stock options
were exercised:
Name of No. of Shares Exercise Date of Per Share Exercise Total
Executive Exercised* Price* Exercise Date Value Value Realized
--------- ------------- -------- -------- ------------------ --------------
Mr. Collins: 1,100 $4.6509 5/6/03 $ 8.908 $ 9,799
Mr. Hallman 1.100 $4.6509 5/6/03 $ 8.908 $ 9,799
Mr. Raleigh 3,300 $2.9545 4/7/03 $ 8.182 $27,001
* Share amounts exercise and option price have been adjusted for the 1 for
10 stock distributions to shareholders of record on July 31, 2003 and
2002.
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------
Related Party Leases
In the past, because our access to third party financing was insufficient,
we entered into arrangements with our directors and executive officers in order
to fund the construction or acquisition of our assembly facilities. In such
cases, we commissioned independent appraisals in 1999, 2002 and 2004 to ensure
that these arrangements approximated arrangements made on an arms length basis.
We believe that we currently have sufficient access to financing to fund our
current and anticipated facility needs and we do not anticipate entering into
additional arrangements with our directors or executive officers in the future
and we are examining alternatives for financing these facilities that do not
include executive officers or directors. We intend to conclude our study of the
alternative financing arrangements by July 30, 2004 and to implement any new
financing arrangements by October 30, 2004. A description of our current
arrangements with our directors and executive officers follows.
POMS Holding Co., or POMS, was formed in 1984 to lease both land and a
building to us because bank financing was unavailable. POMS is a partnership
whose partners include three of our directors, one of our officers and six other
individuals who were stockholders at the time of the formation of POMS. Raymond
J. Smith, the chairman of our board of directors, Harvey Pride, Jr., our Vice
President - Manufacturing, and John J. Collins and Eric O. Hallman, both of whom
are directors, have a 20%, 20%, 8.75% and 5% interest in POMS, respectively.
POMS presently leases to us a 91,788 square foot disposable garment
manufacturing facility in Decatur, Alabama of which approximately 20% is highly
improved office space. Under a lease effective September 1, 1999, we paid an
annual rent of $364,900. This lease was renewed on April 1, 2004 through March
31, 2009 at the same rental rate.
On June 1, 1999, we entered into a five year lease agreement (expiring May
31, 2004) with River Group Holding Co., L.L.P. for a 49,500 sq. ft. warehouse
facility located next to the existing facility in Decatur, Alabama. River Group
Holding Co., L.L.P. is a limited liability partnership consisting of Raymond
Smith, John Collins, Eric Hallman, Walter Raleigh, Christopher Ryan and Harvey
Pride who are all equal partners. Mr. Ryan is our President, Secretary, General
Counsel and a director of our company, Messrs. Smith, Collins, Hallman and
Raleigh are all directors of our company, and Mr. Pride is our Vice President -
Manufacturing. We paid an annual rent of $199,100 for this facility during our
fiscal year ended January 31 2004. We are the sole occupant of the facility.
This lease was renewed on April 1, 2004 through March 31, 2009 at the same
rental rate.
On March 1, 1999, we entered into a one year (renewable for four
additional one year terms) lease agreement with Harvey Pride, Jr., our Vice
President - Manufacturing, for a 2,400 sq. ft. customer service office located
next to our existing Decatur, Alabama facility. We paid an annual rent of
$18,000 for this facility under the lease agreement during our fiscal year ended
January 31, 2004. This lease was renewed on March 1, 2004 through February 28,
2009 at the same rental rate.
Past Related Party Transactions
In 1997, An Qui Holding Co., L.L.C., a limited liability company whose
members are Lakeland, five of our directors and one of our officers, financed
the construction of a 46,000 square foot building in An Qui City, China and the
leasing of the real property underlying the building for 50 years to Weifang
Lakeland Safety Product Co., Ltd., one of our subsidiaries. Weifang was
obligated to make annual rental payments and to pay a portion of the proceeds
from any sale of the property to An Qui. In 2002, An Qui sold to Weifang its
rights to the annual rental payments and to its contractual rights to proceeds
from the
20
sale of the property for an aggregate purchase price of $406,045 (net of
expenses). Weifang paid $222,645, $89,000 and $94,400 of this purchase price to
An Qui in December 2002, January 2003 and June 2003, respectively. Messrs Pride,
Hallman, Smith, Ryan and Collins each received 10.94% (or $44,421) of these
proceeds while Mr. Raleigh received 9.8% (or $39,792) of such proceeds.
In 2001, An Qui also financed the construction of our facility in Jiazhou
City, China through two separate loans. On June 19, 2003, we acquired one of
these construction loans in return for payment of $168,100 (plus accrued
interest) to An Qui and a foreign investor who had participated in the loan. The
loan (by Messrs. Pride, Hallman, Smith, Ryan and Collins and two other investors
in the amount of $168,100) was evidenced by an assignable unsecured promissory
note dated May 17, 2002 bearing simple interest at 9% annually, and, if not paid
by May 30, 2003, the interest rate would have increased to 10%. Each of the 5
Lakeland officers and directors invested $26,000 in the project and was repaid
his investment of $26,000 plus interest of $3,037.59.
The second loan was an intercompany loan made by Meiyang Protective
Products Co., Ltd., a wholly owned subsidiary, to its sister subsidiary Qing Dao
May Tung Healthcare Co., Ltd. The outstanding principal amount of this loan was
approximately $1,218,588 as of January 31, 2004.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
requires the Company's directors, officers and beneficial owners of more than
10% of the Common Stock to file with the SEC initial reports of ownership of the
Company's equity securities and to file subsequent reports when there are
changes in such ownership. Officers, directors and beneficial owners of more
than 10% of the Common Stock are required by SEC regulations to furnish the
Company with copies of all Section 16(a) reports they file.
Based upon a review of Forms 3, 4, and 5 furnished to the Company during or with
respect to preceding fiscal year and written representations from certain
reporting persons, we were not aware of any failure by a reporting person to
make timely filings of those Forms as required by Section 16(a) of the
Securities Exchange Act of 1934.
OTHER MATTERS
----------
The Board of Directors knows of no matters other than those described
above that may come before the Annual Meeting. As to other matters, if any, that
properly may come before the Annual Meeting, the Board of Directors intends that
proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the person or persons voting the proxies.
21
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
----------
Stockholder proposals for inclusion in the Company's Proxy Statement for the
2005 Annual Meeting of Stockholders must be received by the Company not later
than January 31, 2005. The person submitting the proposal must have been a
record or beneficial owner of the Company's Common Stock for at least one year
and must continue to own such securities through the date on which the meeting
is held, and the securities so held must have a market value of at least $1,000.
Any such proposal will be included in the Proxy Statement for such Annual
Meeting if the rules of the Securities and Exchange Commission are complied with
as to the timing and form of such proposal, and the content of such
stockholder's proposal is determined by the Company to be appropriate under
rules promulgated by the Commission.
By the Order of the Board of Directors
Christopher J. Ryan,
Secretary
May 7, 2004
22
Appendix A
LAKELAND INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
Membership
The audit committee will be composed of not less than three members of the
board. They will be selected by the board, taking into account prior experience
in matters to be considered by the committee, probable availability at times
required for consideration of these matters, and their individual independence
and objectivity.
The committee membership will meet the requirements of the audit committee
policy of the NASDAQ Independent Director and Audit Committee Requirements.
Accordingly, all of the members will be directors independent of management and
free from any relationship that, in the opinion of the board of directors, would
interfere with the exercise of independent judgment as a committee member.
No officers or employees of the company or its subsidiaries will serve on
the committee. A former officer of the company or any of its subsidiaries may
serve on the committee (even though the former officer may be receiving pension
or deferred compensation payments from the company) if, in the opinion of the
board of directors, the former officer will exercise independent judgment and
will materially assist the committee's function. However, a majority of the
committee will be directors who were not formerly officers of the company or any
of its subsidiaries.
In considering relationships that might affect independence, including
possible affiliate status, the board of directors will give appropriate
consideration to guidelines issued by the NASDAQ as supplementary material to
its audit committee policy, which were provided to assist boards of directors in
observing the spirit of the policy.
Actions of the Committee
The activities of the committee may result in the following types of
actions.
a. Those in which the committee will inform the board that action has
been taken in the board's interest and does not require prior board
approval.
1. Review and approve the scope of the annual audit for the
company and its subsidiaries recommended jointly by the
independent CPAs and the president.
2. Review and approve the scope of the company's annual profit
and pension trusts audits.
3. When requested by the chairman of the board during an annual
shareholders' meeting, the committee chairman will answer
questions raised by a shareholder on matters relating to the
committee's activities.
4. Request the president to have the internal audit staff study a
particular area of interest or concern.
23
b. Those which the committee will review and study and then recommend
action by the board.
1. Appoint independent public accountants.
2. Review major accounting policy changes before implementation.
3. Review SEC registration statements before signature by other
board members.
4. Review annual audit reports and the content of proposed
published reports.
c. Those which the committee will review and study and provide summary
information reports to the board when appropriate.
1. Review trends in accounting policy changes proposed or adopted
by organizations such as the Financial Accounting Standards
Board, the Securities and Exchange Commission (SEC), and the
American Institute of Certified Public Accountants or by
comparable bodies outside the United States.
2. Interview independent CPAs for review and analysis of
strengths and weaknesses of the company's financial staff,
systems, adequacy of controls, and other factors which might
be pertinent to the integrity of published financial reports.
3. Participate in financial review preceding publication of
quarterly reports.
4. Review administration of the company's "conflict of interest"
policy.
5. Review the performance of management and operating personnel
under the company's code of ethics.
6. Review insurance programs from the standpoint of gaps and
exposure as well as fraud.
7. Review reports on the company or its subsidiaries by agencies
of governments in countries where the company or its
subsidiaries operate.
8. Review periodic SEC filings by the company and assure that
adequate programs and procedures exist to comply with SEC
regulations and regulations of securities exchanges (such as
the NASDAQ).
24
Appendix B
12/1/00
LAKELAND INDUSTRIES, INC.
CODE OF ETHICS
FOR DIRECTORS, OFFICERS AND EMPLOYEES.
Introduction
For the past several years, the activities of business organizations, both large
and small, have been the subject of increased scrutiny and criticism by the
public, the government, and the news media.
This is particularly true of multinational corporations, which have been the
object of worldwide demands for public statements of their corporate codes of
ethics.
For that reason, it is appropriate for Lakeland Industries, Inc. to restate it
position on ethical conduct, based on the original precepts of the business and
on policies formulated as the corporation has grown.
As a good corporate citizen, Lakeland Industries, Inc. has always endeavored to
conduct its business in a manner conforming to the highest ethical standards.
The company's reputation for unquestionable integrity is its most valuable asset
in its relationships with its customers, employees, shareholders, and the
communities in which its plants are located.
The following statement of business principles has been prepared to guide the
future conduct of company activities in an ethical and legal manner. It is not
intended to supply answers for every business activity; rather, it is an effort
to reiterate the continuing policies of the corporation on ethical business
behavior, which must be observed by all Lakeland Industries, Inc. employees and
representatives throughout the world. It is essential that all employees and
representatives conform to these principles as they perform their activities on
behalf of Lakeland Industries, Inc.
Lakeland and its employees
Employees are the corporation's greatest asset, and it is a Lakeland Industries,
Inc. policy to treat them fairly in all matters and to pay them competitively.
Lakeland and its domestic subsidiaries are engaged in a program of full
compliance with all federal and state laws applicable to hiring and promoting
people on the basis of demonstrated ability, experience, and training without
regard to race, religion, sex age, national origin, or other factors requiring
affirmative action. The corporation requires continuous management attention at
all corporate levels to assure compliance with the spirit and letter of this
policy.
With this in mind, it is the intent of Lakeland to:
Choose its employees on the basis of their ability to perform the work for which
they are hired without regard to race, religion, sex, age, national origin, or
other factors requiring affirmative action.
Offer employees a safe, healthy, and clean work environment.
Offer work that challenges the employees and gives them a feeling of
satisfaction. Pay employees fairly in relation to their contributions to the
company's efforts, within the boundaries of current standards.
Lakeland and the Community
The corporation shall conduct its business in a manner that is socially
responsible. In addition to manufacturing and selling products, it shall protect
the quality of the environment and endeavor to conserve energy and other
valuable resources.
25
Each of the corporation's facilities is expected to make every effort to be an
integral part of the community in which it operates, and to participate in its
activities as a concerned and responsible citizen. Like individual citizens, it
benefits from such activities as health, welfare, character building, education,
and culture. And like individuals, it has the responsibility to support and
develop these social and civic activities.
The company recognizes that employee participation in cultural, social or
volunteer organizations can be public service of a higher order, and all
Lakeland employees are encouraged to participate in public activities of their
individual choice.
Lakeland and its Customers
The corporation shall endeavor to supply its customers with quality products,
delivered on schedule and sold at a fair price. Lakeland products will be
manufactured to the company's high quality standards and will offer customers
all the technical skills of its employees and the expertise of Lakeland
technology and know-how.
Lakeland and the Law
It is the policy of Lakeland to comply fully with all valid laws and regulations
that govern its operations in the various communities, states and countries in
which it operates and to conduct its affairs in keeping with the highest moral,
legal and ethical standards.
There is an obligation, both corporate and individual, to fulfill the intent of
the above statement. It is not expected that every employee will have full
knowledge of the laws affecting his or her responsibilities. The company does,
however, expect that employees with significant responsibilities will have a
general knowledge of prohibited activities involved in their work and will seek
guidance on any matter on which there is a question, either directly from the
corporation's legal department or through their supervisors.
Honesty is not subject to equivocation at any time in any culture, and even
where the law may be permissive; your corporation chooses to follow the course
of highest integrity. The reputation of the company for scrupulous dealing is a
priceless asset, just as it is for individuals. The intent of these principles
is to maintain and develop the corporation's reputation in the future as it has
in the past.
Lakeland and Business Ethics
The law is a base for ethical business conduct which should normally be at a
level well above the minimum required by law. In its relationships with
customers, the corporation will offer the same advantages to all and will be
fair in all its endeavors. Gifts or bribes for the purpose of influencing the
buying decisions of employees of customers or potential customers or persons in
a position to influence a buying decision are clearly improper and prohibited.
In dealing with suppliers, an employee shall not solicit, accept, or countenance
payments or substantial gifts, regardless of motive, from either a vendor or a
potential vendor.
In its relationships with its competitors, the corporation and its employees
will fully understand and strictly adhere to the requirements of the antitrust
laws. These laws, which, in the United States, include the Sherman Act, Clayton
Act, Robinson-Patman Act, and Federal Trade Commission Act, seek to advance and
maintain the free enterprise system and take precedence over any business
objective of the corporation, notwithstanding any resulting increases in sales
or profits.
Such acts as price-fixing, restrictive agreements, boycotts, tie-in arrangements
exclusive of reciprocal dealings, monopolizing, price inducements, and
discriminatory allowances are or may be illegal. All employees shall
scrupulously avoid violations of the antitrust laws. The corporation will not
condone any actions which an employee knew or should have known would violate
the antitrust laws or any other valid law or regulation.
The corporation and its units shall make no financial contributions to a
political party or to a candidate running for any elective office. This policy
applies to all political parties or candidates worldwide, even when permitted by
local
26
law. Payments, regardless of amount, to any government employee, or gifts or
services of substantial value or lavish entertainment, regardless of motive, are
prohibited.
Relationships with public employees shall be so conducted that neither the
officials nor the company's integrity would be compromised if the full details
of the relationship became a matter of public knowledge.
Lakeland and Conflicts of Interest
It has always been, and continues to be, the corporation's intent that its
employees maintain the highest standards of loyalty in their conduct of company
affairs. In essence, company employees shall deal with suppliers, customers, and
other persons doing business or seeking to do business with the corporation in a
manner that eliminates considerations of personal advantage.
Because they hold positions of trust in the corporation, a director, an officer,
or any employees may not make a profit from the corporation because of their
official position. They are also clearly prohibited from engaging in a competing
business.
In addition to the legal responsibility of the directors and officers, it is the
duty of all employees to act in the best interests of the corporation and to
avoid situations which might produce a conflict between their own interests and
those of the corporation. Employees shall have no financial interest in any firm
doing business with or seeking to do business with the corporation, nor shall
they accept employment outside the company which may result in a conflict of
interest, unless same is fully disclosed and approved by a disinterested group
of officers and/or directors.
Enforcement and Protection for Reporting Persons
Any director, officer or employee can report, anonymously, if they want,
violations of the above Code of Ethics directly to Michael Cirenza an
independent director and member to our Audit Committee. Mr. Cirenza will then
inform the other independent directors Messrs. Hallman, Collins, and Raleigh and
they will determine whether a violation has occurred, according to the standards
outlined above, hold a formal meeting, if required, to question the officer,
employee or director reported, and if necessary recommend a disciplinary remedy,
termination, or notify the appropriate legal authorities. The reporting contact
is Michael Cirenza, CFO County-Life, 180 Vanderbilt Motor Parkway, Hauppauge, NY
11788, Tel. # 631-232-5482; E-mail: Michael@country-life.com.
27
REVOCABLE PROXY
LAKELAND INDUSTRIES, INC.
711-2 Koehler Avenue, Ronkonkoma, New York 11779-7410
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Eric O. Hallman and Christopher J. Ryan as
proxies, each with power to appoint his substitute, and hereby authorizes them
to represent and to vote, as designated hereon, all the shares of common stock
of Lakeland Industries, Inc., held of record by the undersigned on April 23,
2004 at the annual meeting of stockholders to be held on June 16, 2004 or any
adjournment thereof.
Please be sure to sign and date this Proxy in the box below.
Date
Stockholder sign above
Co-holder (if any) sign above
1. Election of Directors
Raymond J. Smith Walter J. Raleigh
With- For All
For hold Except
[_] [_] [_]
2. Ratify appointment of Auditors PricewaterhouseCoopers LLP for fiscal year
2005.
For Against Abstain
[_] [_] [_]
3. Other Business
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
Please sign exactly as your name appears on this card. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
--------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
LAKELAND INDUSTRIES, INC.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
If your address has changed, please correct the address in the space provided
below and return this portion with the proxy in the envelope provided.