-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UuReIHTWoZRwjCLliF5CLk0Bguj/ap4wSyFaNtlzOemVZikNYLFKixl/Mhhnu5Dc HNCekw6GRMiFwcBRVYiSTg== 0000914317-00-000318.txt : 20000501 0000914317-00-000318.hdr.sgml : 20000501 ACCESSION NUMBER: 0000914317-00-000318 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAKELAND INDUSTRIES INC CENTRAL INDEX KEY: 0000798081 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 133115216 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15535 FILM NUMBER: 613943 BUSINESS ADDRESS: STREET 1: 711-2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 BUSINESS PHONE: 5169819700 MAIL ADDRESS: STREET 1: 711- 2 KOEHLER AVENUE STREET 2: 711- 2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 10-K 1 FORM 10-K - ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark one) X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 (Fee Required) For the fiscal year ended January 31, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 (No fee required) For the transition period from _____________ to ______________ Commission File Number: 0 - 15535 LAKELAND INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 13-3115216 - ------------------------- -------------------------------- (State of Incorporation) (I.R.S. Employer Identification Number) 711-2 Koehler Ave., Ronkonkoma, NY 11779 -------------------------------------------- (Address of Principal Executive Offices) (631) 981-9700 -------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Common Stock, $.01 Par Value ------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S - K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10 - K or any amendment to this Form 10 - K _ . The aggregate market value of the Common Stock outstanding and held by nonaffiliates (as defined in Rule 405 under the Securities Exchange Act of 1934) of the Registrant, based upon the average high and low bid price of the Common Stock on NASDAQ on April 17, 2000 was approximately $5,743,038 (based on 1,506,173 shares held by nonaffiliates). The number of shares outstanding of the Registrant's common stock, $.01 par value, on April 29, 2000 was 2,644,000. . DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended January 31, 2000 are incorporated by reference in Items 5-7A of Part II and certain portions of the Registrant's Definitive Proxy Statement, for the Annual Meeting of Stockholders to be held June 21, 2000, are incorporated by reference in Items 10 - 13 of Part III of this Annual Report on Form 10-K. A-1 PART I ITEM 1. BUSINESS Lakeland Industries, Inc. (the"Company") believes that it is the leading manufacturer of a comprehensive line of safety garments and accessories for the industrial safety and protective clothing industries in the United States. The Company's major product areas include disposable / limited use protective industrial garments, specialty safety and industrial work gloves, reusable woven industrial and medical apparel, fire and heat protective clothing along with protective systems for personnel, and suits for use by toxic waste clean up teams. Products are manufactured both domestically and internationally by the Company and by contract manufacturers. Products are sold by Company personnel and 44 independent sales representatives, primarily to a network of 500 safety and mill supply distributors. The Company's protective garments are used primarily for: (i) safety and hazard protection, to protect the wearer from contaminants or irritants, such as, chemicals, pesticides, fertilizers, paint, grease, and dust and from limited exposure to hazardous waste and toxic chemicals including acids, asbestos, lead, and hydro-carbon's (PCB's) (ii) clean room environments, for the prevention of human contamination of manufacturing processes in clean room environments, (iii) hand and arm protection, to protect the wearer's hand and arms from lacerations, heat and chemical irritants without sacrificing manual dexterity or comfort, (iv) heat and fire protection, to protect municipal fire fighters, military, airport and industrial fire fighting teams and for maintenance of "hot" equipment, such as, coke ovens, kilns, glass furnaces, refinery installations, and smelting plants, (v) protection from viral and bacterial microbiologicals, to protect the wearer from contagious diseases, such as AIDS and hepatitis, at hospitals, clinics and emergency rescue sites, and (vi) protection from highly concentrated and powerful chemical and biological toxins, to protect the wearer from toxic wastes at Super Fund sites, accidental toxic chemical spills or biological discharges, the handling of chemical or biological warfare weapons and the cleaning and maintenance of chemical, petro- chemical and nuclear facilities. These products are manufactured, distributed and sold through five divisions and four wholly owned subsidiaries. The Company was incorporated in New York in 1982 and later reincorporated in Delaware in 1986. A new subsidiary, Fireland Industries, Inc. was formed during fiscal 1994 and to act as Trustee and Sponsor of the Fireland Industries, Inc. Pension Plan. During fiscal 1998, the name of this subsidiary was changed to Laidlaw, Adams & Peck, Inc. Effective February 1, 1999, the China division, Weifang Lakeland Safety Products Co., Ltd., was incorporated in China as a wholly owned subsidiary of the Company. Background and Market The market for disposable industrial garments has increased substantially in the past 20 years. In 1970, Congress enacted the Occupational Safety and Health Act ("OSHA"), which requires employers to supply protective clothing in certain work environments. At about the same time, DuPont developed Tyvek(TM) which, for the first time, allowed for the economical production of lightweight, disposable protective clothing. The attraction of disposable garments grew in the late 1970's with the increases in both labor and material costs of producing cloth garments and the promulgation of federal, state and local regulations requiring that employees wear protective clothing to protect against exposure to certain contaminants, such as asbestos and P.C.B.s. The use of disposable garments avoids the continuing costs of laundering and decontaminating woven cloth work garments and reduces the overhead costs associated with handling, transporting and replacing such garments. As manufacturers have become aware of the advantages of disposable clothing, the demand for such garments has increased. This has allowed for greater production volume and, in turn, has reduced the cost of manufacturing disposable industrial garments. The Company believes that this market will grow due to the extensive government legislation which mandates the clean up of toxic waste sites and the elimination of hazardous materials from the environment as promulgated under prior Congressional Super Fund Acts. The Environmental Protection Agency ("EPA") designated OSHA to be responsible for the health and safety of workers in and around areas of hazardous materials and contaminated waste. OSHA responded by formulating an all encompassing compendium of safety regulations that prescribe operating standards for all aspects of OSHA projects. Almost 2 million people are affected by OSHA Standards today. Various states have also enacted worker safety laws which are equal to or go beyond OSHA standards and requirements, as it affects the Company's products. In 1990, additional standards proposed and developed by the National Fire Protection Association ("NFPA") and the American Society for Testing and Materials ("ASTM") were accepted by OSHA. NFPA Standard 1991 set performance requirements for total-encapsulating vapor-proof chemical suits and includes rigid chemical and flame resistance tests and a A-2 permeability test against 17 challenge chemicals. The basic OSHA Standards call for 4 levels of protection, A through D, and specify in detail the equipment and clothing required to adequately protect the wearer at corresponding danger levels. A summary of these four levels follows: NFPA 1991 / Level A calls for total encapsulation in a vapor-proof chemical suit with self-contained breathing apparatus ("SCBA") and appropriate accessories. Level B calls for SCBA or positive pressure supplied respirator with escape SCBA, plus hooded chemical resistant clothing (overalls, and long sleeved jacket; coveralls; one or two piece chemical-splash suit; or disposable chemical-resistant overalls). Level C requires hooded chemical-resistant clothing (overalls; two-piece chemical-splash suit; disposable chemical-resistant overalls). Level D is basically a work and/or training situation requiring minimal coverall protection. The growth in the markets for disposable/limited use garments in the industrial safety market has resulted from the following factors: o lower cost of disposable/limited use garments as opposed to reusable woven and cloth garments due to the elimination of costs associated with laundering, decontaminating, handling, transporting and replacing reusable woven or cloth garments; o the promulgation of federal (OSHA) and state regulations requiring that employees wear protective clothing to protect against exposure to certain contaminants, such as, asbestos, PCB(s), lead, acids and other numerous hazardous chemicals and radioactive materials; o increasing workmens' compensation claims and large class action liability suits instituted by both present and prior employees for failure to be protected against hazardous agents found in the workplace. In general, manufacturers of industrial and safety clothing are considered to be highly fragmented, since they consist of a large number of closely held small family businesses. Accordingly, the Company believes that the industries encompassed by disposable/limited use protective garments, industrial work gloves, reusable woven industrial and medical apparel and fire and heat protective clothing could present attractive acquisition opportunities. There are few, if any, dominant personal protective apparel manufacturers, and the market is witnessing significant ongoing consolidation activity, both at the manufacturing level and more significantly, at the safety distributor customer level. Recently, safety distribution channels have experienced more consolidation than the safety manufacturing segment, due to a number of large distributors with access to capital acquiring smaller distributors. A-3 Products - General The following table summarizes the principal products manufactured and/or sold by the Company, organized by the respective fabric's principal markets/uses therefore:
Product Raw Material Protection Against User Industry - ------- ------------ ------------------ ------------- o Limited Use/Disposable o Tyvek(TM)and Tyvek(TM) Contaminants, irritants, o Chemical/petrochemical Protective Clothing laminates chemicals, fertilizers, industries pesticides, acids, o Automotive and asbestos, PCB(s), lead pharmaceutical industries and other hazardous o Public utilities chemicals o Janitorial o Gloves o Kevlar(TM)yarns Cuts, lacerations, heat o Chemical plants o Arm guards o Spectra(TM)yarns and chemical irritants o Automotive, glass and metal fabrication industries o Fire fighting apparel o Neoprene Fire, burns and excessive o Municipal, corporate and o Nomex(TM) heat volunteer fire departments o Gortex(TM) o Airport crash rescue o Heat protective o Aluminized Nomex(TM) Fire, burns and excessive Hot equipment maintenance aluminized fire suits o Aluminized Kevlar(TM) heat personnel and industrial fire departments o Protective woven o Cotton Polyester blends o Protects manufactured o Hospital and Industrial reusable garments o Cotton products from human Facilities o Polyester contamination or static o clean room environments o Staticsorb(TM)Carbon electrical charge o Emergency Medical Thread C-3 Polyester o Bacteria, viruses and Ambulance Services blood borne pathogens o High end Chemical o TyChem(TM) Chemical spills o Hazardous material teams protective suits o Teflon(TM) Toxic chemicals used in o Chemical and nuclear o Other Company patented manufacturing processes industries-various uses Co-Polymer Laminates
Limited Use/Disposable Protective Clothing The Company manufactures a complete line of disposable/limited use protective garments at its U.S., Mexican and Chinese assembly facilities. These garments are offered in coveralls, lab-coats, shirts, pants, hoods, aprons, sleeves and smocks. The Company offers these garments in a number of sizes and styles to fit the end users' needs. Limited-use garments can also be coated or laminated to increase splash protection against many inorganic acids, bases, and other liquid chemicals. Limited use garments are made from several non-woven fabrics including Tyvek(TM), TyvekQC(TM), Tyvek/Saranex 23-P(TM), Pyrolon FR(TM), and Polypropylene and Polyethylene materials and derivatives. The Company incorporates many seaming techniques depending on the level of hold-out needed in the end use application. Seam types utilized include standard serge seam, bound seam, and heat sealed seam. Disposable/limited use industrial garments are used in a wide variety of industries and applications. Typical industry users are chemical plants, petro chemical refineries and related installations, automotive manufacturers, pharmaceutical companies, coal and oil power generation utilities and telephone utility companies. There are many smaller industries that use these garments for specific safety applications unique to their situation. The Company's limited use garments range in price from $.06 for disposable/limited use shoe covers to approximately $12.00 A-4 for Tyvek/Saranex 23-P laminated hood and booted coverall. The Company's largest selling item, a standard white limited-use Tyvek coverall, costs the end user approximately $2.75 to $3.25 per garment. By comparison, similar re-usable cloth coveralls range in price from $20.00 to $60.00, exclusive of significant laundering, maintenance and shrinkage expenses. The Company cuts, warehouses and sells its disposable/limited use garments primarily at its Decatur, Alabama facility. The fabric is first cut into required patterns at this plant which is ISO 9002 certified. The cut fabric and any necessary accessories, such as zippers or elastic, are then obtained from the Company's plant by the Company's wholly owned assembly facilities or independent sewing contractors. The Company's assembly facilities in China or Mexico and independent contractors sew and package the finished garments at their own facilities and return them to the Company's plant, normally within one to eight weeks for immediate shipment to the customer. The Company presently utilizes over 11 independent sewing contractors under agreements that are terminable at will by either party. These contractors employ approximately 140 people full-time (both domestically and internationally) and operate and maintain their own industrial sewing machines. The Company believes that it is the only customer of the majority of its independent sewing contractors and considers its relations with such contractors to be excellent. In the year ended January 31, 2000, no independent sewing contractors accounted for more than 5% of the Company's production of disposable/limited use garments. The Company believes that it can obtain adequate alternative production capacity should any of its independent contractors become unavailable. The Company believes that its manufacturing system permits it considerable flexibility. Furthermore, by employing additional sewing contractors, the Company can increase production without substantial additional capital expenditures. While the Company has not experienced reduced demand for its disposable / limited use garments, management believes that by its use of its facilities complemented by the use of independent sewing contractors, the Company is capable of reducing or alternately increasing by 20% its production capacity without incurring large on-going costs typical of many manufacturing operations. This allows the Company to react quickly to changing unit demand for its products. Gloves and Arm Guards The Company manufacturers and sells speciality safety gloves and sleeves made from Kevlar(TM). The Company is one of five companies licensed to sell 100% Kevlar(TM) gloves. Kevlar(TM) is a cut and heat resistant, high-strength lightweight, flexible and durable material produced by Dupont. Kevlar(TM), on an equivalent weight basis, is five times stronger than steel and has increasingly been used in manufacturing such diverse products as airplane fuselage components and bullet-resistant vests. Gloves made of Kevlar(TM) offer a better overall level of protection, lower the injury rate and are more cost effective than work gloves made from such traditional material as leather, canvas and coated gloves. Kevlar(TM) gloves can withstand temperatures of up to 400 degrees F and are sufficiently cut-resistant to allow workers to safely handle sharp or jagged unfinished sheet metal. Kevlar(TM) gloves are used primarily in the automotive, glass and metal fabrication industries. The Company is devoting an increasing portion of its manufacturing capacity to the production of Kevlar(TM) , Spectra(TM) and Company patented yarns to make gloves, which carry a higher profit margin than commodity gloves. Spectra(TM) is a cut resistant fiber made by Allied Signal, Inc. In order to maintain a full line of gloves, however, the Company intends to continue to produce or import commodity gloves as are necessary to meet customer demand for its glove products. The Company believes that there are adequate and reliable foreign manufacturers available to meet the Company's import requirements of commodity gloves, if needed. The Company's Kevlar(TM) and Spectra(TM) gloves range in price from $37.00 to $240.00 for a dozen pair. The Company also manufactures gloves at its Decatur, Alabama facility. Computerized robotic knitters are used to weave gloves from both natural and synthetic materials, including Kevlar(TM)and Spectra(TM) on an automatic basis. These robotic knitters are generally in operation 20 hours a day, 5-1/2 days a week. The Company's robotic knitters allow flexibility in production as they can be easily reprogrammed in minutes to produce gloves and sleeves in different sizes, styles, weights, weaves or combinations of materials. Additionally, these robotic knitters can produce gloves and sleeves separately or as a one-piece garment. Gloves and sleeves can also be knitted in different weights and combinations of yarns, such as Kevlar(TM) mixed with cotton or polyester. Heat Protective and Fire Fighting Apparel The Company's products protect individuals that must work in high heat environments and the Company has been the creator, innovator and inventor of protective systems for high heat or hazardous occupations for the last 13 years. The brand name A-5 FYREPEL(TM) is recognized nationally and internationally. The Company has completed an intensive redesign and engineering study to address the ergonomic needs of stressful occupations. The Company's protective aluminized fire suits include: Fire entry suit - for total flame entry for industries dealing with volatile and highly flammable products. Kiln Entry suit - to protect kiln maintenance workers from extreme heat. Proximity suits - designed for performance in high heat areas to give protection where exposure to hot liquids, steam or hot vapors is possible. Approach suits - for personnel engaged in maintenance, repair and operational tasks where temperatures do not exceed 200F degrees ambient, with a radiant heat exposure up to 2,000F degrees. The Company also manufactures fire fighters protective apparel for domestic and foreign fire departments and developed the popular Sterling Heights style (short coat and bib pants) bunker gear. Crash Rescue has been a major market for this product division, which was the first to produce and supply military and civilian markets with protection worn at airports, petrochemical plants and in the marine industry. Each of the fire suits range in cost to the end user from $450 for standard fire department turn-out gear to $2,000 for the fire entry suit. Protective Woven Reusable Garments The Company also manufactures and markets a line of reusable and launderable woven cloth protective apparel which supplement the disposable / limited use garments, giving the Company access to the much larger woven industrial and health care related markets. Cloth re-usable garments are more appropriate in certain situations or applications because of worker familiarity with and acceptance of these fabrics and woven cloth's heavier weight, durability and longevity. These products give the Company the flexibility to supply and satisfy a wider range of safety and customer needs. The Company designs and manufactures: o special anti-static apparel, primarily for the automotive industry (perceived as a premium-priced product) o clean room apparel as used in the most sophisticated semiconductor manufacturing facilities o hospital garments for protection against blood borne pathogens o jackets and bib overalls for use by emergency medical rescue teams The Company's reusable wovens range in price from $10.00 to $80.00 per garment. The Company manufactures and sells woven cloth garments at its facility in St. Joseph, Missouri. After the Company receives fabrics from suppliers, principally blends of polyester and cotton, the Company cuts and sews the fabrics at its own facilities to meet customer purchase orders. High-End Chemical Protective Suits The Company manufactures heavy duty fully encapsulated chemical suits (three of which have been developed internally and are patented) using proprietary co-polymer laminates or Viton(TM), butyl rubber, polyvinyl chloride ("PVC") and the Dupont TyChem(TM)and Barricade(TM) fabrics. These suits are worn to protect the user from exposure to hazardous chemicals. Hazardous material teams or individuals use chemical suits for toxic cleanups, chemical spills, or in industrial, chemical and electronic plants. The Company's line of chemical suits range in cost from $80.00 for the Checkmate suits to $3,400 for its Forcefield Teflon suits. The chemical suits can be used in conjunction with a fire protective shell manufactured by the Company which will protect the user from both chemical and flash fire hazards. The Company has introduced four National Fire Protection Agency ("NFPA") approved garments for varying levels of protection required depending on field conditions: TyChem(TM) - 10,000 is a co-polymer film laminated to a durable spunbonded substrate. It offers the broadest temperature range for limited use garments - -25o F to 225o F. TyChem(TM) 10,000 meets all OSHA Level A requirements. It is available in NFPA 1991-94 certified versions when worn with an aluminized over cover. TyChem(TM) - 9400 meets all OSHA Level B and all NFPA 1993 fabric requirements and offers excellent splash protection against a wide array of chemicals. Forcefield(TM) - A heavyweight hazmat suit, totally encapsulized providing greater mobility, visibility, dependability and versatility in dealing safely and effectively with most types of chemical hazards. This product meets NFPA 1991 standards for a fully certified chemical protective suit. When combined with an Aluminized PBI/Kevlar over cover, it provides NFPA 1991 / Level A protection; Interceptor(TM) - Model A meets all OSHA Level A requirements as a vapor-proof suit. Model 1 meets and exceeds NFPA A-6 1991 requirements of certification for vapor-proof suit when used with an Aluminized PBI / Kevlar over cover. Checkmate(TM) - Is used for lower level chemical protection. This suit is lightweight, tough, versatile, durable and cost effective and can be used for: splash protection, basic clean up, toxic waste dumps and post fire monitoring of toxic residue. It meets all NFPA requirements. The Company manufactures chemical protective clothing at its facility in Decatur, Alabama. After the Company obtains such materials as Barricade (R), TyChem(R), Viton(R), butyl rubber, PVC or its own patented laminates, it designs, cuts, glues and/or sews the materials to meet customer purchase orders. Quality Control To assure quality, Company employees monitor the sewing of disposable / limited use garments at its own Mexican and Chinese facilities and at the facilities of independent sewing contractors and also inspect the garment upon delivery to the Company's facilities. Finished product that is below standard is returned to the contractor for reworking. The Company has been required on a few occasions to return product to its independent sewing contractors. The Company also actively participates in the Industrial Safety Equipment Association's (ISEA) frequent independent quality inspection programs. The Company conducts quality control inspections of its industrial gloves, cloth, fire and chemical garments throughout the manufacturing process. Both the Company's Alabama disposable and China disposable facilities are ISO9002 certified. ISO standards are internationally recognized quality manufacturing standards established by the International Organization for Standardization based in Geneva, Switzerland. To obtain its ISO registration, the Company's factories were independently audited to ensure compliance with the applicable standards, and to maintain registration, the factories receive regular announced inspections by an independent certification organization. The Company believes that the ISO 9002 registration makes it more competitive in the marketplace, as customers are increasingly recognizing the standard as an indication of product quality. Marketing and Sales The Company's products are sold primarily by over 500 safety and mill supply distributors including four of the five leading North American distributors. Sales of the Company's products are solicited by 16 agencies engaging 44 independent sales representatives. The Company also employs an in-house sales force of nine (9) people. These independent representatives call on over 500 safety and industrial distributors nationwide and promote and sell the Company's products to safety and industrial distributors and provide product information. The distributors buy the Company's products and maintain inventory at the local level in order to assure quick response time and the ability to service accounts properly. The independent representatives maintain regular interaction with end users and decision makers at the distribution level, thereby providing the Company with valuable feedback on market perception of the Company's products, as well as new developments within the industry. During the year ended January 31, 2000, no one distributor accounted for more than 5% of sales. The Company's marketing plan is to maximize the efficiency of its established distribution network by direct promotion at the end-user level. Advertising is primarily through trade publications. Promotional activities include sales catalogs, mailings to end users and a nationwide publicity program. The Company exhibits at both regional and national trade shows and was represented at the National Safety Congress in New Orleans, LA (Fall of 1999) and at the American Industrial Hygienists Convention (Spring of 1999). Research and Development The Company has a history of new product development and innovation and has introduced the Grapolator(TM) and Kut Buster(TM) glove and sleeve lines which combine a stainless steel wire core combined with high strength man made fibers providing the ultimate in cut protection without sacrificing dexterity, and additionally the patented Thermbar Mock Twist(TM) which provides heat protection for temperatures up to 600o F. The Company has ten patents on various fabrics and production machinery. The Company plans to continue to be an innovator in protective apparel fabrics, manufacturing equipment, and intends to introduce new products to the market place in the future. Specifically, the Company plans to develop new anti-static reusable gowns for the automotive industry made of specially knit polyester with carbon threads and will continue to dedicate resources to research and development. A-7 Suppliers and Materials The Company does not have long-term, formal agreements with unaffiliated suppliers of non-woven fabric raw materials used by the Company in the production of its product lines. Tyvek(TM) and Kevlar(TM), however, are purchased from Dupont under licensing agreements. Polypropylene, Polyethylene, Polyvinyle Chloride and their derivatives are available from thirty or more major mills, while flame retardant fabrics are also available from a number of both domestic and international mills. The accessories used in the production of the Company's disposable garments such as snaps and elastics are obtained from unaffiliated suppliers. The Company has not experienced difficulty in obtaining its requirements for these commodity component items. The Company also has not experienced difficulty in obtaining materials, including cotton, polyester and nylon, used in the production of reusable non-wovens and commodity gloves. Kevlar(TM), used in the production of the Company's specialty safety gloves, is obtained from independent mills that purchase the fiber from Dupont. The Company has not experienced difficulty in obtaining its requirements for its raw materials, fabrics or components on any of the above described products. The Company obtains the Spectra(TM) yarn used in its Dextra Guard(TM) gloves from mills that purchase the fiber from Allied Signal Company, Inc. ("Allied"). The Company believes that Allied will be able to meet the Company's needs for Spectra(TM). In manufacturing its fire and heat protective suits, the Company uses glass fabric, aluminized glass, Nomex(TM), aluminized Nomex(TM), Kevlar(TM), aluminized Kevlar(TM), polybenzimidazole (PBI) and Gortex(TM), as well as combinations utilizing neoprene coatings. The chemical protective suits are made of Viton(TM), butyl rubber, PVC (available from multiple sources), proprietary and Company patented laminates and Teflon(TM), Saranex(TM) Tyvek QC(TM), TyChem(TM) and Barricade(TM) from Dupont. The Company has not experienced difficulty obtaining any of the aforementioned materials. Competition The Company's business is in a highly competitive industry. The Company believes that the barriers to entry in each of the fields in which it operates are relatively low, except in Tyvek(TM) disposable limited use clothing because of the limited number of Tyvek(TM) licensees. The Company faces competition in some of its other product markets from large established companies that have greater financial, managerial, sales and technical resources than the Company. Where larger competitors offer products that are directly competitive with the Company's products, particularly as part of an established line of products, there can be no assurance that the Company can successfully compete for sales and customers. Larger competitors also may be able to benefit from economics of scale or to introduce new products that compete with the Company's products. Seasonality The Company's quarterly operating results have varied and are expected to continue to vary in the future. These fluctuations may be caused by many factors, including seasonal buying patterns, demand for the Company's products, competitive pricing and services, the size and timing of individual sales, the lengthening of the Company's sales and production cycle, competitive pricing pressures, customer order deferrals in anticipation of new products, changes in the mix of products and services sold, the timing of introductions and enhancements of products by the Company or its competitors, market acceptance of new products, technological changes in fabrics or production equipment used to make the Company's products, changes in the Company's operating expenses, changes in the mix of domestic and international revenues, the Company's ability to complete fixed price government or private long-term contracts within a budget, personnel changes, expansion of international operations, changes in the Company's strategies, and general industry and economic conditions. The Company's business has experienced, and is expected to continue to experience, seasonal fluctuations due in large part to the cyclical nature of certain industrial customers' businesses. Patents and Trademarks At this time, there are no patents or trademarks which are significant to the Company's operations; however, the Company has one exclusive ten (10) year licensing arrangement covering seven patents in the Company's name, three Company developed patents, two additional patents in the application and approval process with the U.S. Patent and Trademark office, and has one non-exclusive agreement with Dupont regarding patented materials used in the manufacture of chemical suits. Employees As of April 17, 2000, the Company had approximately 1,311 full-time employees (1,078 or 82.2% of whom were international and 233 or 17.8% of whom were domestic). The Company has experienced a low turnover rate among its employees. The Company believes its employee relations to be excellent. A-8 ITEM 2 Properties The Company leases two domestic manufacturing facilities, four foreign manufacturing facilities, one foreign sales office, one Canadian warehouse facility and a corporate office headquarters. The Company's 91,788 square foot manufacturing facility and the new 40,000 square foot warehouse facility in Decatur, Alabama, are used in the production and storage of disposable / limited use garments. The Alabama facilities are leased entirely by the Company from partnerships consisting primarily of certain stockholders of the Company, pursuant to two lease agreements expiring on May 31 and August 31, 2004. Highland and Chemland divisions relocated from Somerville, Alabama to this Decatur facility in late 1999. Early in 1999, the Company entered into a one year (renewable for four additional one year terms) lease agreement with an officer of the Company, for 2400 sq. ft. customer service office. This is located next to the existing Decatur, Alabama facility mentioned above. In mid 1999, the Company entered into a five year lease agreement for a 40,000 sq. ft. warehouse facility (mentioned above)located next to the existing facility in Decatur, Alabama from a limited liability partnership made up of the Directors and certain officers of the Company. The annual rent for this facility is $199,100 and the Company is the sole occupant of the facility. This lease expires on May 31, 2004. The Company leases 44,000 square feet of manufacturing space in St. Joseph, Missouri, from a third party, which is used in the manufacturing of woven cloth garments and other cloth products. This lease expires on October 31, 2001. The Company's Mexican subsidiary leases two manufacturing facilities from third parties totaling 33,816 square feet under one lease expiring on December 31, 2000 and the second smaller facility is leased on a month to month basis. The Company also leases a 46,000 square foot manufacturing facility in China. This lease agreement is with a partnership of American and Chinese individuals (which include certain officers, employees and directors of the Company) who own the buildings and who have leased the underlying real property for 50 years. The partnership in turn leases the buildings and real property to the Company's Chinese subsidiary as a sales, distribution and manufacturing facility. In fiscal 2000, the lease was for eight months, expiring in April 2000, at an annual rental of $48,972. A second auxiliary facility to this main facility was rented on a month to month basis starting October 10,1999 at a monthly rent of $670 for 16,000 square feet. This lease was terminated on April 30, 2000. A small 2,000 sq. ft. sales office is also leased from a third party at an annual rental of $8,000. The Company leases a 5,600 square foot warehouse in Canada from a third party under a lease expiring on November 30, 2002. The Company leases 4,362 square feet of office space in Ronkonkoma, New York, from a third party, in which its corporate, executive and sales offices are located. This lease expires on June 30, 2002. For the years ended January 31, 2000, 1999 and 1998, the Company paid total rent on property and all leased equipment of approximately $827,000, $643,000 and $621,000, respectively. The Company believes that these facilities are adequate for its present operations. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are involved as plaintiffs in certain receivable collection actions and claims arising in the ordinary course of business, none of which are of a material nature. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of security holders of the Company. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Reference is made to Page 5 ("Market for the Registrant's Common Stock and Related Stockholder Matters") of the Registrant's 2000 Annual Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) A-9 ITEM 6. SELECTED FINANCIAL DATA Reference is made to Page 1 ("Selected Financial Data") of the Registrant's 2000 Annual Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Reference is made to Page 2 ("Management's Discussion and Analysis of Financial Condition and Results of Operations") of the Registrant's 2000 Annual Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Page 4 ("Quantitative and Qualitative Disclosures about Market Risk") of the Registrant's 2000 Annual Report to Shareholders filed as Exhibit 13 hereto and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following Consolidated Financial Statements are incorporated herein by reference to Pages 6 to 23 of the Registrant's Annual Report to Shareholders for the year ended January 31, 2000: Report of Independent Certified Public Accountants Consolidated Balance Sheets - January 31, 2000 and 1999 Consolidated Statements of Income for the years ended January 31, 2000, 1999 and 1998 Consolidated Statement of Stockholders' Equity for the years ended January 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows for the years ended January 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT See the information under the caption "Election of Directors" in the Company's Proxy Statement relating to the 2000 Annual Meeting of Stockholders ("Proxy Statement"), which information is included in Exhibit 20 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) The following table sets forth the names and ages of all executive officers of the Company, and all positions and offices within the Company presently held by such executive officers. None of the directors, executive officers or nominees for director has any family relationship with any other director, executive officer or nominee for director of the Company. Name Age Position Held Raymond J. Smith 61 Chairman of the Board, President and Director Christopher J. Ryan 48 Executive Vice President - Finance & Secretary and Director Harvey Pride, Jr. 53 Vice President - Manufacturing James M. McCormick 52 Vice President and Treasurer A-10 Mr. Smith, a co-founder of the Company, has been Chairman of the Board and President since its incorporation. Prior to 1982, he was employed for 16 years by Disposables, Inc., a manufacturer of disposable garments, first as sales manager, then as Executive Vice President and subsequently as President and Director. Mr. Christopher J. Ryan has served as Executive Vice President- Finance and director since May, 1986 and Secretary since April 1991. From October 1989 until February 1991 Mr. Ryan was employed by Sands Brothers & Co. Ltd. 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 he was employed as the Managing Director of Corporate Finance for Brean Murray, Foster Securities, Inc. Mr. Pride has been Vice President of the Company since May 1986. He was Vice President of Ryland (the Company's former subsidiary) from May 1982 to June 1986, and President of Ryland until its merger into Lakeland on January 31, 1990. Mr. McCormick has been Vice President and Treasurer since May 1986. Between January 1986 and May 1986 he was the Company's Controller. ITEM 11. EXECUTIVE COMPENSATION See information under the caption "Compensation of Executive Officers" in the Company's Proxy Statement, which information is included in Exhibit 20 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See the information under the caption "Voting Securities and Stock Ownership of Officers, Directors and Principal Stockholders" in the Company's Proxy Statement, which information is included in Exhibit 20 hereto and incorporated herein by reference. (See Part IV, Item 14(c) Exhibits.) ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the information under the caption "Certain Relationships and Related Transactions" in the Company's Proxy Statement, which information is included in Exhibit 20 hearto and incorporated herein and by reference. (See Part IV, Item 14(c) Exhibits.) PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8 - K (a) Index to Consolidated Financial Statements and Schedule: 1. Financial Statements: The following Consolidated Financial Statements of the Registrant are incorporated herein by reference to the Registrant's Annual Report to Shareholders for the year ended January 31, 2000, as noted in Item 8 hereof: Report of Independent Certified Public Accountants Consolidated Balance Sheets - January 31, 2000 and 1999 Consolidated Statements of Income for the years ended January 31, 2000, 1999 and 1998 Consolidated Statement of Stockholders' Equity for the years ended January 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows for the years ended January 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements 2. Financial Statement Schedules The following consolidated financial statement schedule is included in Part IV of this report: Schedule II - Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable, or not require d, or because the required information is included in the consolidated financial statements or notes thereto. A-11 (b) Reports on Form 8 - K. No report on Form 8 - K has been filed for the quarter ended January 31, 2000. (c) Exhibits: 3 (a) Restated Certificate of Incorporation* 3 (b) By-Laws, as amended* 10 (a) Lease agreements between POMS Holding Co., as lessor, and the Company, as lessee, dated September 1, 1999 10 (b) Lease agreement between Southwest Parkway, Inc., as lessor, and the Company, as lessee, dated June 11, 1996. 10 (c) The Company's Stock Option Plan* 10 (d) Asset Purchase Agreement, dated as of December 26, 1986, by and among the Company, Fireland, Fyrepel Products, Inc. and John H. Weaver, James R. Gauerke and Vernon W. Lenz** 10 (e) Asset Purchase Agreement, dated as of December 26, 1986, by and among the Company, Chemland, Siena Industries, Inc. and John H. Weaver, James R. Gauerke, Eugene R. Weir, John E. Oberfield and Frank Randles** 10 (f) Asset Purchase Agreement, dated September 30, 1987 by and among the Company and Walter H. Mayer & Co. (Incorporated by reference to the report on Form 8 - K filed by the Company on October 14, 1987.) 10 (g) Employment agreement between the Company and Raymond J. Smith, dated January 23, 1998. 10 (h) Employment agreement between the Company and Harvey Pride, Jr., dated January 31, 1998. 10 (i) Lease between Lakeland Industries, Inc. and JBJ Realty, dated April 16, 1999. 10 (j) Asset Purchase Agreement, dated November 19, 1990 by and among the Company, Mayer and WHM Acquisition Corp. (Incorporated by reference to the report on Form 10 - Q for the quarter ended October 31, 1990, filed by the Company on December 14, 1990). 10 (k) Employment agreement between the Company and Christopher J. Ryan, dated February 14, 1997. 10 (l) Loan agreement dated December 12, 1997 between the Company and Merrill Lynch. 10 (m) Consulting and License Agreements between the Company and W. Novis Smith dated December 10, 1991. 10 (n) Agreement dated June 17, 1993 between the Company and Madison Manpower and Mobile Storage, Inc. 10 (o) Lease Agreement between River Group Holding Co., LLP, as lessor, and the Company, as lessee, dated June 1, 1999. 10 (p) Lease Agreement between Harvey Pride, Jr., as lessor, and the Company, as lessee, dated March 1, 1999. 10 (q) Term loan and security agreement between the Company and Merrill Lynch, dated November 1, 1999. A-12 11 Consent of Grant Thornton LLP dated April 14,2000*** 13 Annual Report to Shareholders for the year ended January 31, 2000 20 Proxy Statement of the Registrant for Annual Meeting of Stockholders - June 21, 2000 22 Subsidiaries of the Company (wholly-owned): Lakeland Protective Wear, Inc. Lakeland de Mexico S.A. de C.V. Laidlaw, Adams & Peck, Inc. Weifang Lakeland Safety Products Co. Ltd. 27 Financial Data Schedule All other exhibits are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. - ----------------------- * Incorporated by reference to Registration Statement on Form S - 18 on file with the Securities and Exchange Commission No.33-7512-NY. ** Incorporated by reference to report on Form 8 - K filed by the Company on January 9, 1987. *** Incorporated by reference to Registration Statement on Form S-8 on file with the Securities & Exchange Commission No. 33-92564 - NY. The Exhibits listed above (with the exception of the Annual Report to Shareholders) have been filed separately with the Securities and Exchange Commission in conjunction with this Annual Report on Form 10-K. On request, Lakeland Industries, Inc. will furnish to each of its shareholders a copy of any such Exhibit for a fee equal to Lakeland's cost in furnishing such Exhibit. Requests should be addressed to the Office of the Secretary, Lakeland Industries, Inc., 711-2 Koehler Avenue, Ronkonkoma, New York 11779. A-13 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: April 28, 2000 LAKELAND INDUSTRIES, INC. By: /s/ Raymond J. Smith --------------------- Raymond J. Smith , Chairman of the Board and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name Title Date - ---- ----- ---- Raymond J. Smith Chairman of the Board, April 28, 2000 - ----------------------- President and Director Raymond J. Smith (Principal Executive Officer) Christopher J. Ryan Executive V. P.- Finance April 28, 2000 - ------------------------ & Secretary and Director Christopher J. Ryan James M. McCormick Vice President and Treasurer April 28, 2000 - -------------------- (Principal Financial and James M. McCormick Accounting Officer) Eric O. Hallman Director April 28, 2000 - ------------------------ Eric O. Hallman John J. Collins Director April 28, 2000 - ------------------------ John J. Collins,Jr. Walter J. Raleigh Director April 28, 2000 - ------------------------ Walter J. Raleigh
A-14 EX-10 2 EXHIBIT 10 (a) This Agreement between POMS Holding Co., a New York partnership, c/o Murphy, Bartol & O'Brien, LLP, 22 Jericho Turnpike, Suite 103, Mineola, NY 11501-2976 as Landlord and Lakeland Industries, Inc., a Delaware corporation with offices at 711-2 Koehler Avenue, Ronkonkoma, N.Y. 11779 as Tenant Witnesseth: The Landlord hereby leases to the Tenant the following premises: approximately 91,788 square feet of the building located at and known at 202 Pride Lane, Decatur, Alabama 35603 for the term of to commence for the 1st day of September, 1999 and to end on the 31st day of August, 2004 to be used and occupied only for Office, light manufacturing and warehouse space upon the conditions and covenants following: 1st. That the Tenant shall pay the annual rent of Three Hundred Sixty-Four Thousand Nine Hundred ($364,900.00) Dollars said rent to be pain in equal monthly payments in advance on the day of each and every month during the term aforesaid, as follows: Thirty Thousand Four Hundred Eight and 33/100 ($30,408.33) Dollars on September 1st, 1999 and monthly thereafter non-structural 2nd. That the Tenant shall take good care of the premises and shall, at the Tenant's own cost and expense make all/repairs including, but not limited to, repairs of the plumbing, heating and electrical systems, and at the end or other expiration of the term, shall deliver up the demised premises in good order or condition, damages by the elements excepted. 3rd. That the Tenant shall promptly execute and comply with all statutes, ordinances, rules orders, regulations and requirements of the Federal, State and Local Governments and of any and all their Departments and Bureaus applicable to said premises, for the correction, prevention and abatement of nuisances or other grievances, in, upon, or connected with said premises during said term; and shall also promptly comply with and execute all rules, orders and regulations of the New York Board of Fire Underwriters, or any other similar body, at the Tenant's own cost and expense. 4th. That the Tenant, successors, heirs, executors and administrators shall not assign this agreement , or underlet or underlease the premises, or any part thereof, or make any alterations on the premises, without the Landlord's consent in writing; or occupy, or permit or suffer the same to be occupied for any business or purpose deemed disreputable or extra-hazardous on account of fire, under the penalty of damages and forfeiture, and in the event of a breach thereof, the term herein shall immediately cease and determine at the option of th Landlord as if it were the expiration of the original term. 5th. Tenant must give Landlord prompt notice of fire, accident, damage or dangerous or defective condition. If the Premises can not be used because of fire or other casualty, Tenant is not required to pay rent for the time the Premises are unusable. If part of the Premises can not be used, Tenant must pay rent for the usable part. Landlord shall have the right to decide which part of the Premises is usable. Landlord need only repair the damaged structural parts of the Premises. Landlord is not required to repair or replace any equipment , fixtures, furnishings or decorations unless originally installed by Landlord. Landlord is not responsible for delays due to settling insurance claims, obtaining estimates, labor and supply problems or any other cause not fully under Landlords control. If the fire or other casualty is caused by an act or neglect of Tenant, Tenant's employees or invitees, or at the time of the fire or casualty Tenant is in default in any term of this Lease, then all repairs will be made at Tenant's expense and Tenant must pay the full rent with no adjustment. The cost of the repairs will be added rent. Landlord has the right to demolish or rebuild the Building if there is substantial damage by fire or other casualty. Landlord may cancel this Lease within 30 days after the substantial fire or casualty by giving Tenant notice of Landlord's intention to demolish or rebuild. The Lease will end 30 days after Landlord's cancellation notice to the Tenant. Tenant must deliver the Premises to the Landlord on or before the cancellation date in the notice and pay all rent due to the date of the fire or casualty. If the Lease is cancelled Landlord is not required to repair the Premises or Building. The cancellation does not release Tenant of liability in connection with the fire or casualty. This Section is intended to replace the terms of New York Real Property Law Section 227. 6th. The said Tenant agrees that the said Landlord and the Landlord's agents and other representatives shall have the right to enter into and upon said premises, or any part thereof, at all reasonable hours for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. 7th. The Tenant also agrees to permit the Landlord or the Landlord's agents to show the premises to persons wishing to hire or purchase the same; and the Tenant further agrees that on and after the sixth month, next preceding the expiration of the term hereby granted, the Landlord or the Landlord's agents shall have the right to place notices on the front of said premises, or any part thereof, offering the premises "To Let" or "For Sale", and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation. 8th. That if the said premises, or any part thereof shall be deserted or become vacant during said term, or if any default be made in the payment of the said rent or any part thereof, or if any default be made in the performance of any of the covenants herein contained, the Landlord or representatives may re-enter the said premises by force, summary proceedings or otherwise, and remove all persons therefrom, without being liable to prosecution therefor, and the Tenant hereby expressly waives the service of any notice in writing of intention to re-enter, and the Tenant shall pay at the same time as the rent becomes payable under the terms hereof a sum equivalent to the rent reserved herein, and the Landlord may tent the premises on behalf of the Tenant, reserving the right to rent the premises for a longer period of time than fixed in the original lease without releasing the original Tenant from any liability, applying any moneys collected, first to the expense of resuming or obtaining possession, second to restoring the premises to a rentable condition, and then to the payment of the rent and all other charges due and to grow due to the Landlord, any surplus to be paid to the Tenant, who shall remain liable for any deficiency. 9th. Landlord may replace, at the expense of Tenant, any and all broken glass in and about demised premises. Landlord may insure, and keep insured, all plate glass in the demised premises for and in the name of Landlord. Bills, for the premiums therefor shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due for, and payable by Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, additional rental. Damage and injury to the said premises, caused by the carelessness, negligence or improper conduct on the part of the said Tenant or the Tenant's agents or employees shall be repaired as speedily as possible by the Tenant at the Tenant's own cost and expense. 10th. That the Tenant shall neither encumber nor obstruct the sidewalk in front of, entrance to, or halls and stairs of said premises, nor allow the same to be obstructed or encumbered in any manner. 11th. The Tenant shall neither place, or cause or allow to be placed, any sign or signs of any kind whatsoever at, in or about the entrance to said premises or any other part of same, except in or at such place or places as may be indicated by the Landlord and consented to by the Landlord in writing. And in case the Landlord or the Landlord's representatives shall deem it necessary to remove any such sign or signs in order to paint the said premises or the building wherein same is situated or make any other repairs , alterations or improvements in or upon said premises or building or any part thereof, the Landlord shall have the right to do so, providing the same be removed and replaced at the Landlord's expense, whenever the said repairs, alterations or improvements shall be completed. 12th. That the Landlord is exempt from any and all liability for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building or from any damage or injury resulting or arising from any other cause or happening whatsoever unless said damage or injury be caused by or be due to the negligence of the Landlord. 13th. That if default be made in any of the covenants herein contained, then it shall be lawful for the said Landlord to re-enter the said premises, and the same to have again, re-possess and enjoy. The said Tenant hereby expressly waives the service of any notice in writing of intention to re-enter. 14th. That this instrument shall not be a lien against said premises in respect to any mortgages that are now on or that hereafter may be placed against said premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this lease, irrespective of the date of recording and the Tenant agrees to execute without cost, any such instrument which may be deemed necessary or desirable to further effect the subordination of this lease to any such mortgage or mortgages, and a refusal to execute such instrument shall entitle the Landlord, or the Landlord's assigns and legal representatives to the option of cancelling this lease without incurring any expense or damage and the term hereby granted is expressly limited accordingly. 15th. The Tenant has this day deposited with the Landlord the sum of $ -0- as security for the full and faithful performance by the Tenant of all the terms, covenants and conditions of this lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of said terms, covenants and conditions on Tenant's part to be performed. In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord. 16th. That the security deposited under this lease shall not be mortgaged, assigned or encumbered by the Tenant without the written consent of the Landlord. 17th. It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part thereof as herein specified, or if, without the consent of the Landlord, the Tenant shall sell, assign, or mortgage this lease or if defaults be made in the performance of any of the covenants and agreements in this lease contained on the part of the Tenant to be kept and performed, or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders regulations and requirements of the Federal, State and Local Governments or of any and all their Departments and Bureaus, applicable to said premises, or if the Tenant shall file or there be filed against Tenant a petition in bankruptcy or arrangement, or Tenant be adjudicated a bankrupt or make an assignment for the benefit of creditors or take advantage of any insolvency act, the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days' notice in writing of the Landlord's intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises. 18th. Tenant shall pay to the Landlord the rent or charge, which may, during the demised term , be assessed or imposed for the water used or consumed in or on the said premises, whether determined by meter or otherwise, as soon as and when the same may be assessed or imposed, and will also pay the expenses for the setting of a water meter in the said premises should the latter be required. Tenant shall pay Tenant's proportionate part of the sewer rent or charge imposed upon the building. All such rents or charges or expenses shall be paid as additional rent and shall be added to the next month's rent thereafter to become due. 19th. That the Tenant will not nor will the Tenant permit undertenants or other person to do anything in said premises, or bring anything into said premises, or permit anything to be brought into said premises or to be kept therein, which will in any way increase the rate of fire insurance on said demised premises, nor use the demised premises or any part thereof, nor suffer or permit their use for any business or purpose which would cause an increase in the rate of fire insurance on said building, and the Tenant agrees to pay on demand any such increase. 20th. The failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein, shall not be deemed a waiver of any rights or remedies that the Landlord may have, and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained. This instrument may not be charged, modified, discharged or terminated orally. 21st. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim against Landlord for the value of any unexpired term of said lease. No part of any award shall belong to the Tenant. 22nd. If after default in payment of rent of violation or any other provision of this lease, or upon the expiration of this lease, the Tenant moves out or is dispossessed and fails to remove any trade fixtures or other property prior to such said default, removal, expiration of lease, or prior to the issuance of the final order or execution of the warrant, then and in that event, the said fixtures and property shall be deemed abandoned by the said Tenant and shall become the property of the Landlord. 23rd. In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord, and the Tenant expressly agrees to pay as damages for the breach of the covenants herein contained, the difference between the rent reserved and the rent collected and received, if any, by the Landlord during the remainder of the unexpired term, such difference or deficiency between the rent herein reserved and the rent collected if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained; and it is mutually agreed between Landlord and Tenant that the respective parties hereto shall and hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other on any matters whatsoever arising out of or in any way connected with this lease, the Tenant's use or occupancy of said premises, and/or any claim of injury or damage. 24th. The Tenant waives all rights to redeem under any law. 25th. This lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in nowise be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repairs, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with a National Emergency or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the condition of supply and demand which have been or are effected by war or other emergency. 26th. No diminution or abatement of rent, or other compensation, shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the building or to its appliances, nor for any space taken to comply with any law, ordinance or order of a governmental authority. In respect to the various "services," if any, herein expressly or impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed that there shall be no diminution or abatement of the rent, or any other compensation, for interruption or curtailment of such "service" when such interruption or curtailment shall be due to accident, alterations or repairs desirable or necessary to be made or to inability or difficulty in securing supplies or labor for the maintenance of such "service" or to some other cause, not gross negligence on the part of the Landlord. No such interruption or curtailment of such "service" shall be deemed a constructive eviction. The Landlord shall not be required to furnish, and the Tenant shall not be entitled to receive, any of such "services" during any period wherein the Tenant shall be in default in respect to the payment of rent. Neither shall there be any abatement or diminution of rent because of making of repairs, improvements or decorations to the demised premises after the date above fixed for the commencement of the term, it is being understood that rent shall, in any, commence to run as such date so above fixed. 27th. Landlord shall not be liable for failure to give possession of the premises upon commencement date by reason of the fact that premises are not ready for occupancy or because a prior Tenant or any other person is wrongfully holding over or is in wrongful possession, or for any other reason. The rent shall not commence until possession is given or is available, but the term herein shall not be extended. Additional Provisions on Rider attached Herein. And the said Landlord doth covenant that the Tenant on paying the said yearly rent, and performing the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid, provided however, that this covenant shall be conditioned upon the retention of title to the premises by the Landlord. And it is mutually understood and agreed that the covenants and agreements contained in the within lease shall be binding upon the parties hereto and upon their respect successors, heirs, executors and administrators. In Witness Whereof, the parties have interchangeably set their hands and seals (or caused these presents to be signed by their proper corporate officers and caused their proper corporate seal to be hereto affixed) this day of 1999 Poms holding Co., as Landlord By: Lakeland Industries, INc. By: /s/Raymond J. Smith ------------------- Raymond J. Smith, President Signed, sealed and delivered in the presence of State of New York, County of S.S. On the day of 19 , before me personally came to me known and known to me to be the individual described in, and who executed, the foregoing instrument, and acknowledged to me that he executed the same. State of New York, County of S.S. On the day of 19 , before me personally came to me known, who, being by me duly sworn, did depose and say that he resides at No. that he is the of the corporation mentioned in, and which executed, the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of said corporation; and that he signed h name thereto by like order. POMS HOLDING CO./ Landlord, - -with- LAKELAND INDUSTRIES, INC., Tenant. Lease Dated, September, 1999 In Consideration of the letting of the premises within mentioned to the within named Tenant and the sum of $1.00 paid to the undersigned by the within named Landlord, the undersigned do hereby covenant and agree, to and with the Landlord and the Landlord's legal representatives, that if default shall at any time be made by the said Tenant in the payment of the rent and the performance of the covenants contained in the within lease, on the Tenant's part to be paid and performed, that the undersigned will well and truly pay the said rent, or any arrears thereof, that may remain due unto the said Landlord, and also pay all damages that may arise in consequences of the non-performance of said covenants, or either of them, without requiring notice of any such default from the said Landlord. The undersigned hereby waives all right to trial by jury in any action or proceeding hereinafter instituted by the Landlord, to which the undersigned may be a party. In Witness Whereof, the undersigned has set hand and seal this day of , 19 WITNESS L.S. RIDER TO LEASE Dated: September 1, 1999 between POMS HOLDING CO., as Landlord and LAKELAND INDUSTRIES, INC., as Tenant 28th. Wherever there is a conflict between the printed and typewritten portions of this lease, the typewritten portions shall govern. 29th. Tenant, at its own expense, shall maintain plateglass and comprehensive general public liability insurance protecting Landlord and Tenant and naming Landlord as an additional insured with respect to personal injury or property damage due to negligence occurring in or about the leased premises with minimum limits of $300,000.00 for personal injury to any one person, and $500,000.00 for personal injury to any number of persons arising out of one accident, and $100,000.00 for property damage. Said insurance shall be taken out with a company licensed to do business in the State of New York and the State of Alabama and proof of such insurance shall be delivered to the Landlord upon the commencement of this lease. Annual proof of payment shall thereafter be submitted to the Landlord. The original policy, upon Landlord's request, shall be exhibited to the Landlord by the Tenant within thirty (30) days after commencement of the term of this agreement. Upon failure of the Tenant to so deposit said policy, the Landlord shall have the privilege to procure said insurance on his own application therefor, and the amount of the premium, if paid by the Landlord, shall be due and payable with the rent reserved hereunder, collectible with the same remedies as if originally reserved as rent hereunder. 30th. Notwithstanding anything else contained in this lease, it is understood and agreed that the Tenant shall provide his own heat and pay his own electricity bills. All of the utilities shall be supplied by the Tenant at his own cost and expense. 31st. Notwithstanding anything else contained in this lease, upon the expiration of same for amy reason whatsoever, Tenant covenants and agrees that the premises will be redelivered to the Landlord broom clean. 32nd. The Tenant shall make no physical improvements, changes, modifications, alterations or additions to the leased premises without the written consent of the Landlord. All alterations, repairs, improvements, extensions or additions which may be made to the demised premises by the Tenant shall immediately become the property of the Landlord and become a part of the demised premises hereunder, excepting, however, removable trade fixtures. It is, however, agreed that when trade fixtures are removed, the demised premises are to be placed, at the Tenant's expense, in their original condition. 33rd. The Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all taxes on the entire building of which the leased premises are a part, including, but not limited to, ad valorem taxes, real estate taxes and water charges. Such payment shall be hade within thirty (30) days of the demand therefor by the Landlord and receipted tax bills shall be sufficient evidence of the amount of such taxes. 34th. Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all fire insurance premiums on the entire building of which the leased premises are a part within thirty (30) days of the date of receipt by Tenant from Landlord of a bill therefor. 35th. Tenant shall have the right to sublet all or any portion of the demised premises provided the following conditions are complied with: (a) At the time of such subletting, this lease must be in full force and effect without any breach or default thereunder on the part of the Tenant. (b) A copy of sublease shall be mailed to Landlord within ten (10) days from the effective date of such subletting. (c) Such subletting shall be upon and subject to all the provisions, terms, covenants and conditions of this lease and Tenant shall continue to be and remain liable hereunder. (d) Notwithstanding the foregoing, if the Tenant proposes to sublet all or substantially all of the demised premises, Tenant shall so notify the Landlord and Landlord shall have the option to cancel and terminate this lease as of the date proposed by Tenant for such subletting, which options shall be exercisable within fifteen (5) days after receipt of such notice by Landlord of the proposed subletting. (e) Tenant shall not assign this lease without the consent of Landlord first hand received, which consent Landlord agrees not to unreasonably withhold or delay; provided, however, that Tenant shall have the right, without the consent of Landlord, to assign this lease to (i) a subsidiary or affiliated corporation, either of which may have a normal capital; (ii) any corporation resulting from a reorganization of Tenant or its parent company with any one or more corporations; (iii) any corporation resulting from the consolidation of Tenant with or into any one or more corporations. 36th. Throughout the term of this lease, Tenant shall indemnify Landlord and save it harmless against and from any and all liability, losses, damages, costs, expenses and claims by or on behalf of any person, firm, corporation, governmental authority or other entity incurred by Landlord with respect to the leased premises, including, without limitation, burdens resulting from any and all acts of commission or omission on the part of Tenant or of anyone holding by, through or under Tenant, and any and all of its agents, servants, employees, invitees and contractors, and against and from any injury or damage to any person, or to any property of any person, except as a result of Landlord's own acts of commission or omission. 37th. Tenant shall be responsible for, and hereby relieves and shall save landlord harmless of and from any and all liability by reason of any injury or damage to any person or property in the leased premises, whether such property belongs to Tenant or to any persons, firms, corporations or other entity caused by any fire, installation or from water, rain or show that may leak into, issue or flow from any part of said leased premises, or from the drains, pipes or plumbing work of the said leased premises, or from any place or quarter and from the use, misuse or abuse of any hoists, conveyors, hatches, openings, platforms, stairways, machinery or equipment of any kind whatever which may exist at the time of the date of this lease or thereafter be installed in or on the leased premises, and from any and all kinds of injury and damage which may arise in or upon the leased premises from any other cause, unless such damage, injury, use, misuse or abuse shall have been caused by or result from the negligence of Landlord, its agents, servants or employees during the continuance of this lease by acts of commission or omission. 38th. It is hereby understood and agreed that in the event the Tenant leaves any property on the leased premises subsequent to the expiration of the within lease that said property is hereby deemed abandoned and the Landlord may dispose of said property at its option without any liability on the part of the Landlord. It is further understood and agreed that the Tenant waives any and all rights, title and interest to said property, releases and waives any and all claims thereto, and further agrees that the Tenant will be responsible to the Landlord for any and all expenses incurred by the Landlord concerning said property. 39th. Whenever under the terms of this lease any sum of money is required to be paid by Tenant in addition to the rental herein reserved, and said additional amount so to be paid is not designated as "additional," or provision is not made in the paragraph covering such payment for the collection of said amount as "additional rental," then said amount shall nevertheless, at the option of Landlord if not paid when due, be deemed "additional rental," and collectible as such with any installment of rental thereafter falling due hereunder, but nothing herein contained shall be deemed to suspend or delay the payment of any sum at the time the same becomes due and payable hereunder or limit any other remedy of Landlord. 40th. This lease contains the entire agreement between Landlord and Tenant and shall not be modified in any manner except by an instrument in writing signed by Landlord and Tenant. POMS HOLDING CO., Landlord By: Raymond J. Smith ----------------- Raymond J. Smith, President LAKELAND INDUSTRIES, INC., Tenant By: Exhibit (l) Merrill Lynch TERM LOAN AND SECURITY AGREEMENT TERM LOAN AND SECURITY AGREEMENT NO. 9909550501 ("Loan Agreement") dated as of September 9, 1999, between LAKELAND INDUSTRIES, INC., a corporation organized and existing under the laws of the State of Delaware having its principal office at 711-2 Koehler Avenue, Ronkonkoma, NY 11779-7410 ("Customer"), and MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the laws of the State of Delaware having its principal office at 222 North LaSalle Street, Chicago, IL 60601 ("MLBFS"). In consideration of the mutual covenants of the parties hereto, Customer and MLBFS hereby agree as follows: Article 1. DEFINITIONS 1.1 Specific Terms. In addition to terms defined elsewhere in this Loan Agreement, when used herein the following terms shall have the following meanings: (a) "Account Debtor" shall mean any party who is or may become obligated with respect to an Account or Chattel Paper. (b) "Additional Agreements" shall mean all agreements, instruments, documents and opinions other than this Loan Agreement, whether with or from Customer or any other party, which are contemplated hereby or otherwise reasonably required by MLBFS in connection herewith, or which evidence the creation, guaranty or collateralization of any of the Obligations or the granting or perfection of liens or security interests upon the Collateral or any other collateral for the Obligations, and shall include, without limitation, the Note. (c) "Bankruptcy Event" shall mean any of the following: (i) a proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt or receivership law or statute shall be filed or consented to by Customer or any Guarantor; or (ii) any such proceeding shall be filed against Customer or any Guarantor and shall not be dismissed or withdrawn within sixty (60) days after filing; or (iii) Customer or any Guarantor shall make a general assignment for the benefit of creditors; or (iv) Customer or any Guarantor shall generally fail to pay or admit in writing its inability to pay its debts as they become due; or (v) Customer or any Guarantor shall be adjudicated a bankrupt or insolvent. (d) "Business Day" shall mean any day other than a Saturday, Sunday, federal holiday or other day on which the New York Stock Exchange is regularly closed. (e) "Closing Date" shall mean the date upon which all conditions precedent to MLBFS' obligation to make the Loan shall have been met to the satisfaction of MLBFS. (f) "Collateral" shall mean all Accounts, Chattel Paper, Contract Rights, Inventory, Equipment, Fixtures, General Intangibles, Deposit Accounts, Documents, Instruments, Investment Property and Financial Assets of Customer, howsoever arising, whether now owned or existing or hereafter acquired or arising, and wherever located; together with all parts thereof (including spare parts), all accessories and accessions thereto, all books and records (including computer records) directly related thereto, all proceeds thereof (including, without limitation, proceeds in the form of Accounts and insurance proceeds), and the additional collateral described in Section 3.6 (c) hereof. (g) "Commitment Expiration Date" shall mean October 9, 1999. (h) "Commitment Fee" shall mean a fee of $7,500.00 due to MLBFS in connection with this Loan Agreement. (i) "Default" shall mean either an "Event of Default" as defined in Section 3.5 hereof, or an event which with the giving of notice, passage of time, or both, would constitute such an Event of Default. (j) "General Funding Conditions" shall mean each of the following conditions to each loan or advance by MLBFS hereunder: (i) no Default shall have occurred and be continuing or would result from the making of any such loan or advance hereunder by MLBFS; (ii) there shall not have occurred and be continuing any material adverse change in the business or financial condition of Customer or any Guarantor; (iii) all representations and warranties of Customer or any Guarantor herein or in any Additional Agreements shall then be true and correct in all material respects; (iv) MLBFS shall have received this Loan Agreement and all Additional Agreements, duly executed and filed or recorded where applicable, all of which shall be in form and substance reasonably satisfactory to MLBFS; (v) the Commitment Fee shall have been paid in full; (vi) MLBFS shall have received, as and to the extent applicable, copies of invoices, bills of sale, loan payoff letters and/or other evidence reasonably satisfactory to it that the proceeds of the Loan will satisfy the Loan Purpose; (vii) MLBFS shall have received evidence reasonably satisfactory to it as to the ownership of the Collateral and the perfection and priority of MLBFS' liens and security interests thereon, as well as the ownership of and the perfection and priority of MLBFS' liens and security interests on any other collateral for the Obligations furnished pursuant to any of the Additional Agreements; (viii) MLBFS shall have received evidence reasonably satisfactory to it of the insurance required hereby or by any of the Additional Agreements; and (ix) any additional conditions specified in the "Term Loan Approval" letter executed by MLBFS with respect to the transactions contemplated hereby shall have been met to the reasonable satisfaction of MLBFS. (k) "Guarantor" shall mean a person or entity who has either guaranteed or provided collateral for any or all of the Obligations; and "Business Guarantor" shall mean any such Guarantor that is a corporation, partnership, proprietorship, limited liability company or other entity regularly engaged in a business activity. (l) "Loan" shall mean a five-year term installment loan in an amount equal to the lesser of: (A) 100% of the amount required by Customer to satisfy or fulfill the Loan Purpose, (B)the aggregate amount which Customer shall request be advanced by MLBFS on account of the Loan Purpose or (C)$3,000,000.00. (m) "Loan Purpose" shall mean the purpose for which the proceeds of the Loan will be used; to wit: Partial term out WCMA line of credit no. 849-07230. (n) "Location of Tangible Collateral" shall mean the address of Customer set forth at the beginning of this Loan Agreement together with any other address or addresses set forth on an exhibit hereto as being a Location of Tangible Collateral. (o) "Obligations" shall mean all liabilities, indebtedness and obligations of Customer to MLBFS, howsoever created, arising or evidenced, whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, due or to become due, primary or secondary or joint or several, and, without limiting the foregoing, shall include interest accruing after the filing of any petition in bankruptcy, and all present and future liabilities, indebtedness and obligations of Customer under the Note and this Loan Agreement and under that certain WCMA Note Loan and Security Agreement No. 849-07230. (p) "permitted Liens" shall mean with respect to the Collateral: (i) liens for current taxes not delinquent, other non-consensual liens arising in the ordinary course of business for sums not due, and, if MLBFS' rights to and interest in the Collateral are not materially and adversely affected thereby, any such liens for taxes or other non consensual liens arising in the ordinary course of business being contested in good faith by appropriate proceedings; (ii) liens in favor d MLBFS; liens which will be discharged with the proceeds of the initial WCMA Loan; and (iv) any other liens expressly permitted in writing by MLBFS. 1.2 Other Terms. Except as otherwise defined herein, all terms used in this Loan Agreement which are defined in the Uniform Commercial Code of Illinois ("UCC") shall have the meanings set forth in the UCC. Article 11. THE LOAN 2.1 Commitment. Subject to the terms and conditions hereof, MLBFS hereby agrees to make the Loan to Customer for the Loan Purpose, and Customer agrees to borrow all amounts borrowed to satisfy the Loan Purpose from MLBFS. The entire proceeds of the Loan shall be disbursed on the Closing Date either directly to the applicable third party or parties on account of the Loan Purpose or to reimburse Customer for amounts directly expended by it; all as directed by Customer in a Closing Certificate to be executed by Customer and delivered to MLBFS prior to the Closing Date. 2.2 Note. The Loan will be evidenced by and repayable in accordance with that certain Collateral Installment Note made by Customer payable to the order of MLBFS and issued pursuant to this Loan Agreement ("the Note"). The Note is hereby incorporated as a part hereof as if fully set forth herein. 2.3 Conditions of MLBFS' Obligation. The Closing Date and MLBFS' obligation to make the Loan on the Closing Date are subject to the prior fulfillment of each of the following conditions (a) MLBFS shall have received a written request from Customer that the Loan be funded in accordance with the terms hereof, together with a written direction from Customer as to the method of payment and payee(s) of the proceeds of the Loan, which request and direction shall have been received by MLBFS not less than two Business Days prior to any requested funding date; (b) MLBFS shall have received a copy of invoices, bills of sale, payoff letters or other applicable evidence reasonably satisfactory to it that the proceeds of the Loan will satisfy or fulfill the Loan Purpose; (c) the Commitment Expiration Date shall not then have occurred; and (d) each of the General Funding Conditions shall then have been met or satisfied to the reasonable satisfaction of MLBFS. 2.4 Use of Loan Proceeds. The proceeds of the Loan shall be used by Customer solely for a Loan Purpose, or, with the prior written consent of MLBFS, for other lawful business purposes of Customer not prohibited hereby. Customer agrees that under no circumstances will the proceeds of the Loan be used: (a) for personal, family or household purposes of any person whatsoever, or (b) to purchase, carry or trade in securities, or repay debt incurred to purchase, carry or trade in securities, or (c) unless otherwise consented to in writing by MLBFS, to repay any debt to Merrill Lynch and Co., or any of its subsidiaries. 2.5 Commitment Fee. In consideration of the agreement by MLBFS to extend the Loan to Customer in accordance with and subject to the terms hereof, Customer has paid or shall, on or before the Closing Date pay, the Commitment Fee to MLBFS. Customer acknowledges and agrees that the Commitment Fee has been fully earned by MLBFS, and that it will not under any circumstances be refundable. Article III. GENERAL PROVISIONS 3.1 REPRESENTATIONS AND WARRANTIES Customer represents and warrants to MLBFS that: (a) Organization and Existence. Customer is a corporation, duly organized and validly existing in good standing under the laws of the State of Delaware and is qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary; and, where applicable, each Business Guarantor is duly organized, validly existing and in good standing under the laws of the state of its formation and is qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary. (b) Execution, Delivery and Performance. The execution, delivery and performance by Customer of this Loan Agreement and by Customer and each Guarantor of such of the Additional Agreements to which it is a party: (I) have been duly authorized by all requisite action, (ii) do not and will not violate or conflict with any law or other governmental requirement, or any of the agreements, instruments or documents which formed or govern Customer or any such Guarantor, and (iii) do not and will not breach or violate any of the provisions of, and will not result in a default by Customer or any such Guarantor under, any other agreement, instrument or document to which it is a party or by which it or its properties are bound. 2 (c) Notices and Approvals. Except as may have been given or obtained, no notice to or consent or approval of any governmental body or authority or other third party whatsoever (including, without limitation, any other creditor) is required in connection with the execution, delivery or performance by Customer or any Guarantor of such of this Loan Agreement, the Note and the other Additional Agreements to which it is a party. (d) Enforceability. This Loan Agreement, the Note and such of the other Additional Agreements to which Customer or any Guarantor is a party are the respective legal, valid and binding obligations of Customer and such Guarantor, enforceable against it or them, as the case may be, in accordance with their respective terms, except as enforceability may be limited by bankruptcy and other similar laws affecting the rights of creditors generally or by general principles of equity. (e) Collateral. Except for any Permitted Liens: (I) Customer has good and marketable title to the Collateral, (ii) none of the Collateral is subject to any lien, encumbrance or security interest, and (iii) upon the filing of all Uniform Commercial Code financing statements executed by Customer with respect to the Collateral in the appropriate jurisdiction(s) and/or the completion of any other action required by applicable law to perfect its liens and security interests, MLBFS will have valid and perfected first liens and security interests upon all of the Collateral. (f) Financial Statements. Except as expressly set forth in Customer's or any Business Guarantor's financial statements, all financial statements of Customer and each Business Guarantor furnished to MLBFS have been prepared in conformity with generally accepted accounting principles, consistently applied, are true and correct in all material respects, and fairly present the financial condition of it as at such dates and the results of its operations for the periods then ended (subject, in the case of interim unaudited financial statements, to normal year-end adjustments); and since the most recent date covered by such financial statements, there has been no material adverse change in any such financial condition or operation. All financial statements furnished to MLBFS of any Guarantor other than a Business Guarantor are true and correct in all material respects and fairly represent such Guarantor's financial condition as of the date of such financial statements (subject, in the case of interim unaudited financial statements of a Business Guarantor, to normal year-end adjustments), and since the most recent date of such financial statements, there has been no material adverse change in such financial condition. (g) Litigation. No litigation, arbitration, administrative or governmental proceedings are pending or, to the knowledge of Customer, threatened against Customer or any Guarantor, which would, if adversely determined, materially and adversely affect the liens and security interests of MLBFS hereunder of under any of the Additional Agreements, the financial condition of Customer or any such Guarantor or the continued operations of Customer or any Business Guarantor. (h) Tax Returns. All federal, state and local tax returns, reports and statements required to be filed by Customer and each Guarantor have been filed with the appropriate governmental agencies and all taxes due and payable by Customer and each Guarantor have been timely paid (except to the extent that any such failure to file or pay will not materially and adversely affect either the liens and security interests of MLBFS hereunder or under any of the Additional Agreements, the financial condition of Customer or any Guarantor, or the continued operations of Customer or any Business Guarantor). (i) Collateral Location. All of the tangible Collateral is located at a Location of Tangible Collateral. (j) No Outside Broker. Except for employees of MLBFS, MLPF&S or one of their affiliates, Customer has not in connection with the transactions contemplated hereby directly or indirectly engaged or dealt with, and was not introduced or referred to MLBFS by, any broker or other loan arranger. Each of the foregoing representations and warranties: (I) has been and will be relied upon as an inducement to MLBFS to make the Loan, and (ii) is continuing and shall be deemed remade by Customer on the Closing Date. 3.2 FINANCIAL AND OTHER INFORMATION (a) Customer shall furnish or cause to be furnished to MLBFS during the term of this Loan Agreement all of the following: (i) Annual Financial Statements. Within 120 days after the close of each fiscal year of Customer, a copy of the annual audited financial statements of Customer, including in reasonable detail, a balance sheet and statement of retained earnings as at the close of such fiscal year and statements of profit and loss and cash flow for such fiscal year; (ii) Interim Financial Statements. Within 45 days after the close of each fiscal quarter of Customer, a copy of the interim financial statements of Customer for such fiscal quarter (including in reasonable detail both a balance sheet as of the close of such fiscal period, and statement of profit and loss for the applicable fiscal period); (iii) A/R Agings. Within 15 days after the close of each fiscal year of Customer, a copy of the Accounts Receivable Aging of Customer as of the end of such fiscal year; (iv) Inventory Report. Within 15 days after the close of each fiscal year of Customer, a copy of the Inventory Report of Customer as of the end of such fiscal year; and (v) Other Information. Such other information as MLBFS may from time to time reasonably request relating to Customer, any Guarantor or the Collateral. (b) General Agreements With Respect to Financial Information. Customer agrees that except as otherwise specified herein or otherwise agreed to in writing by MLBFS: (I) all annual financial statements required to be furnished by Customer to MLBFS hereunder will be prepared by either the current independent accountants for Customer or other independent accountants reasonably acceptable to MLBFS, and (ii) all other financial information required to be furnished by Customer to MLBFS hereunder will be certified as correct by the party who has prepared such information, and, in the case of internally prepared information with respect to Customer or any Business Guarantor, certified as correct by their respective chief financial officer. 3 3.3 OTHER COVENANTS Customer further agrees during the term of this Loan Agreement that: (a) Financial Records; Inspection. Customer and each Business Guarantor will: (I) maintain at its principal place of business complete and accurate books and records, and maintain all of its financial records in a manner consistent with the financial statements heretofore furnished to MLBFS, or prepared on such other basis as may be approved in writing by MLBFS; and (ii) permit MLBFS or its duly authorized representatives, upon reasonable notice and at reasonable times, to inspect its properties (both real and personal), operations, books and records. (b) Taxes. Customer and each Guarantor will pay when due all taxes, assessments and other governmental charges, howsoever designated, and all other liabilities and obligations, except to the extent that any such failure to pay will not materially and adversely affect either the liens and security interests of MLBFS hereunder or under any of the Additional Agreements, the financial condition of Customer or any Guarantor or the continued operations of Customer or any Business Guarantor. (c) Compliance With Laws and Agreements. Neither Customer nor any Guarantor will violate any law, regulation or other governmental requirement, any judgment or order of any court or governmental agency or authority, or any agreement, instrument of document to which it is a party or by which it is bound, if any such violation will materially and adversely affect either the liens and security interests of MLBFS hereunder or under any of the Additional Agreements, the financial condition of Customer or any Guarantor, or the continued operations of Customer or any Business Guarantor. (d) No Use of Merrill Lynch Name. Except prior written consent of MLBFS, neither Customer nor any Guarantor will directly or indirectly publish, disclose or otherwise use in any advertising or promotional material, or press release or interview, the name, logo or any trademark of MLBFS, MLPF&S, Merrill Lynch and Co., Incorporated or any of their affiliates. (e) Notification By Customer. Customer shall provide MLBFS with prompt written notification of: (I) any Default; (ii) any materially adverse change in the business, financial condition or operations of Customer or any Business Guarantor; (iii)any information which indicates that any financial statements of Customer or any Guarantor fail in any material respect to present fairly the financial condition and results of operations purported to be presented in such statements; and (iv) any change in Customer's outside accounts. Each notification by Customer pursuant hereto shall specify the event or information causing such notification, and, to the extent applicable, shall specify the steps being taken to rectify or remedy such event or information. (f) Notice of Change. Customer shall give MLBFS not less than 30 days prior written notice of any change in the name (including any fictitious name) or principal place of business or residence of Customer or any Guarantor. (g) Continuity. Except upon the prior written consent of MLBFS, which consent will not be unreasonably withheld: (I) neither Customer nor any Business Guarantor shall be a party to any merger or consolidation with, or purchase or otherwise acquire all or substantially all of the assets of, or any material stock, partnership, joint venture or other equity interest in, any person or entity, or sell, transfer or lease all or any substantial part of its assets, if any such action would result in either: (A) a material change in the principal business, ownership or control of Customer or such Business Guarantor, or (B) a material adverse change in the financial condition or operations of Customer or such Business Guarantor; (ii) Customer and each Business Guarantor shall preserve their respective existence and good standing in the jurisdiction(s) of establishment and operation; (iii) neither Customer nor any Business Guarantor shall engage in any material business substantially different from their respective business in effect as of the date of application by Customer for credit from MLBFS, or cease operating any such material business; (iv) neither Customer nor any Business Guarantor shall cause or permit any other person or entity to assume or succeed to any material business or operations of Customer or such Business guarantor; and (v) neither Customer nor any Business Guarantor shall cause or permit any material change in its controlling ownership. (h) Minimum Tangible Net Worth. Customer's "tangible net worth" shall at all times exceed $11,000,000.00. For the purposes hereof, the term "tangible net worth" shall mean Customer's net worth as shown on Customer's regular financial statements prepared in a manner consistent with the terms hereof, but excluding an amount equal to (I) any assets which are ordinarily classified as "intangible" in accordance with generally accepted accounting principles, and (ii) any amounts now or hereafter directly or indirectly owing to Customer by officers, shareholders or affiliates of Customer. 3.4 COLLATERAL (a) Pledge of Collateral. To secure payment and performance of the Obligations, Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grants to MLBFS first liens and security interests in and upon all of the Collateral, subject only to Permitted Liens. (b) Liens. Except upon the prior written consent of MLBFS, Customer shall not create or permit to exist any lien, encumbrance or security interest upon or with respect to any Collateral now owned or hereafter acquired other than Permitted Liens. (c) Performance of Obligations. Customer shall perform all of its obligations owing on account of or with respect to the Collateral; it being understood that nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or otherwise, shall be deemed an assumption by MLBFS of any of Customer's said obligations. (d) Sales and Collections. So long as no Event of Default shall have occurred and be continuing, Customer may in the ordinary course of its business: (I) sell any Inventory normal held by Customer for sale, (ii) use or consume any materials and supplies normally held by Customer for use or consumption, and (iii) collect all of its Accounts. Customer shall take such action with respect to protection of its Inventory and the other Collateral and the collection of its Accounts as MLBFS may from time to time reasonably request. (e) Account Schedules. Upon the request of MLBFS, made now or at any reasonable time or times hereafter, Customer shall deliver to MLBFS, in addition to the other information required hereunder, a schedule identifying, for each Account and all Chattel Paper subject to MLBFS' security interests. 4 hereunder, each Account Debtor by name and address and amount, invoice or contract number and date of each invoice or contract. Customer shall furnish to MLBFS such additional information with respect to the Collateral, and amounts received by Customer as proceeds of any of the Collateral, as MLBFS may from time to time reasonably request. (f) Alterations and Maintenance. Except upon the prior written consent of MLBFS Customer shall not make or permit any material alterations to any tangible Collateral which might materially reduce or impair its market value or utility. Customer shall at all times keep the tangible Collateral in good condition and repair, reasonable wear and tear excepted, and shall pay or cause to be paid all obligations arising from the repair and maintenance of such Collateral, as well as all obligations with respect to any Location of Tangible Collateral, except for any such obligations being contested by Customer in good faith by appropriate proceedings. (g) Location. Except for movements required in the ordinary course of Customer's business, Customer shall give MLBFS 30 days' prior written notice of the placing at or movement of any tangible Collateral to any location of her than a Location of Tangible Collateral. In no event shall Customer cause or permit any material tangible Collateral to be removed from the United States without the express prior written consent of MLBFS. (h) Insurance. Customer shall insure all of the tangible Collateral under a policy or policies of physical damage insurance providing that losses will be payable to MLBFS as its interest may appear pursuant to a Lender's Loss Payable Endorsement and containing such other provisions as may be reasonably required by MLBFS. Customer shall further provide and maintain a policy or policies of comprehensive public liability insurance naming MLBFS as an additional party insured. Customer and each Business Guarantor shall maintain such other insurance as may be required by law or is customarily maintained by companies in a similar business or otherwise reasonably required by MLBFS. All such insurance policies shall provide that MLBFS will receive not less than 10 days prior written notice of any cancellation, and shall otherwise be in form and amount and with an insurer or insurers reasonably acceptable to MLBFS. Customer shall furnish MLBFS with a copy or certificate of each such policy or policies and, prior to any expiration or cancellation, each renewal or replacement thereof. (i) Event of Loss. Customer shall at its expense promptly repair all repairable damage to any tangible Collateral. In the event that any tangible Collateral is damaged beyond repair, lost, totally destroyed or confiscated (an "Event of Loss") and such Collateral had a value prior to such Event of Loss of $25,000.00 or more, then, on or before the first to occur of (I) 90 days after the occurrence of such Event of Loss, or (ii) 10 Business Days after the date on which either Customer of MLBFS shall receive any proceeds of insurance on account of such Event of Loss, Customer shall, at Customer's option, either replace the Collateral subject to such Event of Loss with comparable Collateral free of all liens other than Permitted Liens (in which event Customer shall be entitled to utilize the proceeds of insurance on account of such Event of Loss for such purpose, and may retain any excess proceeds of such insurance), or prepay the Loan by an amount equal to the actual cash value of such Collateral as determined by either the insurance company's payment (plus any application deductible) or, in absence of insurance company payment, as reasonably determined by MLBFS. Notwithstanding the foregoing, if at any time of occurrence of such Event of Loss or any time thereafter prior to replacement or prepayment, as aforesaid, an Event of Default shall have occurred and be continuing hereunder, then MLBFS may at its sole option, exercisable at any time while such Event of Default shall be continuing, require Customer to either replace such Collateral or make a prepayment on account of the Loan, as aforesaid. Any partial prepayment of the Loans shall be applied to installments due in inverse order of maturity. (j) Notice of Certain Events. Customer shall give MLBFS immediate notice of any attachment, lien, judicial process, encumbrance or claim affecting or involving $25,000.00 or more of the Collateral. (k) Indemnification. Customer shall indemnify, defend and save MLBFS harmless from and against any and all claims, liabilities, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) of any nature whatsoever which may be asserted against or incurred by MLBFS arising out of or in any manner occasioned by (I) the ownership, collection, possession, use or operation of any Collateral, or (ii) any failure by Customer to perform any of its obligations hereunder; excluding, however, from said indemnity any such claims, liabilities, etc. arising directly out of the willful wrongful act or active gross negligence of MLBFS. This indemnity shall survive the expiration or termination of this Loan Agreement as to all matters arising or accruing prior to such expiration or termination. 3.5 EVENTS OF DEFAULT The occurrence of any of the following events shall constitute an "Event of Default" under this Loan Agreement: (a) Failure to Pay. Customer shall fail to pay when due any amount owing by Customer to MLBFS under the Note or this Loan Agreement, or shall fail to pay when due any other Obligations, and any such failure shall continue for more than five (5) Business Days after written notice thereof shall have been given by MLBFS to Customer. (b) Failure to Perform. Customer or any Guarantor shall default in the performance or observance of any covenant or agreement on its part to be performed or observed under this Loan Agreement, the Note or any of the other Additional Agreements (not constituting an Event of Default under any other clause of this Section), and such default shall continue unremedied for ten (10) Business Days after written notice thereof shall have been given by MLBFS to Customer. (c) Breach of Warranty. Any representation or warranty made by Customer or any Guarantor contained in this Loan Agreement, the Note or any of the other Additional Agreements shall at any time prove to have been incorrect in any material respect when made. (d) Default Under Other Agreement. A default or Event of Default by Customer or any Guarantor shall occur under the terms of any other agreement, instrument or document with or intended for the benefit of MLBFS, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") or any of their affiliates, and any required notice shall have been given and required notice shall have been given and required passage of time shall have elapsed. 5 (e) Bankruptcy Event. Any Bankruptcy Event shall occur. (f) Material Impairment. Any event shall occur which shall reasonably cause MLBFS to in good faith believe that the prospect of full payment or performance by Customer or any Guarantor of any of their respective liabilities or obligations under this Loan Agreement, the Note or any of the other Additional Agreements to which Customer or such Guarantor is a party has been materially impaired. The existence of such a material impairment shall be determined in a manner consistent with the intent of Section 1-208 of the UCC. (g) Acceleration of Debt to Other Creditors. Any event shall occur which results in the acceleration of the maturity of any indebtedness of $100,000.00 or more of Customer or any Guarantor to another creditor under any indenture, agreement, undertaking or otherwise. (h) Seizure or Abuse of Collateral. The Collateral, or any material part thereof, shall be or become subject to any material abuse or misuse, or any levy, attachment, seizure or confiscation which is not released within ten (10) Business Days. 3.6 REMEDIES (a) Remedies Upon Default. Upon the occurrence and during the continuance of any Event of Default, MLBFS may at its sole option do any one or more to all of the following, at such time and in such order as MLBFS may in its sole discretion choose: (i) Termination. MLBFS may without notice terminate its obligation to make the Loan (if the Loan has not then been funded) or otherwise extend any credit to or for the benefit of Customer (it being understood, however, that upon the occurrence of any Bankruptcy Event all such obligations shall automatically terminate without any action on the part of MLBFS); and upon any such termination MLBFS shall be relieved of all such obligations. (ii) Acceleration. MLBFS may declare the principal of and interest and any premium on the Note, and all other Obligations to be forthwith due and payable, whereupon all such amounts shall be immediately due and payable, without presentment, demand for payment, protest and notice of protest, notice of dishonor, notice of acceleration, notice of intent to accelerate or other notice or formality of any kind, all of which are hereby expressly waived; provided, however, that upon the occurrence of any Bankruptcy Event all such principal, interest, premium and other Obligations shall automatically become due and payable without any action on the part of MLBFS. (iii) Exercise Other Rights. MLBFS may exercise any or all of the remedies of a secured party under applicable law, including, but not limited to, the UCC, and any or all of its other rights and remedies under this Loan Agreement and the Additional Agreements. (iv) Possession. MLBFS may require Customer to make the Collateral and the records pertaining to the Collateral available to MLBFS at a place designated by MLBFS which is reasonably convenient to Customer, or may take possession of the Collateral and the records pertaining to the Collateral without the use of any judicial process and without any prior notice to Customer. (v) Sale. MLBFS may sell any or all of the Collateral at public or private sale upon such terms and conditions as MLBFS may reasonably deem proper. MLBFS may purchase any Collateral at any such public sale. The net proceeds of any such public or private sale and all other amounts actually collected or received by MLBFS pursuant hereto, after deducting all costs and expenses incurred at any time in the collection of the Obligations and in the protection, collection and sale of the Collateral, will be applied to the payments of the Obligations, with any remaining proceeds paid to Customer or whoever else may be entitled thereto, and with Customer and each Guarantor remaining jointly and severally liable for any amount remaining unpaid after such application. (vi) Delivery of Cash, Checks, Etc. MLBFS may require Customer to forthwith upon receipt, transmit and deliver to MLBFS in the form received, all cash, checks, drafts and other instruments for the payment of money (properly endorsed, where required, so that such items may be collected by MLBFS) which may be received by Customer at any time in full or partial payment of any Collateral, and require that Customer not commingle any such items which may be so received by Customer with any other of its funds or property but instead hold them separate and apart and in trust for MLBFS until deliver is made to MLBFS. (vii) Notification of Account Debtors. MLBFS may notify any Account Debtor that its Account or Chattel Paper has been assigned to MLBFS and direct such Account Debtor to make payment directly to MLBFS of all amounts due or becoming due with respect to such Account or Chattel Paper; and MLBFS may enforce payment and collect, by legal proceedings or otherwise, such Account or Chattel Paper. (viii) Control of Collateral. MLBFS may otherwise take control in any lawful manner of any cash or non-cash items of payment or proceeds of Collateral and of any rejected, returned, stopped in transit or repossessed goods included in the Collateral and endorse Customer's name on any item of payment on or proceeds of the Collateral (b) Collection Fee. If following any acceleration of the Note and other Obligations pursuant to Section 3.6 (a) (ii) hereof Customer shall fail to pay the entire balance of the Note and all such other Obligations in full within ten (10) Business Days after Customer is notified of such acceleration, then Customer shall pay to MLBFS, in addition to al other sums payable hereunder, a collection fee in an amount equal to the lesser of: (I) five percent (5%) of the sum of the then outstanding balance of the Note and then outstanding Obligations, or (ii) the maximum collection fee permitted by law. Such collection fee, which is intended to compensate MLBFS for its administrative costs incident to the collection of the Note and other Obligations following an Event of Default and acceleration, shall be payable on demand. (c) Set-Off. MLBFS shall have the further right upon the occurrence and during the continuance of an Event of Default to set-off, appropriate and apply toward payment of any of the Obligations, in such order of application as MLBFS may from time to time and at any time elect, any cash, credit, deposits, 6 accounts, financial assets, investment property, securities and any other property of Customer which is in transit to or in the possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or affiliate of MLBFS or MOPF&S. Customer hereby collaterally assigns and grants to MLBFS a continuing security interest in all such property ass additional Collateral. (d) Power of Attorney. Effective upon the occurrence and during the continuance of an Event of Default, Customer hereby irrevocably appoints MLBFS as its attorney-in-fact, with full power of substitution, in its place and stead and in its name or in the name of MLBFS, to from time to time in MLBFS; sole discretion take any action and to execute any instrument which MLBFS may deem necessary or advisable to accomplish the purposes of this Loan Agreement, including, but not limited to, to receive, endorse and collect all checks, drafts and other instruments for the payment of money made payable to Customer included in the collateral. (e) Remedies are Severable and Cumulative. All rights and remedies of MLBFS herein are severable and cumulative and in addition to all other rights and remedies available in the Note, the other Additional Agreements, at law or in equity, and any one or more of such rights and remedies may be exercised simultaneously or successively. (f) Notices. To the fullest extent permitted by applicable law, Customer hereby irrevocably waives and releases MLBFS of and from any and all liabilities and penalties for failure of MLBFS to comply with any statutory or other requirement imposed upon MLBFS relating to notices of sale, holding of sale or reporting of any sale, and Customer waives all rights of redemption or reinstatement from any such sale. Any notices required under applicable law shall be reasonably and properly given to Customer if given by any of the methods provided herein at least 5 Business Days prior to taking action. MLBFS shall have the right to postpone or adjourn any sale or other disposition of Collateral at any time without giving notice of any such postponed or adjourned date. In the event MLBFS seeks to take possession of any or all of the Collateral by court process, Customer further irrevocably waives to the fullest extent permitted by law any bonds and any surety or security relating thereto by any statute, court rule or otherwise as an incident to such possession, and any demand for possession prior to the commencement of any suit or action. 3.7 MISCELLANEOUS (a) Non-Waiver. No failure or delay on the part of MLBFS in exercising any right, power or remedy pursuant to this Loan Agreement, the Note or any of the other Additional Agreements shall operate as a waiver thereof, and no single or partial exercise of any such right, power or remedy shall preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. Neither any waiver of any provision of this Loan Agreement, the Note or any of the other Additional Agreements, nor any consent to any departure by Customer therefrom, shall be effective unless the same shall be in writing and signed by MLBFS. Any waiver of any provision of this Loan Agreement, the Note or any of the other Additional Agreements shall be effective only in the specific instance and for the specific purpose for which given. Except as otherwise expressly provided herein, no notice to or demand on Customer shall in any case entitle Customer to any other or further notice or demand in similar or other circumstances. (b) Disclosure. Customer hereby irrevocably authorizes MLBFS and each of its affiliates, including without limitation, MLPF&S, to at any time (whether or not an Event of Default shall have occurred) obtain from and disclose to each other any and all financial and other information about Customer. (c) Communications. All notices and other communications required or permitted hereunder shall be in writing, and shall be either delivered personally, mailed by postage prepaid certified mail or sent by express overnight courier or by facsimile. Such notices and communications shall be deemed to be given on the date of personal delivery, facsimile transmission or actual delivery of certified mail, or one Business Day after delivery to an express overnight courier. Unless otherwise specified in a notice sent or delivered in accordance with the terms hereof, notices and other communications in writing shall be given to the parties hereto at their respective addresses set forth at the beginning of this Loan Agreement, or, in the case of facsimile transmission, to the parties at their respective regular facsimile telephone number. (d) Costs, Expenses and Taxes. Customer shall upon demand pay or reimburse MLBFS for: (I) all Uniform Commercial Code and other filing and search fees and expenses incurred by MLBFS in connection with the verification, perfection or preservation of MLBFS; rights hereunder or in the Collateral or any other collateral for the Obligations; (ii) any and all stamp, transfer and other taxes and fees payable or determined to be payable in connection with the execution, delivery and/or recording of this Loan Agreement or any of the Additional Agreements; and (iii) all reasonable fees and out-of-pocket expenses (including, but not limited to, reasonable fees and expenses of outside counsel) incurred by MLBFS in connection with the collection of any sum payable hereunder or under any of the Additional Agreements not paid when due, the enforcement of this Loan Agreement or any of the Additional Agreements and the protection of MLBFS; rights hereunder or thereunder, excluding, however, salaries and normal overhead attributable to MLBFS' employees. The obligations of customer under this paragraph shall survive the expiration or termination of this Loan Agreement and the discharge of the other Obligations. (e) Right to Perform Obligations. If Customer shall fail to do any act or thing which it has covenanted to do under this Loan Agreement or any representation or warranty on the part of Customer contained in this Loan Agreement shall be breached, MLBFS may, in its sole discretion, after 5 Business Days written notice is sent to Customer (or such lesser notice including no notice, as is reasonable under the circumstances), do the same or cause it to be done or remedy any such breach, and may expend its funds for such purpose. Any and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by Customer upon demand, with interest at the "Interest Rate" (as that item is defined in the Note) during the period from and including the date funds are so expended by MLBFS to the date of repayment, and all such amounts shall be additional Obligations. The payment or performance by MLBFS of any of Customer's obligations hereunder shall not relieve Customer of said obligations or of the consequences of having failed to pay or perform the same, and shall not waive or be deemed a cure of any Default. (f) Further Assurances. Customer agrees to do such further acts and things and to execute and deliver to MLBFS such additional agreements, instruments and documents as MLBFS may reasonable require or deem advisable to effectuate the purposes of this Loan Agreement, the Note or any of the other Additional Agreements, or to establish, perfect and maintain MLBFS' security interests and liens upon the Collateral, including but not limited to: (I) 7 executing financing statements or amendments thereto when and as reasonably requested by MLBFS; and (ii) if in the reasonable judgment of MLBFS it is required by local law, causing the owners and/or mortgagees of the real property on which any Collateral may be located to execute and deliver to MLBFS waivers or subordinations reasonably satisfactory to MLBFS with respect to any rights in such Collateral. (g) Binding Effect. This Loan Agreement, the Note and the other Additional Agreements shall be binding upon, and shall inure to the benefit of MLBFS, Customer and their respective successors and assigns. Customer shall not assign any of its rights or delegate any of its obligations under this Loan Agreement, the Note or any of the other Additional Agreements without the prior written consent of MLBFS. Unless otherwise expressly agreed to in a writing signed by MLBFS, no such consent shall in any event relieve Customer of any of its obligations under this Loan Agreement, the Note or any of the other Additional Agreements. (h) Headings. Captions and section and paragraph headings in this Loan Agreement are inserted only as a matter of convenience, and shall not affect the interpretation hereof. (i) Governing Law. This Loan Agreement, the Note, and unless otherwise expressly provided therein, each of the other Additional Agreements, shall be governed in all respects by the laws of the State of Illinois. (j) Severability of Provisions. Whenever possible, each provision of this Loan Agreement, the Note and the other Additional Agreements shall be interpreted in such manner as to be effective and valid under applicable law. Any provision of this Loan Agreement, the Note or any of the other Additional Agreements which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Loan Agreement, the Note and the other Additional Agreements or affecting the validity or enforceability of such provision in any other jurisdiction. (k) Term. This Loan Agreement shall become effective when accepted by MLBFS at its office in Chicago, Illinois, and subject to the terms hereof, shall continue in effect so long thereafter as there shall be any moneys owing hereunder of under the Note, or there shall be any other Obligations outstanding. (l) Counterparts. This Loan Agreement may be executed in one or more counterparts which, when taken together, constitute one and the same agreement. (m) Jurisdiction; Waiver. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION, IN ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT, THE NOTE AND THE OTHER ADDITIOAL AGREEMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER JURISDICTION WHERE CUSTOMER OR ANY COLLATERAL FOR THE OBLIGATIONS MAY BE LOCATED. CUSTOMER CONSENTS TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN ANY STATE OR FECERAL COURT IN THE COUNTY OF COOK FOR SUCH PURPOSES, AND CUSOMER WAIVES ANY AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE. CUSTOMER FURTHER WAIVES ANY RIGHTS TO COMMENCE ANY ACTION AGAINST MLBFS IN ANY JURISDICTION EXCEPT IN THE COUNTY OF COOK AND STATE OF ILLINOIS. MLBFS AND CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDINGOR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LOAN, THE NOTE, THIS LOAN AGREEMENT, ANY OTHER ADDITIONAL GREEMENTS AND/OR ANY OF THE TRANSACTIONW WHICH ARE THE SUBJECT MATTER OF THIS LOAN AGREEMENT. 8 (n) Integration. THIS LOAN AGREEMENT, TOGETHER WITH THE NOTE AND THE OTHER ADDITIONAL AGREEMENTS, CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS THE FULL AND FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN AGREEMENTS OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. WITHOUT LIMITING THE FOREGOING, CUSTOMER ACKNOWLEDGES THAT: (I) NO PROMISE OR COMMITMENT HAS BEEN MADE TO IT BY MLBFS, MLPF&S OR ANY OF THEIR RESPECTIVE EMPLOYEES, AGENTS OR REPRESENTATIVES TO MAKE THE LOAN ON ANY TERMS OTHER THAN AS EXPRESSLY SET FORTH HEREIN AND IN THE NOTE, OR TO MAKE ANY OTHER LOAN OR OTHERWISE EXTEND ANY OTHER CREDIT TO CUSTOMER OR ANY OTHER PARTY; AND (II) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HREIN, THIS LOAN AGREEMENT SUPERSEDES AND REPLACES ANY AND ALL PROPOSALS, LETTERS OF INTENT AND APPROVAL AND COMMITMENT LETTERS FROM MLBFS TO CUTOMER, NONE OF WHICH SHALL BE CONSIDERED AN ADDITIONAL AGREEMENT. NO AMENDMENT OR MODIFICATION OF THIS AGREEMENT OR ANY OF THE ADDITIONAL AGREEMENTS TO WHICH CUSTOMER IS A PARTY SHALL BE EFFECTIVE UNLESS IN A WRITING SIGNED BY BOTH MLBFS AND CUSTOMER. IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year first above written. LAKELAND INDUSTRIES, INC. By: /s/ Raymond J. Smith /s/Christopher J. Ryan ---------------------------------------------------- Signature (1) Signature (2) Raymond J Smith Christopher J. Ryan ---------------------------------------------------- Printed Name Printed Name President Exec V.P. & Secretary ---------------------------------------------------- Title Title Accepted at Chicago, Illinois: MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. By: --------------------------------- EXHIBIT A ATTACHED TO AND HEREBY MADE A PART OF TERM LOAN AND SECURITY AGREEMENT NO. 9909550501 BETWEEN MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. AND LAKELAND INDUSTRIES, INC. Additional Locations of Tangible Collateral: 1. Lakeland Industries, Inc. 711-2 Koehler Ave. Ronkonkoma, NY 11779 (Landlord JBJ Realty - Peter Hofrichor) 2. Lakeland Industries, Inc. 2451 Highway 67 South Somerville, AL 35670 (Landlord - Harvey Pride) 3. Lakeland Industries, Inc. 3420 Valley Ave. S.W. Decatur, AL (Landlord - River Group Holding Co. LLC - Harvey Pride, General Manager) 4. Lakeland Industries, Inc. 202 Pride Lane S.W. Decatur, AL 35603 (Landlord - POMS Holding Co., a partnership - Harvey Pride, General Partner) 5. Lakeland Industries, Inc. 2401 Southwest Parkway St. Joseph, MO 64503 (Landlord - Southwest Parkway, Inc. - S.C. Crawford) Merrill Lynch No. 9909550501 $3,000,000.00 September 9, 1999 COLLATERAL INSTALLMENT NOTE FOR VALUE RECEIVED, LAKELAND INDUSTRIES, INC., a corporation organized and existing under the laws of the State of Delaware ("Customer") hereby promises to pay to the order of MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the laws of the State of Delaware ("MLBFS"), in lawful money of the United States, the principal sum of Three Million Dollars ($3,000,000.00), or if more or less, the aggregate amount advanced by MLBFS to Customer pursuant to the Loan Agreement (the "Loan Amount"); together with interest on the unpaid balance of the Loan Amount, from the Closing Date until payment, at the Interest Rate (or, if applicable, at the Default Interest Rate), as follows: 1. DEFINITIONS (a) In addition to terms defined elsewhere in this Note, as used herein, the following terms shall have the following meanings: (i) "Closing Date" shall mean the date of advancement of funds hereunder. (ii) "Default Interest Rate" shall mean a rate equal to the sum of the "Interest Rate", as determined below, plus two percent (2%) per annum. (iii) "Excess Interest" shall mean any amount of interest in excess of the maximum amount of interest permitted to be charged by law. (iv) "Interest Rate" shall mean a variable per annum rate equal to the sum of (I) 2.45% per annum, and (ii) the interest rate from time to time published in the "Money Rates" section of The Wall Street Journal for 30-day high-grade unsecured notes sold through dealers by major corporations (the "30-day Dealer Commercial Paper Rate"). The Interest Rate will change as of the date of publication in The Wall Street Journal of a 30-day Dealer Commercial Paper Rate that is different from that published on the preceding Business Day. In the event that The Wall Street Journal shall, for any reason, fail or cease to publish the 30-day Dealer Commercial paper Rate, MLBFS will choose a reasonably comparable index or source to use as the basis for the Interest Rate. Upon the occurrence and during the continuance of a Default, the Interest Rate May be increased to the "Default Interest Rate", as herein provided. (v) "Loan Agreement" shall mean that certain TERM LOAN AND SECURITY AGREEMENT NO. 9909550501 between Customer and MLBFS, as the same may have been or may hereafter be amended or supplemented. (vi) "Note" shall mean THIS COLLATERAL INSTALLMENT NOTE. 2. PAYMENT OR OTHER TERMS. Customer shall pay the indebtedness under this Note in 60 consecutive monthly installments commencing on the first day of the second calendar month following the Closing Date and continuing on the first day of each calendar month thereafter until this Note shall be paid in full. Each such installment in an amount equal to the sum of (I) accrued interest, and (ii) 1/60th of the Loan Amount (with the first such installment including interest accrued from the date of funding). Each payment received hereunder shall be applied first to any fees and expenses of MLBFS payable by Customer under the terms of the Loan Agreement (including, without limitation, collection fees), next to accrued interest at the Interest Rate and/or Default Interest Rate, as applicable, with the balance applied on account of the unpaid principal hereof. Upon the occurrence and during the continuance of any Default, but without limiting the rights and remedies otherwise available to MLBFS or waiving such Default, the interest payable by Customer hereunder shall be at the option of MLBFS accrue and be payable at the Default Interest Rate. The Default Interest Rate, once implemented, shall continue to apply to this Note and be payable by Customer until the date such Default is either cured or waived in writing by MLBFS. All interest shall be computed on the basis of actual days elapsed over a 360-day year. All sums payable hereunder shall be payable at the office of MLBFS at 222 North LaSalle Street, Chicago, Illinois 60601, or at such other place or places as the holder hereof may from time to time appoint in writing. Customer may prepay this Note at any time in whole or in part; provided, however, that if any such prepayment is made from the proceeds of a refinancing of this Note by another lender, such prepayment shall: (I) if made prior to the end of the first "year" after the Closing Date, be accompanied by a premium equal to 3% of the amount prepaid; (ii) if made during the second year following the Closing Date be accompanied by a premium equal to 2% of the amount prepaid; and (iii) if made thereafter be accompanied by a premium equal to 1% of the amount prepaid. A "year" for the purposes of this clause is a 365-366 day period commencing on the Closing Date or any anniversary of the Closing Date. Any partial prepayment shall be applied to installments of the Loan Amount in inverse order of maturity. This Note is the Collateral Installment Note referred to in, and is entitled to all of the benefits of the Loan Agreement and any Additional Agreements. If Customer shall fail to pay when due any installment or other sum due hereunder, and any such failure shall continue for more than five (5) Business Days after written notice thereof shall have been given by the holder hereof to Customer, or if any other Event of Default shall have occurred and be continuing, then at the option of the holder hereof (or, upon the occurrence of any Bankruptcy Event, automatically, without any action on the part of the holder hereof), and in addition to all other rights and remedies available to such holder under the Loan Agreement, any Additional Agreements, and otherwise, the entire Loan Amount at such time remaining unpaid, together with accrued interest thereon and all other sums then owing by Customer under the Loan Agreement, may be declared to be and thereby become immediately due and payable. It is expressly understood, however, that nothing contained in the Loan Agreement, any other agreement, instrument or document executed by Customer, or otherwise, shall affect or impair the right, which is unconditional and absolute, of the holder hereof to enforce payment of all sums due under this Note at or after maturity, whether by acceleration or otherwise, or shall affect the obligation of Customer, which is also unconditional and absolute, to pay the sums payable under this Note in accordance with its terms. Except as otherwise expressly set forth herein or in the Loan Agreement, Customer hereby waives presentment, demand for payment, protest and notice of protest, notice of dishonor, notice of acceleration, notice of intent to accelerate and all other notices and formalities in connection with this Note. Wherever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Note. Notwithstanding any provision to the contrary in this Note, the Loan Agreement or any of the Additional Agreements, no provision of this Note, the Loan Agreement or any of the Additional Agreements shall require the payment or permit the collection of any Excess Interest. If any Excess Interest is provided for, or is adjudicated as being provided for, in this Note, the Loan Agreement or any of the Additional Agreements, then: (a) Customer shall not be obligated to pay any Excess Interest; and (b) any Excess interest that MLBFS may have received under this Note, the Loan Agreement or any of the Additional Agreements shall, at the option of MLBFS, be: (I) applied as a credit against the then unpaid principal balance of this Note, or accrued interest hereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to the payor thereof, of (iii) any combination of the foregoing. This Note shall be construed in accordance with the laws of the State of Illinois and may be enforced by the holder hereof in any jurisdiction in which the Loan Agreement may be enforced. IN WITNESS WHEREOF, this Note has been executed by Customer as of the day and year first above written. LAKELAND INDUSTRIES, INC. By: /s/ Raymond J. Smith /s/Christopher J. Ryan ---------------------------------------------------- Signature (1) Signature (2) Raymond J Smith Christopher J. Ryan ---------------------------------------------------- Printed Name Printed Name President Exec V.P. & Secretary ---------------------------------------------------- Title Title Exhibit 10(o) This Agreement between River Group Holding Co., LLP, c/o Harvey Pride Jr., 202 Pride Lane, SW, Decatur, AL 35603 as Landlord and Lakeland Industries, Inc., a Delaware corporation with offices at 711-2 Koehler Avenue, Ronkonkoma, N.Y. 11779 as Tenant Witnesseth: The Landlord hereby leases to the Tenant the following premises: The premises located at 3428 Valley Avenue (2011/2 Pride Lane), Decatur, AL consisting of approximately 91,788 square feet. for the term of five (5) years. to commence from the 1st day of June, 1999 and to end on the 31st day of May, 2004 to be used and occupied only for Office, light manufacturing and warehouse space upon the conditions and covenants following: 1st. That the Tenant shall pay the annual rent of One Hundred Ninety Nine Thousand One Hundred ($199,100.00) Dollars said rent to be pain in equal monthly payments in advance on the first day of each and every month during the term aforesaid, as follows: Sixteen Thousand Five Hundred and Ninety Two ($16,592.00) Dollars on June 1st, 1999 and monthly thereafter non-structural 2nd. That the Tenant shall take good care of the premises and shall, at the Tenant's own cost and expense make all/repairs including, but not limited to, repairs of the plumbing, heating and electrical systems, and at the end or other expiration of the term, shall deliver up the demised premises in good order or condition, damages by the elements excepted. 3rd. That the Tenant shall promptly execute and comply with all statutes, ordinances, rules orders, regulations and requirements of the Federal, State and Local Governments and of any and all their Departments and Bureaus applicable to said premises, for the correction, prevention and abatement of nuisances or other grievances, in, upon, or connected with said premises during said term; and shall also promptly comply with and execute all rules, orders and regulations of the New York Board of Fire Underwriters, or any other similar body, at the Tenant's own cost and expense. 4th. That the Tenant, successors, heirs, executors and administrators shall not assign this agreement , or underlet or underlease the premises, or any part thereof, or make any alterations on the premises, without the Landlord's consent in writing; or occupy, or permit or suffer the same to be occupied for any business or purpose deemed disreputable or extra-hazardous on account of fire, under the penalty of damages and forfeiture, and in the event of a breach thereof, the term herein shall immediately cease and determine at the option of th Landlord as if it were the expiration of the original term. 5th. Tenant must give Landlord prompt notice of fire, accident, damage or dangerous or defective condition. If the Premises can not be used because of fire or other casualty, Tenant is not required to pay rent for the time the Premises are unusable. If part of the Premises can not be used, Tenant must pay rent for the usable part. Landlord shall have the right to decide which part of the Premises is usable. Landlord need only repair the damaged structural parts of the Premises. Landlord is not required to repair or replace any equipment , fixtures, furnishings or decorations unless originally installed by Landlord. Landlord is not responsible for delays due to settling insurance claims, obtaining estimates, labor and supply problems or any other cause not fully under Landlords control. If the fire or other casualty is caused by an act or neglect of Tenant, Tenant's employees or invitees, or at the time of the fire or casualty Tenant is in default in any term of this Lease, then all repairs will be made at Tenant's expense and Tenant must pay the full rent with no adjustment. The cost of the repairs will be added rent. Landlord has the right to demolish or rebuild the Building if there is substantial damage by fire or other casualty. Landlord may cancel this Lease within 30 days after the substantial fire or casualty by giving Tenant notice of Landlord's intention to demolish or rebuild. The Lease will end 30 days after Landlord's cancellation notice to the Tenant. Tenant must deliver the Premises to the Landlord on or before the cancellation date in the notice and pay all rent due to the date of the fire or casualty. If the Lease is cancelled Landlord is not required to repair the Premises or Building. The cancellation does not release Tenant of liability in connection with the fire or casualty. This Section is intended to replace the terms of New York Real Property Law Section 227. 6th. The said Tenant agrees that the said Landlord and the Landlord's agents and other representatives shall have the right to enter into and upon said premises, or any part thereof, at all reasonable hours for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. 7th. The Tenant also agrees to permit the Landlord or the Landlord's agents to show the premises to persons wishing to hire or purchase the same; and the Tenant further agrees that on and after the sixth month, next preceding the expiration of the term hereby granted, the Landlord or the Landlord's agents shall have the right to place notices on the front of said premises, or any part thereof, offering the premises "To Let" or "For Sale", and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation. 8th. That if the said premises, or any part thereof shall be deserted or become vacant during said term, or if any default be made in the payment of the said rent or any part thereof, or if any default be made in the performance of any of the covenants herein contained, the Landlord or representatives may re-enter the said premises by force, summary proceedings or otherwise, and remove all persons therefrom, without being liable to prosecution therefor, and the Tenant hereby expressly waives the service of any notice in writing of intention to re-enter, and the Tenant shall pay at the same time as the rent becomes payable under the terms hereof a sum equivalent to the rent reserved herein, and the Landlord may tent the premises on behalf of the Tenant, reserving the right to rent the premises for a longer period of time than fixed in the original lease without releasing the original Tenant from any liability, applying any moneys collected, first to the expense of resuming or obtaining possession, second to restoring the premises to a rentable condition, and then to the payment of the rent and all other charges due and to grow due to the Landlord, any surplus to be paid to the Tenant, who shall remain liable for any deficiency. 9th. Landlord may replace, at the expense of Tenant, any and all broken glass in and about demised premises. Landlord may insure, and keep insured, all plate glass in the demised premises for and in the name of Landlord. Bills, for the premiums therefor shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due for, and payable by Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, additional rental. Damage and injury to the said premises, caused by the carelessness, negligence or improper conduct on the part of the said Tenant or the Tenant's agents or employees shall be repaired as speedily as possible by the Tenant at the Tenant's own cost and expense. 10th. That the Tenant shall neither encumber nor obstruct the sidewalk in front of, entrance to, or halls and stairs of said premises, nor allow the same to be obstructed or encumbered in any manner. 11th. The Tenant shall neither place, or cause or allow to be placed, any sign or signs of any kind whatsoever at, in or about the entrance to said premises or any other part of same, except in or at such place or places as may be indicated by the Landlord and consented to by the Landlord in writing. And in case the Landlord or the Landlord's representatives shall deem it necessary to remove any such sign or signs in order to paint the said premises or the building wherein same is situated or make any other repairs , alterations or improvements in or upon said premises or building or any part thereof, the Landlord shall have the right to do so, providing the same be removed and replaced at the Landlord's expense, whenever the said repairs, alterations or improvements shall be completed. 12th. That the Landlord is exempt from any and all liability for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building or from any damage or injury resulting or arising from any other cause or happening whatsoever unless said damage or injury be caused by or be due to the negligence of the Landlord. 13th. That if default be made in any of the covenants herein contained, then it shall be lawful for the said Landlord to re-enter the said premises, and the same to have again, re-possess and enjoy. The said Tenant hereby expressly waives the service of any notice in writing of intention to re-enter. 14th. That this instrument shall not be a lien against said premises in respect to any mortgages that are now on or that hereafter may be placed against said premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this lease, irrespective of the date of recording and the Tenant agrees to execute without cost, any such instrument which may be deemed necessary or desirable to further effect the subordination of this lease to any such mortgage or mortgages, and a refusal to execute such instrument shall entitle the Landlord, or the Landlord's assigns and legal representatives to the option of cancelling this lease without incurring any expense or damage and the term hereby granted is expressly limited accordingly. 15th. The Tenant has this day deposited with the Landlord the sum of $ -0- as security for the full and faithful performance by the Tenant of all the terms, covenants and conditions of this lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of said terms, covenants and conditions on Tenant's part to be performed. In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord. 16th. That the security deposited under this lease shall not be mortgaged, assigned or encumbered by the Tenant without the written consent of the Landlord. 17th. It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part thereof as herein specified, or if, without the consent of the Landlord, the Tenant shall sell, assign, or mortgage this lease or if defaults be made in the performance of any of the covenants and agreements in this lease contained on the part of the Tenant to be kept and performed, or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders regulations and requirements of the Federal, State and Local Governments or of any and all their Departments and Bureaus, applicable to said premises, or if the Tenant shall file or there be filed against Tenant a petition in bankruptcy or arrangement, or Tenant be adjudicated a bankrupt or make an assignment for the benefit of creditors or take advantage of any insolvency act, the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days' notice in writing of the Landlord's intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises. 18th. Tenant shall pay to the Landlord the rent or charge, which may, during the demised term , be assessed or imposed for the water used or consumed in or on the said premises, whether determined by meter or otherwise, as soon as and when the same may be assessed or imposed, and will also pay the expenses for the setting of a water meter in the said premises should the latter be required. Tenant shall pay Tenant's proportionate part of the sewer rent or charge imposed upon the building. All such rents or charges or expenses shall be paid as additional rent and shall be added to the next month's rent thereafter to become due. 19th. That the Tenant will not nor will the Tenant permit undertenants or other person to do anything in said premises, or bring anything into said premises, or permit anything to be brought into said premises or to be kept therein, which will in any way increase the rate of fire insurance on said demised premises, nor use the demised premises or any part thereof, nor suffer or permit their use for any business or purpose which would cause an increase in the rate of fire insurance on said building, and the Tenant agrees to pay on demand any such increase. 20th. The failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein, shall not be deemed a waiver of any rights or remedies that the Landlord may have, and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained. This instrument may not be charged, modified, discharged or terminated orally. 21st. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim against Landlord for the value of any unexpired term of said lease. No part of any award shall belong to the Tenant. 22nd. If after default in payment of rent of violation or any other provision of this lease, or upon the expiration of this lease, the Tenant moves out or is dispossessed and fails to remove any trade fixtures or other property prior to such said default, removal, expiration of lease, or prior to the issuance of the final order or execution of the warrant, then and in that event, the said fixtures and property shall be deemed abandoned by the said Tenant and shall become the property of the Landlord. 23rd. In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord, and the Tenant expressly agrees to pay as damages for the breach of the covenants herein contained, the difference between the rent reserved and the rent collected and received, if any, by the Landlord during the remainder of the unexpired term, such difference or deficiency between the rent herein reserved and the rent collected if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained; and it is mutually agreed between Landlord and Tenant that the respective parties hereto shall and hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other on any matters whatsoever arising out of or in any way connected with this lease, the Tenant's use or occupancy of said premises, and/or any claim of injury or damage. 24th. The Tenant waives all rights to redeem under any law. 25th. This lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in nowise be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repairs, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with a National Emergency or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the condition of supply and demand which have been or are effected by war or other emergency. 26th. No diminution or abatement of rent, or other compensation, shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the building or to its appliances, nor for any space taken to comply with any law, ordinance or order of a governmental authority. In respect to the various "services," if any, herein expressly or impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed that there shall be no diminution or abatement of the rent, or any other compensation, for interruption or curtailment of such "service" when such interruption or curtailment shall be due to accident, alterations or repairs desirable or necessary to be made or to inability or difficulty in securing supplies or labor for the maintenance of such "service" or to some other cause, not gross negligence on the part of the Landlord. No such interruption or curtailment of such "service" shall be deemed a constructive eviction. The Landlord shall not be required to furnish, and the Tenant shall not be entitled to receive, any of such "services" during any period wherein the Tenant shall be in default in respect to the payment of rent. Neither shall there be any abatement or diminution of rent because of making of repairs, improvements or decorations to the demised premises after the date above fixed for the commencement of the term, it is being understood that rent shall, in any, commence to run as such date so above fixed. 27th. Landlord shall not be liable for failure to give possession of the premises upon commencement date by reason of the fact that premises are not ready for occupancy or because a prior Tenant or any other person is wrongfully holding over or is in wrongful possession, or for any other reason. The rent shall not commence until possession is given or is available, but the term herein shall not be extended. Additional Provisions on Rider attached Herein. And the said Landlord doth covenant that the Tenant on paying the said yearly rent, and performing the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid, provided however, that this covenant shall be conditioned upon the retention of title to the premises by the Landlord. And it is mutually understood and agreed that the covenants and agreements contained in the within lease shall be binding upon the parties hereto and upon their respect successors, heirs, executors and administrators. In Witness Whereof, the parties have interchangeably set their hands and seals (or caused these presents to be signed by their proper corporate officers and caused their proper corporate seal to be hereto affixed) this day of 1999 Poms holding Co., as Landlord By: Lakeland Industries, INc. By: /s/Harvey Pride, Jr. -------------------- Harvey Pride, Jr. Signed, sealed and delivered in the presence of State of New York, County of S.S. On the day of 19 , before me personally came to me known and known to me to be the individual described in, and who executed, the foregoing instrument, and acknowledged to me that he executed the same. State of New York, County of S.S. On the day of 19 , before me personally came to me known, who, being by me duly sworn, did depose and say that he resides at No. that he is the of the corporation mentioned in, and which executed, the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of said corporation; and that he signed h name thereto by like order. POMS HOLDING CO./ Landlord, - -with- LAKELAND INDUSTRIES, INC., Tenant. Lease Dated, September, 1999 In Consideration of the letting of the premises within mentioned to the within named Tenant and the sum of $1.00 paid to the undersigned by the within named Landlord, the undersigned do hereby covenant and agree, to and with the Landlord and the Landlord's legal representatives, that if default shall at any time be made by the said Tenant in the payment of the rent and the performance of the covenants contained in the within lease, on the Tenant's part to be paid and performed, that the undersigned will well and truly pay the said rent, or any arrears thereof, that may remain due unto the said Landlord, and also pay all damages that may arise in consequences of the non-performance of said covenants, or either of them, without requiring notice of any such default from the said Landlord. The undersigned hereby waives all right to trial by jury in any action or proceeding hereinafter instituted by the Landlord, to which the undersigned may be a party. In Witness Whereof, the undersigned ha set hand and seal this day of , 19 WITNESS L.S. RIDER TO LEASE Dated: September 1, 1999 between POMS HOLDING CO., as Landlord and LAKELAND INDUSTRIES, INC., as Tenant 28th. Wherever there is a conflict between the printed and typewritten portions of this lease, the typewritten portions shall govern. 29th. Tenant, at its own expense, shall maintain plateglass and comprehensive general public liability insurance protecting Landlord and Tenant and naming Landlord as an additional insured with respect to personal injury or property damage due to negligence occurring in or about the leased premises with minimum limits of $300,000.00 for personal injury to any one person, and $500,000.00 for personal injury to any number of persons arising out of one accident, and $100,000.00 for property damage. Said insurance shall be taken out with a company licensed to do business in the State of New York and the State of Alabama and proof of such insurance shall be delivered to the Landlord upon the commencement of this lease. Annual proof of payment shall thereafter be submitted to the Landlord. The original policy, upon Landlord's request, shall be exhibited to the Landlord by the Tenant within thirty (30) days after commencement of the term of this agreement. Upon failure of the Tenant to so deposit said policy, the Landlord shall have the privilege to procure said insurance on his own application therefor, and the amount of the premium, if paid by the Landlord, shall be due and payable with the rent reserved hereunder, collectible with the same remedies as if originally reserved as rent hereunder. 30th. Notwithstanding anything else contained in this lease, it is understood and agreed that the Tenant shall provide his own heat and pay his own electricity bills. All of the utilities shall be supplied by the Tenant at his own cost and expense. 31st. Notwithstanding anything else contained in this lease, upon the expiration of same for amy reason whatsoever, Tenant covenants and agrees that the premises will be redelivered to the Landlord broom clean. 32nd. The Tenant shall make no physical improvements, changes, modifications, alterations or additions to the leased premises without the written consent of the Landlord. All alterations, repairs, improvements, extensions or additions which may be made to the demised premises by the Tenant shall immediately become the property of the Landlord and become a part of the demised premises hereunder, excepting, however, removable trade fixtures. It is, however, agreed that when trade fixtures are removed, the demised premises are to be placed, at the Tenant's expense, in their original condition. 33rd. The Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all taxes on the entire building of which the leased premises are a part, including, but not limited to, ad valorem taxes, real estate taxes and water charges. Such payment shall be hade within thirty (30) days of the demand therefor by the Landlord and receipted tax bills shall be sufficient evidence of the amount of such taxes. 34th. Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all fire insurance premiums on the entire building of which the leased premises are a part within thirty (30) days of the date of receipt by Tenant from Landlord of a bill therefor. 35th. Tenant shall have the right to sublet all or any portion of the demised premises provided the following conditions are complied with: (a) At the time of such subletting, this lease must be in full force and effect without any breach or default thereunder on the part of the Tenant. (b) A copy of sublease shall be mailed to Landlord within ten (10) days from the effective date of such subletting. (c) Such subletting shall be upon and subject to all the provisions, terms, covenants and conditions of this lease and Tenant shall continue to be and remain liable hereunder. (d) Notwithstanding the foregoing, if the Tenant proposes to sublet all or substantially all of the demised premises, Tenant shall so notify the Landlord and Landlord shall have the option to cancel and terminate this lease as of the date proposed by Tenant for such subletting, which options shall be exercisable within fifteen (5) days after receipt of such notice by Landlord of the proposed subletting. (e) Tenant shall not assign this lease without the consent of Landlord first hand received, which consent Landlord agrees not to unreasonably withhold or delay; provided, however, that Tenant shall have the right, without the consent of Landlord, to assign this lease to (i) a subsidiary or affiliated corporation, either of which may have a normal capital; (ii) any corporation resulting from a reorganization of Tenant or its parent company with any one or more corporations; (iii) any corporation resulting from the consolidation of Tenant with or into any one or more corporations. 36th. Throughout the term of this lease, Tenant shall indemnify Landlord and save it harmless against and from any and all liability, losses, damages, costs, expenses and claims by or on behalf of any person, firm, corporation, governmental authority or other entity incurred by Landlord with respect to the leased premises, including, without limitation, burdens resulting from any and all acts of commission or omission on the part of Tenant or of anyone holding by, through or under Tenant, and any and all of its agents, servants, employees, invitees and contractors, and against and from any injury or damage to any person, or to any property of any person, except as a result of Landlord's own acts of commission or omission. 37th. Tenant shall be responsible for, and hereby relieves and shall save landlord harmless of and from any and all liability by reason of any injury or damage to any person or property in the leased premises, whether such property belongs to Tenant or to any persons, firms, corporations or other entity caused by any fire, installation or from water, rain or show that may leak into, issue or flow from any part of said leased premises, or from the drains, pipes or plumbing work of the said leased premises, or from any place or quarter and from the use, misuse or abuse of any hoists, conveyors, hatches, openings, platforms, stairways, machinery or equipment of any kind whatever which may exist at the time of the date of this lease or thereafter be installed in or on the leased premises, and from any and all kinds of injury and damage which may arise in or upon the leased premises from any other cause, unless such damage, injury, use, misuse or abuse shall have been caused by or result from the negligence of Landlord, its agents, servants or employees during the continuance of this lease by acts of commission or omission. 38th. It is hereby understood and agreed that in the event the Tenant leaves any property on the leased premises subsequent to the expiration of the within lease that said property is hereby deemed abandoned and the Landlord may dispose of said property at its option without any liability on the part of the Landlord. It is further understood and agreed that the Tenant waives any and all rights, title and interest to said property, releases and waives any and all claims thereto, and further agrees that the Tenant will be responsible to the Landlord for any and all expenses incurred by the Landlord concerning said property. 39th. Whenever under the terms of this lease any sum of money is required to be paid by Tenant in addition to the rental herein reserved, and said additional amount so to be paid is not designated as "additional," or provision is not made in the paragraph covering such payment for the collection of said amount as "additional rental," then said amount shall nevertheless, at the option of Landlord if not paid when due, be deemed "additional rental," and collectible as such with any installment of rental thereafter falling due hereunder, but nothing herein contained shall be deemed to suspend or delay the payment of any sum at the time the same becomes due and payable hereunder or limit any other remedy of Landlord. 40th. This lease contains the entire agreement between Landlord and Tenant and shall not be modified in any manner except by an instrument in writing signed by Landlord and Tenant. POMS HOLDING CO., Landlord By: /s/Raymond J. Smith ------------------- Raymond J. Smith, President LAKELAND INDUSTRIES, INC., Tenant By: Exhibit 10(o) This Agreement between River Group Holding Co., LLP, c/o Harvey Pride Jr., 202 Pride Lane, SW, Decatur, AL 35603 as Landlord and Lakeland Industries, Inc., a Delaware corporation with offices at 711-2 Koehler Avenue, Ronkonkoma, N.Y. 11779 as Tenant Witnesseth: The Landlord hereby leases to the Tenant the following premises: The premises located at 3428 Valley Avenue (2011/2 Pride Lane), Decatur, AL consisting of approximately 91,788 square feet. for the term of five (5) years. to commence from the 1st day of June, 1999 and to end on the 31st day of May, 2004 to be used and occupied only for Office, light manufacturing and warehouse space upon the conditions and covenants following: 1st. That the Tenant shall pay the annual rent of One Hundred Ninety Nine Thousand One Hundred ($199,100.00) Dollars said rent to be pain in equal monthly payments in advance on the first day of each and every month during the term aforesaid, as follows: Sixteen Thousand Five Hundred and Ninety Two ($16,592.00) Dollars on June 1st, 1999 and monthly thereafter non-structural 2nd. That the Tenant shall take good care of the premises and shall, at the Tenant's own cost and expense make all/repairs including, but not limited to, repairs of the plumbing, heating and electrical systems, and at the end or other expiration of the term, shall deliver up the demised premises in good order or condition, damages by the elements excepted. 3rd. That the Tenant shall promptly execute and comply with all statutes, ordinances, rules orders, regulations and requirements of the Federal, State and Local Governments and of any and all their Departments and Bureaus applicable to said premises, for the correction, prevention and abatement of nuisances or other grievances, in, upon, or connected with said premises during said term; and shall also promptly comply with and execute all rules, orders and regulations of the New York Board of Fire Underwriters, or any other similar body, at the Tenant's own cost and expense. 4th. That the Tenant, successors, heirs, executors and administrators shall not assign this agreement , or underlet or underlease the premises, or any part thereof, or make any alterations on the premises, without the Landlord's consent in writing; or occupy, or permit or suffer the same to be occupied for any business or purpose deemed disreputable or extra-hazardous on account of fire, under the penalty of damages and forfeiture, and in the event of a breach thereof, the term herein shall immediately cease and determine at the option of th Landlord as if it were the expiration of the original term. 5th. Tenant must give Landlord prompt notice of fire, accident, damage or dangerous or defective condition. If the Premises can not be used because of fire or other casualty, Tenant is not required to pay rent for the time the Premises are unusable. If part of the Premises can not be used, Tenant must pay rent for the usable part. Landlord shall have the right to decide which part of the Premises is usable. Landlord need only repair the damaged structural parts of the Premises. Landlord is not required to repair or replace any equipment , fixtures, furnishings or decorations unless originally installed by Landlord. Landlord is not responsible for delays due to settling insurance claims, obtaining estimates, labor and supply problems or any other cause not fully under Landlords control. If the fire or other casualty is caused by an act or neglect of Tenant, Tenant's employees or invitees, or at the time of the fire or casualty Tenant is in default in any term of this Lease, then all repairs will be made at Tenant's expense and Tenant must pay the full rent with no adjustment. The cost of the repairs will be added rent. Landlord has the right to demolish or rebuild the Building if there is substantial damage by fire or other casualty. Landlord may cancel this Lease within 30 days after the substantial fire or casualty by giving Tenant notice of Landlord's intention to demolish or rebuild. The Lease will end 30 days after Landlord's cancellation notice to the Tenant. Tenant must deliver the Premises to the Landlord on or before the cancellation date in the notice and pay all rent due to the date of the fire or casualty. If the Lease is cancelled Landlord is not required to repair the Premises or Building. The cancellation does not release Tenant of liability in connection with the fire or casualty. This Section is intended to replace the terms of New York Real Property Law Section 227. 6th. The said Tenant agrees that the said Landlord and the Landlord's agents and other representatives shall have the right to enter into and upon said premises, or any part thereof, at all reasonable hours for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. 7th. The Tenant also agrees to permit the Landlord or the Landlord's agents to show the premises to persons wishing to hire or purchase the same; and the Tenant further agrees that on and after the sixth month, next preceding the expiration of the term hereby granted, the Landlord or the Landlord's agents shall have the right to place notices on the front of said premises, or any part thereof, offering the premises "To Let" or "For Sale", and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation. 8th. That if the said premises, or any part thereof shall be deserted or become vacant during said term, or if any default be made in the payment of the said rent or any part thereof, or if any default be made in the performance of any of the covenants herein contained, the Landlord or representatives may re-enter the said premises by force, summary proceedings or otherwise, and remove all persons therefrom, without being liable to prosecution therefor, and the Tenant hereby expressly waives the service of any notice in writing of intention to re-enter, and the Tenant shall pay at the same time as the rent becomes payable under the terms hereof a sum equivalent to the rent reserved herein, and the Landlord may tent the premises on behalf of the Tenant, reserving the right to rent the premises for a longer period of time than fixed in the original lease without releasing the original Tenant from any liability, applying any moneys collected, first to the expense of resuming or obtaining possession, second to restoring the premises to a rentable condition, and then to the payment of the rent and all other charges due and to grow due to the Landlord, any surplus to be paid to the Tenant, who shall remain liable for any deficiency. 9th. Landlord may replace, at the expense of Tenant, any and all broken glass in and about demised premises. Landlord may insure, and keep insured, all plate glass in the demised premises for and in the name of Landlord. Bills, for the premiums therefor shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due for, and payable by Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, additional rental. Damage and injury to the said premises, caused by the carelessness, negligence or improper conduct on the part of the said Tenant or the Tenant's agents or employees shall be repaired as speedily as possible by the Tenant at the Tenant's own cost and expense. 10th. That the Tenant shall neither encumber nor obstruct the sidewalk in front of, entrance to, or halls and stairs of said premises, nor allow the same to be obstructed or encumbered in any manner. 11th. The Tenant shall neither place, or cause or allow to be placed, any sign or signs of any kind whatsoever at, in or about the entrance to said premises or any other part of same, except in or at such place or places as may be indicated by the Landlord and consented to by the Landlord in writing. And in case the Landlord or the Landlord's representatives shall deem it necessary to remove any such sign or signs in order to paint the said premises or the building wherein same is situated or make any other repairs , alterations or improvements in or upon said premises or building or any part thereof, the Landlord shall have the right to do so, providing the same be removed and replaced at the Landlord's expense, whenever the said repairs, alterations or improvements shall be completed. 12th. That the Landlord is exempt from any and all liability for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building or from any damage or injury resulting or arising from any other cause or happening whatsoever unless said damage or injury be caused by or be due to the negligence of the Landlord. 13th. That if default be made in any of the covenants herein contained, then it shall be lawful for the said Landlord to re-enter the said premises, and the same to have again, re-possess and enjoy. The said Tenant hereby expressly waives the service of any notice in writing of intention to re-enter. 14th. That this instrument shall not be a lien against said premises in respect to any mortgages that are now on or that hereafter may be placed against said premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this lease, irrespective of the date of recording and the Tenant agrees to execute without cost, any such instrument which may be deemed necessary or desirable to further effect the subordination of this lease to any such mortgage or mortgages, and a refusal to execute such instrument shall entitle the Landlord, or the Landlord's assigns and legal representatives to the option of cancelling this lease without incurring any expense or damage and the term hereby granted is expressly limited accordingly. 15th. The Tenant has this day deposited with the Landlord the sum of $ -0- as security for the full and faithful performance by the Tenant of all the terms, covenants and conditions of this lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of said terms, covenants and conditions on Tenant's part to be performed. In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord. 16th. That the security deposited under this lease shall not be mortgaged, assigned or encumbered by the Tenant without the written consent of the Landlord. 17th. It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part thereof as herein specified, or if, without the consent of the Landlord, the Tenant shall sell, assign, or mortgage this lease or if defaults be made in the performance of any of the covenants and agreements in this lease contained on the part of the Tenant to be kept and performed, or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders regulations and requirements of the Federal, State and Local Governments or of any and all their Departments and Bureaus, applicable to said premises, or if the Tenant shall file or there be filed against Tenant a petition in bankruptcy or arrangement, or Tenant be adjudicated a bankrupt or make an assignment for the benefit of creditors or take advantage of any insolvency act, the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days' notice in writing of the Landlord's intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises. 18th. Tenant shall pay to the Landlord the rent or charge, which may, during the demised term , be assessed or imposed for the water used or consumed in or on the said premises, whether determined by meter or otherwise, as soon as and when the same may be assessed or imposed, and will also pay the expenses for the setting of a water meter in the said premises should the latter be required. Tenant shall pay Tenant's proportionate part of the sewer rent or charge imposed upon the building. All such rents or charges or expenses shall be paid as additional rent and shall be added to the next month's rent thereafter to become due. 19th. That the Tenant will not nor will the Tenant permit undertenants or other person to do anything in said premises, or bring anything into said premises, or permit anything to be brought into said premises or to be kept therein, which will in any way increase the rate of fire insurance on said demised premises, nor use the demised premises or any part thereof, nor suffer or permit their use for any business or purpose which would cause an increase in the rate of fire insurance on said building, and the Tenant agrees to pay on demand any such increase. 20th. The failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein, shall not be deemed a waiver of any rights or remedies that the Landlord may have, and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained. This instrument may not be charged, modified, discharged or terminated orally. 21st. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim against Landlord for the value of any unexpired term of said lease. No part of any award shall belong to the Tenant. 22nd. If after default in payment of rent of violation or any other provision of this lease, or upon the expiration of this lease, the Tenant moves out or is dispossessed and fails to remove any trade fixtures or other property prior to such said default, removal, expiration of lease, or prior to the issuance of the final order or execution of the warrant, then and in that event, the said fixtures and property shall be deemed abandoned by the said Tenant and shall become the property of the Landlord. 23rd. In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord, and the Tenant expressly agrees to pay as damages for the breach of the covenants herein contained, the difference between the rent reserved and the rent collected and received, if any, by the Landlord during the remainder of the unexpired term, such difference or deficiency between the rent herein reserved and the rent collected if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained; and it is mutually agreed between Landlord and Tenant that the respective parties hereto shall and hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other on any matters whatsoever arising out of or in any way connected with this lease, the Tenant's use or occupancy of said premises, and/or any claim of injury or damage. 24th. The Tenant waives all rights to redeem under any law. 25th. This lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in nowise be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repairs, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with a National Emergency or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the condition of supply and demand which have been or are effected by war or other emergency. 26th. No diminution or abatement of rent, or other compensation, shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the building or to its appliances, nor for any space taken to comply with any law, ordinance or order of a governmental authority. In respect to the various "services," if any, herein expressly or impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed that there shall be no diminution or abatement of the rent, or any other compensation, for interruption or curtailment of such "service" when such interruption or curtailment shall be due to accident, alterations or repairs desirable or necessary to be made or to inability or difficulty in securing supplies or labor for the maintenance of such "service" or to some other cause, not gross negligence on the part of the Landlord. No such interruption or curtailment of such "service" shall be deemed a constructive eviction. The Landlord shall not be required to furnish, and the Tenant shall not be entitled to receive, any of such "services" during any period wherein the Tenant shall be in default in respect to the payment of rent. Neither shall there be any abatement or diminution of rent because of making of repairs, improvements or decorations to the demised premises after the date above fixed for the commencement of the term, it is being understood that rent shall, in any, commence to run as such date so above fixed. 27th. Landlord shall not be liable for failure to give possession of the premises upon commencement date by reason of the fact that premises are not ready for occupancy or because a prior Tenant or any other person is wrongfully holding over or is in wrongful possession, or for any other reason. The rent shall not commence until possession is given or is available, but the term herein shall not be extended. Additional Provisions on Rider attached Herein. And the said Landlord doth covenant that the Tenant on paying the said yearly rent, and performing the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid, provided however, that this covenant shall be conditioned upon the retention of title to the premises by the Landlord. And it is mutually understood and agreed that the covenants and agreements contained in the within lease shall be binding upon the parties hereto and upon their respect successors, heirs, executors and administrators. In Witness Whereof, the parties have interchangeably set their hands and seals (or caused these presents to be signed by their proper corporate officers and caused their proper corporate seal to be hereto affixed) this day of 1999 Poms holding Co., as Landlord By: Lakeland Industries, INc. By: /s/Harvey Pride, Jr. -------------------- Harvey Pride, Jr. Signed, sealed and delivered in the presence of State of New York, County of S.S. On the day of 19 , before me personally came to me known and known to me to be the individual described in, and who executed, the foregoing instrument, and acknowledged to me that he executed the same. State of New York, County of S.S. On the day of 19 , before me personally came to me known, who, being by me duly sworn, did depose and say that he resides at No. that he is the of the corporation mentioned in, and which executed, the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of said corporation; and that he signed h name thereto by like order. POMS HOLDING CO./ Landlord, - -with- LAKELAND INDUSTRIES, INC., Tenant. Lease Dated, September, 1999 In Consideration of the letting of the premises within mentioned to the within named Tenant and the sum of $1.00 paid to the undersigned by the within named Landlord, the undersigned do hereby covenant and agree, to and with the Landlord and the Landlord's legal representatives, that if default shall at any time be made by the said Tenant in the payment of the rent and the performance of the covenants contained in the within lease, on the Tenant's part to be paid and performed, that the undersigned will well and truly pay the said rent, or any arrears thereof, that may remain due unto the said Landlord, and also pay all damages that may arise in consequences of the non-performance of said covenants, or either of them, without requiring notice of any such default from the said Landlord. The undersigned hereby waives all right to trial by jury in any action or proceeding hereinafter instituted by the Landlord, to which the undersigned may be a party. In Witness Whereof, the undersigned ha set hand and seal this day of , 19 WITNESS L.S. RIDER TO LEASE Dated: September 1, 1999 between POMS HOLDING CO., as Landlord and LAKELAND INDUSTRIES, INC., as Tenant 28th. Wherever there is a conflict between the printed and typewritten portions of this lease, the typewritten portions shall govern. 29th. Tenant, at its own expense, shall maintain plateglass and comprehensive general public liability insurance protecting Landlord and Tenant and naming Landlord as an additional insured with respect to personal injury or property damage due to negligence occurring in or about the leased premises with minimum limits of $300,000.00 for personal injury to any one person, and $500,000.00 for personal injury to any number of persons arising out of one accident, and $100,000.00 for property damage. Said insurance shall be taken out with a company licensed to do business in the State of New York and the State of Alabama and proof of such insurance shall be delivered to the Landlord upon the commencement of this lease. Annual proof of payment shall thereafter be submitted to the Landlord. The original policy, upon Landlord's request, shall be exhibited to the Landlord by the Tenant within thirty (30) days after commencement of the term of this agreement. Upon failure of the Tenant to so deposit said policy, the Landlord shall have the privilege to procure said insurance on his own application therefor, and the amount of the premium, if paid by the Landlord, shall be due and payable with the rent reserved hereunder, collectible with the same remedies as if originally reserved as rent hereunder. 30th. Notwithstanding anything else contained in this lease, it is understood and agreed that the Tenant shall provide his own heat and pay his own electricity bills. All of the utilities shall be supplied by the Tenant at his own cost and expense. 31st. Notwithstanding anything else contained in this lease, upon the expiration of same for amy reason whatsoever, Tenant covenants and agrees that the premises will be redelivered to the Landlord broom clean. 32nd. The Tenant shall make no physical improvements, changes, modifications, alterations or additions to the leased premises without the written consent of the Landlord. All alterations, repairs, improvements, extensions or additions which may be made to the demised premises by the Tenant shall immediately become the property of the Landlord and become a part of the demised premises hereunder, excepting, however, removable trade fixtures. It is, however, agreed that when trade fixtures are removed, the demised premises are to be placed, at the Tenant's expense, in their original condition. 33rd. The Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all taxes on the entire building of which the leased premises are a part, including, but not limited to, ad valorem taxes, real estate taxes and water charges. Such payment shall be hade within thirty (30) days of the demand therefor by the Landlord and receipted tax bills shall be sufficient evidence of the amount of such taxes. 34th. Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all fire insurance premiums on the entire building of which the leased premises are a part within thirty (30) days of the date of receipt by Tenant from Landlord of a bill therefor. 35th. Tenant shall have the right to sublet all or any portion of the demised premises provided the following conditions are complied with: (a) At the time of such subletting, this lease must be in full force and effect without any breach or default thereunder on the part of the Tenant. (b) A copy of sublease shall be mailed to Landlord within ten (10) days from the effective date of such subletting. (c) Such subletting shall be upon and subject to all the provisions, terms, covenants and conditions of this lease and Tenant shall continue to be and remain liable hereunder. (d) Notwithstanding the foregoing, if the Tenant proposes to sublet all or substantially all of the demised premises, Tenant shall so notify the Landlord and Landlord shall have the option to cancel and terminate this lease as of the date proposed by Tenant for such subletting, which options shall be exercisable within fifteen (5) days after receipt of such notice by Landlord of the proposed subletting. (e) Tenant shall not assign this lease without the consent of Landlord first hand received, which consent Landlord agrees not to unreasonably withhold or delay; provided, however, that Tenant shall have the right, without the consent of Landlord, to assign this lease to (i) a subsidiary or affiliated corporation, either of which may have a normal capital; (ii) any corporation resulting from a reorganization of Tenant or its parent company with any one or more corporations; (iii) any corporation resulting from the consolidation of Tenant with or into any one or more corporations. 36th. Throughout the term of this lease, Tenant shall indemnify Landlord and save it harmless against and from any and all liability, losses, damages, costs, expenses and claims by or on behalf of any person, firm, corporation, governmental authority or other entity incurred by Landlord with respect to the leased premises, including, without limitation, burdens resulting from any and all acts of commission or omission on the part of Tenant or of anyone holding by, through or under Tenant, and any and all of its agents, servants, employees, invitees and contractors, and against and from any injury or damage to any person, or to any property of any person, except as a result of Landlord's own acts of commission or omission. 37th. Tenant shall be responsible for, and hereby relieves and shall save landlord harmless of and from any and all liability by reason of any injury or damage to any person or property in the leased premises, whether such property belongs to Tenant or to any persons, firms, corporations or other entity caused by any fire, installation or from water, rain or show that may leak into, issue or flow from any part of said leased premises, or from the drains, pipes or plumbing work of the said leased premises, or from any place or quarter and from the use, misuse or abuse of any hoists, conveyors, hatches, openings, platforms, stairways, machinery or equipment of any kind whatever which may exist at the time of the date of this lease or thereafter be installed in or on the leased premises, and from any and all kinds of injury and damage which may arise in or upon the leased premises from any other cause, unless such damage, injury, use, misuse or abuse shall have been caused by or result from the negligence of Landlord, its agents, servants or employees during the continuance of this lease by acts of commission or omission. 38th. It is hereby understood and agreed that in the event the Tenant leaves any property on the leased premises subsequent to the expiration of the within lease that said property is hereby deemed abandoned and the Landlord may dispose of said property at its option without any liability on the part of the Landlord. It is further understood and agreed that the Tenant waives any and all rights, title and interest to said property, releases and waives any and all claims thereto, and further agrees that the Tenant will be responsible to the Landlord for any and all expenses incurred by the Landlord concerning said property. 39th. Whenever under the terms of this lease any sum of money is required to be paid by Tenant in addition to the rental herein reserved, and said additional amount so to be paid is not designated as "additional," or provision is not made in the paragraph covering such payment for the collection of said amount as "additional rental," then said amount shall nevertheless, at the option of Landlord if not paid when due, be deemed "additional rental," and collectible as such with any installment of rental thereafter falling due hereunder, but nothing herein contained shall be deemed to suspend or delay the payment of any sum at the time the same becomes due and payable hereunder or limit any other remedy of Landlord. 40th. This lease contains the entire agreement between Landlord and Tenant and shall not be modified in any manner except by an instrument in writing signed by Landlord and Tenant. POMS HOLDING CO., Landlord By: /s/Raymond J. Smith ------------------- Raymond J. Smith, President LAKELAND INDUSTRIES, INC., Tenant By: Exhibit 10(p) This Agreement between Harvey Pride Jr. as Landlord and Lakeland Industries, Inc., a Delaware corporation with offices at 711-2 Koehler Avenue, Ronkonkoma, N.Y. 11779 as Tenant Witnesseth: The Landlord hereby leases to the Tenant the following premises: The premises located at 201 Pride Lane, SW, Decatur, Alabama consisting of approximately 24,000 square feet of office space. for the term of one (1) year, renewable by Tenant for four (4) one year terms. to commence from the 1st day of March, 1999 and to end on the 31st day of March, 2004 to be used and occupied only for Office, light manufacturing and warehouse space upon the conditions and covenants following: 1st. That the Tenant shall pay the annual rent of Eighteen Thousand and no/00 dollars ($18,000.00) said rent to be pain in equal monthly payments in advance on the first day of each and every month during the term aforesaid, as follows: Fifteen Hundred and no/00 ($1,500.00) dollars on March 1st, 1999 and monthly thereafter non-structural 2nd. That the Tenant shall take good care of the premises and shall, at the Tenant's own cost and expense make all/repairs including, but not limited to, repairs of the plumbing, heating and electrical systems, and at the end or other expiration of the term, shall deliver up the demised premises in good order or condition, damages by the elements excepted. 3rd. That the Tenant shall promptly execute and comply with all statutes, ordinances, rules orders, regulations and requirements of the Federal, State and Local Governments and of any and all their Departments and Bureaus applicable to said premises, for the correction, prevention and abatement of nuisances or other grievances, in, upon, or connected with said premises during said term; and shall also promptly comply with and execute all rules, orders and regulations of the New York Board of Fire Underwriters, or any other similar body, at the Tenant's own cost and expense. 4th. That the Tenant, successors, heirs, executors and administrators shall not assign this agreement , or underlet or underlease the premises, or any part thereof, or make any alterations on the premises, without the Landlord's consent in writing; or occupy, or permit or suffer the same to be occupied for any business or purpose deemed disreputable or extra-hazardous on account of fire, under the penalty of damages and forfeiture, and in the event of a breach thereof, the term herein shall immediately cease and determine at the option of th Landlord as if it were the expiration of the original term. 5th. Tenant must give Landlord prompt notice of fire, accident, damage or dangerous or defective condition. If the Premises can not be used because of fire or other casualty, Tenant is not required to pay rent for the time the Premises are unusable. If part of the Premises can not be used, Tenant must pay rent for the usable part. Landlord shall have the right to decide which part of the Premises is usable. Landlord need only repair the damaged structural parts of the Premises. Landlord is not required to repair or replace any equipment , fixtures, furnishings or decorations unless originally installed by Landlord. Landlord is not responsible for delays due to settling insurance claims, obtaining estimates, labor and supply problems or any other cause not fully under Landlords control. If the fire or other casualty is caused by an act or neglect of Tenant, Tenant's employees or invitees, or at the time of the fire or casualty Tenant is in default in any term of this Lease, then all repairs will be made at Tenant's expense and Tenant must pay the full rent with no adjustment. The cost of the repairs will be added rent. Landlord has the right to demolish or rebuild the Building if there is substantial damage by fire or other casualty. Landlord may cancel this Lease within 30 days after the substantial fire or casualty by giving Tenant notice of Landlord's intention to demolish or rebuild. The Lease will end 30 days after Landlord's cancellation notice to the Tenant. Tenant must deliver the Premises to the Landlord on or before the cancellation date in the notice and pay all rent due to the date of the fire or casualty. If the Lease is cancelled Landlord is not required to repair the Premises or Building. The cancellation does not release Tenant of liability in connection with the fire or casualty. This Section is intended to replace the terms of New York Real Property Law Section 227. 6th. The said Tenant agrees that the said Landlord and the Landlord's agents and other representatives shall have the right to enter into and upon said premises, or any part thereof, at all reasonable hours for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. 7th. The Tenant also agrees to permit the Landlord or the Landlord's agents to show the premises to persons wishing to hire or purchase the same; and the Tenant further agrees that on and after the sixth month, next preceding the expiration of the term hereby granted, the Landlord or the Landlord's agents shall have the right to place notices on the front of said premises, or any part thereof, offering the premises "To Let" or "For Sale", and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation. 8th. That if the said premises, or any part thereof shall be deserted or become vacant during said term, or if any default be made in the payment of the said rent or any part thereof, or if any default be made in the performance of any of the covenants herein contained, the Landlord or representatives may re-enter the said premises by force, summary proceedings or otherwise, and remove all persons therefrom, without being liable to prosecution therefor, and the Tenant hereby expressly waives the service of any notice in writing of intention to re-enter, and the Tenant shall pay at the same time as the rent becomes payable under the terms hereof a sum equivalent to the rent reserved herein, and the Landlord may tent the premises on behalf of the Tenant, reserving the right to rent the premises for a longer period of time than fixed in the original lease without releasing the original Tenant from any liability, applying any moneys collected, first to the expense of resuming or obtaining possession, second to restoring the premises to a rentable condition, and then to the payment of the rent and all other charges due and to grow due to the Landlord, any surplus to be paid to the Tenant, who shall remain liable for any deficiency. 9th. Landlord may replace, at the expense of Tenant, any and all broken glass in and about demised premises. Landlord may insure, and keep insured, all plate glass in the demised premises for and in the name of Landlord. Bills, for the premiums therefor shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due for, and payable by Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, additional rental. Damage and injury to the said premises, caused by the carelessness, negligence or improper conduct on the part of the said Tenant or the Tenant's agents or employees shall be repaired as speedily as possible by the Tenant at the Tenant's own cost and expense. 10th. That the Tenant shall neither encumber nor obstruct the sidewalk in front of, entrance to, or halls and stairs of said premises, nor allow the same to be obstructed or encumbered in any manner. 11th. The Tenant shall neither place, or cause or allow to be placed, any sign or signs of any kind whatsoever at, in or about the entrance to said premises or any other part of same, except in or at such place or places as may be indicated by the Landlord and consented to by the Landlord in writing. And in case the Landlord or the Landlord's representatives shall deem it necessary to remove any such sign or signs in order to paint the said premises or the building wherein same is situated or make any other repairs , alterations or improvements in or upon said premises or building or any part thereof, the Landlord shall have the right to do so, providing the same be removed and replaced at the Landlord's expense, whenever the said repairs, alterations or improvements shall be completed. 12th. That the Landlord is exempt from any and all liability for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building or from any damage or injury resulting or arising from any other cause or happening whatsoever unless said damage or injury be caused by or be due to the negligence of the Landlord. 13th. That if default be made in any of the covenants herein contained, then it shall be lawful for the said Landlord to re-enter the said premises, and the same to have again, re-possess and enjoy. The said Tenant hereby expressly waives the service of any notice in writing of intention to re-enter. 14th. That this instrument shall not be a lien against said premises in respect to any mortgages that are now on or that hereafter may be placed against said premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this lease, irrespective of the date of recording and the Tenant agrees to execute without cost, any such instrument which may be deemed necessary or desirable to further effect the subordination of this lease to any such mortgage or mortgages, and a refusal to execute such instrument shall entitle the Landlord, or the Landlord's assigns and legal representatives to the option of cancelling this lease without incurring any expense or damage and the term hereby granted is expressly limited accordingly. 15th. The Tenant has this day deposited with the Landlord the sum of $ -0- as security for the full and faithful performance by the Tenant of all the terms, covenants and conditions of this lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of said terms, covenants and conditions on Tenant's part to be performed. In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord. 16th. That the security deposited under this lease shall not be mortgaged, assigned or encumbered by the Tenant without the written consent of the Landlord. 17th. It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part thereof as herein specified, or if, without the consent of the Landlord, the Tenant shall sell, assign, or mortgage this lease or if defaults be made in the performance of any of the covenants and agreements in this lease contained on the part of the Tenant to be kept and performed, or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders regulations and requirements of the Federal, State and Local Governments or of any and all their Departments and Bureaus, applicable to said premises, or if the Tenant shall file or there be filed against Tenant a petition in bankruptcy or arrangement, or Tenant be adjudicated a bankrupt or make an assignment for the benefit of creditors or take advantage of any insolvency act, the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days' notice in writing of the Landlord's intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises. 18th. Tenant shall pay to the Landlord the rent or charge, which may, during the demised term , be assessed or imposed for the water used or consumed in or on the said premises, whether determined by meter or otherwise, as soon as and when the same may be assessed or imposed, and will also pay the expenses for the setting of a water meter in the said premises should the latter be required. Tenant shall pay Tenant's proportionate part of the sewer rent or charge imposed upon the building. All such rents or charges or expenses shall be paid as additional rent and shall be added to the next month's rent thereafter to become due. 19th. That the Tenant will not nor will the Tenant permit undertenants or other person to do anything in said premises, or bring anything into said premises, or permit anything to be brought into said premises or to be kept therein, which will in any way increase the rate of fire insurance on said demised premises, nor use the demised premises or any part thereof, nor suffer or permit their use for any business or purpose which would cause an increase in the rate of fire insurance on said building, and the Tenant agrees to pay on demand any such increase. 20th. The failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein, shall not be deemed a waiver of any rights or remedies that the Landlord may have, and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained. This instrument may not be charged, modified, discharged or terminated orally. 21st. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim against Landlord for the value of any unexpired term of said lease. No part of any award shall belong to the Tenant. 22nd. If after default in payment of rent of violation or any other provision of this lease, or upon the expiration of this lease, the Tenant moves out or is dispossessed and fails to remove any trade fixtures or other property prior to such said default, removal, expiration of lease, or prior to the issuance of the final order or execution of the warrant, then and in that event, the said fixtures and property shall be deemed abandoned by the said Tenant and shall become the property of the Landlord. 23rd. In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord, and the Tenant expressly agrees to pay as damages for the breach of the covenants herein contained, the difference between the rent reserved and the rent collected and received, if any, by the Landlord during the remainder of the unexpired term, such difference or deficiency between the rent herein reserved and the rent collected if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained; and it is mutually agreed between Landlord and Tenant that the respective parties hereto shall and hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other on any matters whatsoever arising out of or in any way connected with this lease, the Tenant's use or occupancy of said premises, and/or any claim of injury or damage. 24th. The Tenant waives all rights to redeem under any law. 25th. This lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in nowise be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repairs, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with a National Emergency or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the condition of supply and demand which have been or are effected by war or other emergency. 26th. No diminution or abatement of rent, or other compensation, shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the building or to its appliances, nor for any space taken to comply with any law, ordinance or order of a governmental authority. In respect to the various "services," if any, herein expressly or impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed that there shall be no diminution or abatement of the rent, or any other compensation, for interruption or curtailment of such "service" when such interruption or curtailment shall be due to accident, alterations or repairs desirable or necessary to be made or to inability or difficulty in securing supplies or labor for the maintenance of such "service" or to some other cause, not gross negligence on the part of the Landlord. No such interruption or curtailment of such "service" shall be deemed a constructive eviction. The Landlord shall not be required to furnish, and the Tenant shall not be entitled to receive, any of such "services" during any period wherein the Tenant shall be in default in respect to the payment of rent. Neither shall there be any abatement or diminution of rent because of making of repairs, improvements or decorations to the demised premises after the date above fixed for the commencement of the term, it is being understood that rent shall, in any, commence to run as such date so above fixed. 27th. Landlord shall not be liable for failure to give possession of the premises upon commencement date by reason of the fact that premises are not ready for occupancy or because a prior Tenant or any other person is wrongfully holding over or is in wrongful possession, or for any other reason. The rent shall not commence until possession is given or is available, but the term herein shall not be extended. Additional Provisions on Rider attached Herein. And the said Landlord doth covenant that the Tenant on paying the said yearly rent, and performing the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid, provided however, that this covenant shall be conditioned upon the retention of title to the premises by the Landlord. And it is mutually understood and agreed that the covenants and agreements contained in the within lease shall be binding upon the parties hereto and upon their respect successors, heirs, executors and administrators. In Witness Whereof, the parties have interchangeably set their hands and seals (or caused these presents to be signed by their proper corporate officers and caused their proper corporate seal to be hereto affixed) this day of 1999 Poms holding Co., as Landlord By: Lakeland Industries, INc. By: /s/Raymond J. Smith -------------------- Raymond J. Smith, President Signed, sealed and delivered in the presence of State of New York, County of S.S. On the day of 19 , before me personally came to me known and known to me to be the individual described in, and who executed, the foregoing instrument, and acknowledged to me that he executed the same. State of New York, County of S.S. On the day of 19 , before me personally came to me known, who, being by me duly sworn, did depose and say that he resides at No. that he is the of the corporation mentioned in, and which executed, the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of said corporation; and that he signed h name thereto by like order. POMS HOLDING CO./ Landlord, - -with- LAKELAND INDUSTRIES, INC., Tenant. Lease Dated, September, 1999 In Consideration of the letting of the premises within mentioned to the within named Tenant and the sum of $1.00 paid to the undersigned by the within named Landlord, the undersigned do hereby covenant and agree, to and with the Landlord and the Landlord's legal representatives, that if default shall at any time be made by the said Tenant in the payment of the rent and the performance of the covenants contained in the within lease, on the Tenant's part to be paid and performed, that the undersigned will well and truly pay the said rent, or any arrears thereof, that may remain due unto the said Landlord, and also pay all damages that may arise in consequences of the non-performance of said covenants, or either of them, without requiring notice of any such default from the said Landlord. The undersigned hereby waives all right to trial by jury in any action or proceeding hereinafter instituted by the Landlord, to which the undersigned may be a party. In Witness Whereof, the undersigned has set hand and seal this day of , 19 WITNESS L.S. RIDER TO LEASE Dated: September 1, 1999 between POMS HOLDING CO., as Landlord and LAKELAND INDUSTRIES, INC., as Tenant 28th. Wherever there is a conflict between the printed and typewritten portions of this lease, the typewritten portions shall govern. 29th. Tenant, at its own expense, shall maintain plateglass and comprehensive general public liability insurance protecting Landlord and Tenant and naming Landlord as an additional insured with respect to personal injury or property damage due to negligence occurring in or about the leased premises with minimum limits of $300,000.00 for personal injury to any one person, and $500,000.00 for personal injury to any number of persons arising out of one accident, and $100,000.00 for property damage. Said insurance shall be taken out with a company licensed to do business in the State of New York and the State of Alabama and proof of such insurance shall be delivered to the Landlord upon the commencement of this lease. Annual proof of payment shall thereafter be submitted to the Landlord. The original policy, upon Landlord's request, shall be exhibited to the Landlord by the Tenant within thirty (30) days after commencement of the term of this agreement. Upon failure of the Tenant to so deposit said policy, the Landlord shall have the privilege to procure said insurance on his own application therefor, and the amount of the premium, if paid by the Landlord, shall be due and payable with the rent reserved hereunder, collectible with the same remedies as if originally reserved as rent hereunder. 30th. Notwithstanding anything else contained in this lease, it is understood and agreed that the Tenant shall provide his own heat and pay his own electricity bills. All of the utilities shall be supplied by the Tenant at his own cost and expense. 31st. Notwithstanding anything else contained in this lease, upon the expiration of same for amy reason whatsoever, Tenant covenants and agrees that the premises will be redelivered to the Landlord broom clean. 32nd. The Tenant shall make no physical improvements, changes, modifications, alterations or additions to the leased premises without the written consent of the Landlord. All alterations, repairs, improvements, extensions or additions which may be made to the demised premises by the Tenant shall immediately become the property of the Landlord and become a part of the demised premises hereunder, excepting, however, removable trade fixtures. It is, however, agreed that when trade fixtures are removed, the demised premises are to be placed, at the Tenant's expense, in their original condition. 33rd. The Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all taxes on the entire building of which the leased premises are a part, including, but not limited to, ad valorem taxes, real estate taxes and water charges. Such payment shall be hade within thirty (30) days of the demand therefor by the Landlord and receipted tax bills shall be sufficient evidence of the amount of such taxes. 34th. Tenant shall pay as additional rent during the term hereof without any set off or deduction whatsoever, all fire insurance premiums on the entire building of which the leased premises are a part within thirty (30) days of the date of receipt by Tenant from Landlord of a bill therefor. 35th. Tenant shall have the right to sublet all or any portion of the demised premises provided the following conditions are complied with: (a) At the time of such subletting, this lease must be in full force and effect without any breach or default thereunder on the part of the Tenant. (b) A copy of sublease shall be mailed to Landlord within ten (10) days from the effective date of such subletting. (c) Such subletting shall be upon and subject to all the provisions, terms, covenants and conditions of this lease and Tenant shall continue to be and remain liable hereunder. (d) Notwithstanding the foregoing, if the Tenant proposes to sublet all or substantially all of the demised premises, Tenant shall so notify the Landlord and Landlord shall have the option to cancel and terminate this lease as of the date proposed by Tenant for such subletting, which options shall be exercisable within fifteen (5) days after receipt of such notice by Landlord of the proposed subletting. (e) Tenant shall not assign this lease without the consent of Landlord first hand received, which consent Landlord agrees not to unreasonably withhold or delay; provided, however, that Tenant shall have the right, without the consent of Landlord, to assign this lease to (i) a subsidiary or affiliated corporation, either of which may have a normal capital; (ii) any corporation resulting from a reorganization of Tenant or its parent company with any one or more corporations; (iii) any corporation resulting from the consolidation of Tenant with or into any one or more corporations. 36th. Throughout the term of this lease, Tenant shall indemnify Landlord and save it harmless against and from any and all liability, losses, damages, costs, expenses and claims by or on behalf of any person, firm, corporation, governmental authority or other entity incurred by Landlord with respect to the leased premises, including, without limitation, burdens resulting from any and all acts of commission or omission on the part of Tenant or of anyone holding by, through or under Tenant, and any and all of its agents, servants, employees, invitees and contractors, and against and from any injury or damage to any person, or to any property of any person, except as a result of Landlord's own acts of commission or omission. 37th. Tenant shall be responsible for, and hereby relieves and shall save landlord harmless of and from any and all liability by reason of any injury or damage to any person or property in the leased premises, whether such property belongs to Tenant or to any persons, firms, corporations or other entity caused by any fire, installation or from water, rain or show that may leak into, issue or flow from any part of said leased premises, or from the drains, pipes or plumbing work of the said leased premises, or from any place or quarter and from the use, misuse or abuse of any hoists, conveyors, hatches, openings, platforms, stairways, machinery or equipment of any kind whatever which may exist at the time of the date of this lease or thereafter be installed in or on the leased premises, and from any and all kinds of injury and damage which may arise in or upon the leased premises from any other cause, unless such damage, injury, use, misuse or abuse shall have been caused by or result from the negligence of Landlord, its agents, servants or employees during the continuance of this lease by acts of commission or omission. 38th. It is hereby understood and agreed that in the event the Tenant leaves any property on the leased premises subsequent to the expiration of the within lease that said property is hereby deemed abandoned and the Landlord may dispose of said property at its option without any liability on the part of the Landlord. It is further understood and agreed that the Tenant waives any and all rights, title and interest to said property, releases and waives any and all claims thereto, and further agrees that the Tenant will be responsible to the Landlord for any and all expenses incurred by the Landlord concerning said property. 39th. Whenever under the terms of this lease any sum of money is required to be paid by Tenant in addition to the rental herein reserved, and said additional amount so to be paid is not designated as "additional," or provision is not made in the paragraph covering such payment for the collection of said amount as "additional rental," then said amount shall nevertheless, at the option of Landlord if not paid when due, be deemed "additional rental," and collectible as such with any installment of rental thereafter falling due hereunder, but nothing herein contained shall be deemed to suspend or delay the payment of any sum at the time the same becomes due and payable hereunder or limit any other remedy of Landlord. 40th. This lease contains the entire agreement between Landlord and Tenant and shall not be modified in any manner except by an instrument in writing signed by Landlord and Tenant. POMS HOLDING CO., Landlord By: LAKELAND INDUSTRIES, INC., Tenant By: EX-11 3 EXHIBIT 11 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated April 14, 2000, accompanying the consolidated financial statements and schedule included in the Annual Report of Lakeland Industries, Inc. and Subsidiaries on Form 10-K for the fiscal year ended January 31, 2000. We hereby consent to the incorporation by reference of said report in the Registration Statement of Lakeland Industries, Inc. and Subsidiaries on Form S-8 (File No. 33-92564, effective May 15, 1995). /s/ GRANT THORNTON LLP - ---------------------- GRANT THORNTON LLP Melville, New York April 14, 2000 EX-13 4
SELECTED FINANCIAL DATA (In thousands, except per share and share amounts) For the Years Ended January 31, 2000 1999 1998 1997 1996 INCOME STATEMENT DATA: Net sales $58,644 $54,655 $47,263 $41,792 $40,189 Gross profit 10,488 10,374 9,195 7,237 6,288 Operating expenses 7,191 6,451 6,157 5,212 4,882 Operating profit 3,297 3,923 3,038 2,024 1,406 Income before income taxes 2,509 3,222 2,590 1,576 956 Net income 1,748 2,080 1,600 1,063 587 Earnings per share - Basic (1) $.66 $.79 $.63 $.42 $.23 ==== ==== ==== ==== ==== Earnings per share - Diluted (1) $.65 $.77 $.61 $.41 $.22 ==== ==== ==== ==== ==== Weighted average common shares outstanding: Basic 2,653,950 2,642,170 2,558,541 2,550,000 2,550,000 Diluted 2,673,449 2,690,920 2,627,425 2,609,700 2,635,506 BALANCE SHEET DATA (at end of year): Working capital $15,859 $12,403 $18,903 $14,018 $13,618 Total assets 34,770 27,160 25,812 18,573 19,263 Current liabilities 16,601 12,915 5,007 2,920 3,894 Long-term liabilities 2,709 465 9,217 5,746 6,492 Stockholders' equity $15,405 $13,725 $11,518 $9,825 $8,762
- -------------------------------------------------------------------------------- (1) Earnings per share has been restated in accordance with SFAS No. 128, "Earnings Per Share". 1 CAUTIONARY STATEMENTS This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical fact included in this report, including, without limitation, the statements under the headings "Business," "Properties," "Market for Registrant's Common Stock and Related Stockholder Matters," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position and liquidity, the Company's strategic alternatives, future capital needs, development and capital expenditures (including the amount and nature thereof), future net revenues, business strategies, and other plans and objectives of management of the Company for future operations and activities. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, and factors in the Company's other filings with the Securities and Exchange Commission (the "Commission"), general economic and business conditions, the business opportunities that may be presented to and pursued by the Company, changes in law or regulations and other factors, many of which are beyond the control of the Company. Readers are cautioned that these statements are not guarantees of future performance, and that actual results or developments may differ materially from those projected in the forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations may include forward-looking statements with respect to the Company's future financial performance. These forward-looking statements are subject to various risks and uncertainties, including the factors described elsewhere in this Report, that could cause actual results to differ materially from historical results or those currently anticipated. Overview The Company derives the majority of its revenues from the sale of its Tyvek disposable limited/use garments and secondarily from the sales of its cut and heat resistant gloves, woven reusable garments, heat and fire protective clothing, and chemical suits all to safety and mill supply distributors. The Company generally recognizes revenues when it ships its product to its customers. Cost of goods sold includes all direct costs to manufacture the finished product, plus related costs associated with inland or ocean freight on incoming raw materials, customs duty and warehousing, and manufacturing overhead expenses. Selling expenses include all salaries for sales and marketing staffs together with other related expenses such as sales commissions, travel costs, trade shows, advertising and delivery expenses. General and administrative expenses include salaries for executives and administrative and MIS staff, together with related expenses such as travel costs, non-manufacturing facilities costs and consulting and professional fees. 2 Result of Operations The following table sets forth items in the Company's consolidated statement of operations as a percentage of revenues for the periods indicated. Years Ended January 31, 2000 1999 1998 ---- ---- ---- Revenues 100.0% 100.0% 100.0% Cost of Goods Sold 82.1 81.0 80.4 Selling, general and administrative expenses 12.3 11.8 13.0 Depreciation and amortization expense 1.0 1.0 .9 Operating profit 5.6 7.2 6.4 Interest expense, net 1.4 1.3 1.0 Income tax expense 1.3 2.1 2.1 Net income 3.0 3.8 3.4 EBITDA margin (1) 6.7 8.2 7.4 ---------------------- (1) EBITDA (earnings before interest, taxes, depreciation and amortization) margin represents EBITDA expressed as a percentage of revenues. Fiscal Year Ended January 31, 2000 Compared to Fiscal Year Ended January 31, 1999 Net Sales. Net sales for the year ended January 31, 2000 increased $3,989,000 or 7.3% to $58,644,000 from $54,655,000 for the year ended January 31, 1999. The increase in sales was principally attributable to the Company's ability to increase its production capacity and maintain higher inventory levels. Gross Profit. Gross profit for the year ended January 31, 2000 increased by $114,000, or 1.1% to $10,488,000, or 18% of net sales, from $10,374,000, or 19% of net sales, for the year ended January 31, 1999. Gross profit was relatively consistent between years as a result of global manufacturing efficiencies, however, the current year was negatively affected by relocation and expansion which temporarily decreased these efficiencies. This industry is highly competitive and margins (historically and) in the current year were vulnerable to erosion resulting from new competition reduced selling prices. Operating Expenses. Operating expenses for the year ended January 31, 2000 increased by $740,000 or 11.5%, to $7,191,000, or 12.3% of net sales, from $6,451,000, or 11.8% of net sales, for the year ended January 31, 1999. Operating expenses as a percentage of net sales increased to 12.3%, from 11.8% as a result of increased sales volume. The increase in operating expenses was mainly attributable to greater payroll expenses, increased sales commissions and increased freight out, and the addition of in-house regional sales managers. Interest Expense. Interest expense for the year ended January 31, 2000 increased by $47,619, or 6.2% to $821,333 from $773,714 for the year ended January 31, 1999. The increase in interest expense was mainly due to higher interest costs reflecting an increase in average borrowings under the Company's credit facility and increasing interest rates. Income Tax Expense. The effective tax rate of 30.8% deviates from the Federal statutory rate of 34%, mainly attributable to foreign income generating no current taxes or foreign jurisdiction with lower tax rates and the effect of state income taxes. Net Income. As a result of the foregoing, net income for the year ended January 31, 2000 decreased by $332,000 or 16%, to net income of $1,748,000 from net income of $2,080,000 for the year ended January 31, 1999. Fiscal Year Ended January 31, 1999 Compared to Fiscal Year Ended January 31, 1998. Net Sales. Net sales for the year ended January 31, 1999 increased $7,392,000 or 15.6% to $54,655,000 from $47,263,000 for the year ended January 31, 1998. The increase in sales was principally attributable to the Company's ability to increase its production capacity and maintain higher inventory levels and the institution of a price increase on its Tyvek(TM) lines on March 1, 1998. 3 Gross Profit. Gross profit for the year ended January 31, 1999 increased by $1,179,000, or 12.8% to $10,374,000, or 19% of net sales, from $9,195,000, or 19.5% of net sales, for the year ended January 31, 1998. Gross profit was consistent between years as a result of global manufacturing efficiencies which were offset by certain expense reclassifications. Operating Expenses. Operating expenses for the year ended January 31, 1999 increased by $294,000 or 4.8%, to $6,451,000, or 11.8% of net sales, from $6,157,000, or 13% of net sales, for the year ended January 31, 1998. Operating expenses as a percentage of net sales decreased to 11.8%, from 13% as a result of increased sales volume and the reclassification of certain expenses described above. The increase in operating expenses was mainly attributable to greater payroll expenses, increased sales commissions and increased freight out. Interest Expense. Interest expense for the year ended January 31, 1999 increased by $275,975, or 55.4% to $773,714 from $497,739 for the year ended January 31, 1998. The increase in interest expense was mainly due to higher interest costs reflecting an increase in average borrowings under the Company's credit facility. Income Tax Expense. The effective tax rate of 35.4% deviates from the Federal statutory rate of 34%, mainly attributable to state income taxes. Net Income. As a result of the foregoing, net income for the year ended January 31, 1999 increased by $480,000 or 30%, to net income of $2,080,000 from net income of $1,600,000 for the year ended January 31, 1998. LIQUIDITY AND CAPITAL RESOURCES Liquidity and Capital Resources. The Company's working capital is equal to $15,859,000 at January 31, 2000. The Company's primary sources of funds for conducting its business activities have been from cash flow provided by operations and borrowings under its credit facilities. The Company requires liquidity and working capital primarily to fund increases in inventories and accounts receivable associated with sales growth and, to a lesser extent, for capital expenditures. Net cash used in operating activities was $2,858,000 for the year ended January 31, 2000 and was due primarily to the increase in inventories of $6,356,000, and accounts receivable of $1,636,000, offset by the increase in accounts payable and net income from operations of $1,748,000. Net cash provided by financing activities of $3,122,000 was primarily attributable to net borrowings of $3,242,000 during the year in connection with the term loan and revolving credit facility. The revolving credit facility permits the Company to borrow up to a maximum of $13 million. The revolving credit agreement expires on November 30, 2000 and has therefore been classified as a short-term liability in the accompanying balance sheet at January 31, 2000. Borrowings under the revolving credit facility amounted to approximately $11,070,000 at January 31, 2000. The five year $3 million term-loan agreement entered into in November 1999, expires on October 31, 2004. The Company believes that cash flow from operations and the revolving credit facility (upon renewal) will be sufficient to meet its currently anticipated operating, capital expenditures and debt service requirements for at least the next 12 months. Foreign Currency Activity The Company's foreign exchange exposure is principally limited to the relationship of the U.S. Dollar to the Canadian Dollar. Year 2000 Compliance The Company did not experience any difficulties with its' computer systems on January 31, 2000 or subsequently. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk The Company is exposed to market risk, including changes in interest rates and currency exchange rates. To manage the volatility relating to these exposures, the Company seeks to limit, to the extent possible its non-U.S. dollar denominated purchases and sales. Foreign exchange risk occurs principally only with regard to Canadian subsidiary sales. 4 Foreign Exchange Risk Management As a multinational corporation, the Company is exposed to changes in foreign exchange rates. As the Company's non- denominated U.S. dollar international sales grow, exposure to volatility in exchange rates could have an adverse impact on the Company's financial results. The Company's risk from exchange rate changes is presently related to non-dollar denominated sales in Canada. Interest Rate Risk The Company is exposed to interest rate change market risk with respect to its term loan and revolving credit facility with a financial institution which is priced based upon LIBOR or 30 day commercial paper interest rates. At January 31, 2000, $13,970,000 was outstanding under the term-loan and revolving credit facilities. Changes in the above described interest rates during fiscal 2000 will have a positive or negative effect on the Company's interest expense. Each 1% fluctuation in one or both of the above rates will increase or decrease interest expense for the Company by approximately $140,000. In addition, the Company had $90,000 USD on deposit in a Chinese financial institution earning interest at the rate of 4.3% and a $47,000 Money Market account in a Canadian financial institution earning interest at the rate of 4.7%. Each 1% fluctuation in interest rates earned would not increase or decrease interest income on these deposits by a significant amount. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Common Stock is listed on the Nasdaq National Market under the symbol "LAKE". The following table sets forth for the periods indicated the high and low sales prices for the Common Stock as reported by the Nasdaq National Market. The Company has a January 31, fiscal year end. Price Range of Common Stock High Low Fiscal 2000 First Quarter ended April 30, 1999......................$6 3/4 $4 Second Quarter ended July 31, 1999..................... 6 3/4 4 3/4 Third Quarter ended October 31, 1999.................... 7 3/8 2 7/8 Fourth Quarter ended January 31, 2000................... 4 3/4 2 15/16 First Quarter Fiscal 2001 (through April 20, 2000)...... 4 3/4 3 13/16 Fiscal 1999 First Quarter ended April 30, 1998......................$10 1/2 $7 3/4 Second Quarter ended July 31, 1998...................... 11 3/8 9 Third Quarter ended Oct. 31, 1998....................... 9 7/8 5 7/8 Fourth Quarter ended January 31, 1999................... 8 5 7/8 As of April 17, 2000, there were approximately 106 record holders of shares of Common Stock. There are believed to be in excess of 500 beneficial shareholders in addition to those of record, since over 1.0 million shares are held in "street" name by Cede & Co., a large financial clearing house. The Company has never paid cash dividends on its common stock and does not expect to pay such dividends in the foreseeable future. The Company currently intends to retain any future earnings, for the operation and expansion of its business. The payment and rate of future dividends, if any, are subject to the discretion of the Board of Directors of the Company and will depend upon the Company's earnings, financial condition, capital requirements, contractual restrictions under its agreement with its institutional lender and other factors. 5 CORPORATE INFORMATION - ----------------------
Directors: Officers: Counsel: Raymond J. Smith, Chairman Raymond J. Smith, President Law Offices of Thomas J. Smith Christopher J. Ryan Christopher J. Ryan 14 Briarwood Lane John J. Collins, Jr. Executive Vice President of Suffern, NY 10901-3602 Eric O. Hallman Finance and Secretary Walter J. Raleigh James M. McCormick . Vice President and Treasurer Transfer Agent: Harvey Pride, Jr. Market Makers: Vice President, Manufacturing Registrar and Transfer Company 10 Commerce Drive Neuberger & Berman Cranford, NJ 07016 Herzog, Heine, Geduld, Inc. Auditors: NASDAQ symbol: LAKE Donald & Co. Knight Securities Grant Thornton LLP Executive Offices: INCA Suite 3S01 USLD One Huntington Quadrangle 711-2 Koehler Ave. ISLD Melville, NY 11747-4464 Ronkonkoma, NY 11779 STRK (516) 981-9700 . Subsidiaries: Lakeland Protective Wear, Inc. Lakeland de Mexico S.A. de C.V. Laidlaw, Adams & Peck, Inc. Weifang Lakeland Safety Products, Co. Ltd.
Exhibits to Lakeland Industries, Inc.'s fiscal 2000 Form 10 - K are available to shareholders for a fee equal to Lakeland's cost in furnishing such exhibits, on written request to the Secretary, Lakeland Industries, Inc., 711-2 Koehler Avenue, Ronkonkoma, New York 11779. Thermbar(TM), Kut Buster(TM), Grapolator Mock Twist (TM), Safeguard "76"(TM), Zone Guard(TM), RyTex(TM), TomTex(TM), DextraGard (TM), Forcefield (TM), Interceptor (TM), Checkmate (TM), Heatex (TM), Pyrolon (TM), Sterling Heights (TM), Fyrepel (TM), Highland (TM), Chemland (TM) and Uniland (TM) are trademarks of Lakeland Industries, Inc. Tyvek (TM), Viton (TM), Barricade (TM), Nomex (TM), Kevlar (TM), Delrin (TM), TyChem (TM) and Teflon (TM) are registered trademarks of E.I.DuPont de Nemours and Company. Saranex (TM) is a registered trademark of Dow Chemical. Spectra (TM) is a registered trademark of Allied Signal, Inc. 6 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Lakeland Industries, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Lakeland Industries, Inc. and Subsidiaries (the "Company") as of January 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended January 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of January 31, 2000 and 1999, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended January 31, 2000, in conformity with accounting principles generally accepted in the United States. We have also audited Schedule II - Valuation and Qualifying Accounts for each of the three years in the period ended January 31, 2000. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. /s/ GRANT THORNTON LLP - ---------------------- GRANT THORNTON LLP Melville, New York April 14, 2000 7 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS January 31,
ASSETS 2000 1999 ------------ -------- CURRENT ASSETS Cash and cash equivalents $ 650,541 $ 1,436,083 Accounts receivable, net of allowance for doubtful accounts of $200,000 at January 31, 2000 and 1999, respectively 8,379,477 6,743,341 Inventories 22,467,395 16,110,910 Deferred income taxes 661,000 567,000 Other current assets 301,698 461,231 ------------ ------------ Total current assets 32,460,111 25,318,565 PROPERTY AND EQUIPMENT, net 1,851,964 1,326,261 Excess of cost over fair value of net assets acquired, net of accumulated amortization of $256,000 and $236,000 at January 31, 2000 and 1999, respectively 288,810 308,798 OTHER ASSETS 169,365 206,847 ------------ ------------ $34,770,250 $27,160,471 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,242,874 $ 1,455,190 Accrued compensation and benefits 502,785 429,874 Other accrued expenses 135,883 252,274 Current portion of long-term liabilities 11,719,681 10,777,863 ---------- ---------- Total current liabilities 16,601,223 12,915,201 LONG-TERM LIABILITIES 2,708,643 464,762 DEFERRED INCOME TAXES 55,000 56,000
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.01 par; 1,500,000 shares authorized; none issued Common stock, $.01 par; 10,000,000 shares authorized; 2,644,000 and 2,660,500 shares issued and outstanding at January 31, 2000 and 1999, respectively 26,440 26,605 Additional paid-in capital 6,132,491 6,199,656 Retained earnings 9,246,453 7,498,247 ----------- ----------- 15,405,384 13,724,508 ---------- ---------- $34,770,250 $27,160,471 ========== ==========
The accompanying notes are an integral part of these statements. 8 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME Fiscal year ended January 31,
2000 1999 1998 ------------ ------------ ------- Net sales $58,644,181 $54,655,135 $47,262,519 Cost of goods sold 48,155,753 44,281,126 38,067,351 ---------- ---------- ---------- Gross profit 10,488,428 10,374,009 9,195,168 ---------- ---------- ----------- Operating expenses Selling and shipping 4,177,171 3,334,609 3,001,500 General and administrative 3,013,780 3,116,745 3,155,605 ----------- ----------- ----------- Total operating expenses 7,190,951 6,451,354 6,157,105 ----------- ----------- ----------- Operating profit 3,297,477 3,922,655 3,038,063 ----------- ----------- ----------- Other (expense) income Interest expense (821,333) (773,714) (497,739) Interest income 25,716 46,176 35,371 Other income - net 7,346 26,968 14,179 -------------- ------------- ------------- Total other expense (788,271) (700,570) (448,189) ------------- ------------ ------------ Income before income taxes 2,509,206 3,222,085 2,589,874 Income tax expense (761,000) (1,142,000) (990,000) ------------- ----------- ------------ NET INCOME $ 1,748,206 $ 2,080,085 $ 1,599,874 =========== =========== =========== Net income per common share Basic .66 $.79 $.63 === === === Diluted .65 $.77 $.61 === === === Weighted average common shares outstanding Basic 2,653,950 2,642,170 2,558,541 =========== =========== =========== Diluted 2,673,449 2,690,920 2,627,425 =========== =========== ===========
The accompanying notes are an integral part of these statements. 9 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Fiscal years ended January 31, 2000, 1999 and 1998
Common stock Additional ------------------------ paid-in Retained Shares Amount capital earnings Total ---------- ------ ------------------------------------------- Balance, January 31, 1997 2,550,000 $25,500 $5,981,226 $3,818,288 $9,825,014 Net income 1,599,874 1,599,874 Exercise of stock options 60,472 605 92,132 92,737 ----------- -------- ---------- --------------- ------------ Balance, January 31, 1998 2,610,472 $26,105 $6,073,358 $5,418,162 $11,517,625 Net income 2,080,085 2,080,085 Exercise of stock options 50,028 500 126,298 126,798 ----------- -------- ---------- --------------- ------------ Balance, January 31, 1999 2,660,500 26,605 6,199,656 7,498,247 13,724,508 Net income 1,748,206 1,748,206 Purchase and retirement of common stock (16,500) (165) (67,165) (67,330) ----------- -------- ----------- --------------- ------------- Balance, January 31, 2000 2,644,000 $26,440 $6,132,491 $9,246,453 $15,405,384 ========= ====== ========= ========= ==========
The accompanying notes are an integral part of this statement. 10 Lakeland Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal year ended January 31,
2000 1999 1998 ------------ ----------- ---------- Cash flows from operating activities Net income $ 1,748,206 $ 2,080,085 $ 1,599,874 Adjustments to reconcile net income to net cash used in operating activities Deferred income taxes (95,000) (71,000) (53,000) Depreciation and amortization 598,095 534,673 435,849 (Increase) decrease in operating assets Accounts receivable (1,636,136) 210,197 (1,059,944) Inventories (6,356,485) (252,858) (5,963,896) Other current assets 159,533 (236,785) (54,602) Other assets (20,823) (18,808) 23,688 Increase (decrease) in operating liabilities Accounts payable 2,787,684 (2,839,051) 1,759,242 Accrued expenses and other liabilities (43,480) 84,143 355,463 ------------- ------------ ----------- Net cash used in operating activities (2,858,406) (509,404) (2,957,326) ----------- ----------- ---------- Cash flows from investing activities Purchases of property and equipment - net (1,049,124) (388,393) (803,487) Principal payments on note receivable 140,251 7,104 ----------------- ----------- ------------- Net cash used in investing activities (1,049,124) (248,142) (796,383) ----------- ----------- ----------- Cash flows from financing activities Net borrowings under credit agreements 3,241,818 1,911,631 3,416,232 Proceeds from exercise of stock options 126,798 92,737 Purchase and retirement of common stock (67,330) Deferred financing costs (52,500) (67,500) (37,500) ------------- ------------ ------------ Net cash provided by financing activities 3,121,988 1,970,929 3,471,469 ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (785,542) 1,213,383 (282,240) Cash and cash equivalents at beginning of year 1,436,083 222,700 504,940 ---------- ----------- ----------- Cash and cash equivalents at end of year $ 650,541 $ 1,436,083 $ 222,700 ============ ========== ===========
The accompanying notes are an integral part of these statements. 11 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2000, 1999 and 1998 NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES 1. Business Lakeland Industries, Inc. and Subsidiaries (the "Company"), a Delaware corporation, organized in April 1982, is engaged primarily in the manufacture of personal safety protective work clothing. The principal market for the Company's products is in the United States. No customer accounted for more than 10% of net sales during the fiscal years ended January 31, 2000, 1999 and 1998. 2. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Laidlaw, Adams & Peck, Inc. and Subsidiary (formerly Fireland Industries, Inc.), Lakeland Protective Wear, Inc. (a Canadian corporation), Weifang Lakeland Safety Products Co. Ltd. (a Chinese Corporation) and Lakeland de Mexico S.A. de C.V. (a Mexican corporation). All significant intercompany accounts and transactions have been eliminated. 3. Inventories Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out method. 4. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, on a straight-line basis. Leasehold improvements and leasehold costs are amortized over the term of the lease or service lives of the improvements, whichever is shorter. The costs of additions and improvements which substantially extend the useful life of a particular asset are capitalized. Repair and maintenance costs are charged to expense. 5. Excess of Cost Over the Fair Value of Net Assets Acquired The excess of cost over the fair value of net assets acquired (goodwill) is amortized on a straight-line basis over a 30-year period. On an ongoing basis, management reviews the valuation and amortization of goodwill to determine possible impairment by considering current operating results and comparing the carrying value to the anticipated undiscounted future cash flows of the related assets. 6. Income Taxes Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities and loss carryforwards and tax credit carryforwards for which income tax benefits are expected to be realized in future years. A valuation allowance would be established to reduce deferred tax assets if it is more likely than not that all, or some portion of, such deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. 12 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE A (continued) 7. Earnings Per Share Basic earnings per share are based on the weighted average number of common shares outstanding without consideration of potential common shares. Diluted earnings per share are based on the weighted average number of common and potential common shares outstanding. The potential common shares for the years ended January 31, 2000, 1999 and 1998 were 19,499, 48,750 and 68,884, respectively, representing the dilutive effect of stock options. The diluted earnings per share calculation takes into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the fiscal year. 8. Statement of Cash Flows The Company considers highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. Cash equivalents consist of money market funds. The market value of the cash equivalents approximates cost. Foreign dominated cash and cash equivalents were $476,000 and $1,253,000 at January 31, 2000 and 1999, respectively. Supplemental cash flow information for the fiscal years ended January 31, is as follows: 2000 1999 1998 ------- ------- ------ Interest paid $783,664 $ 771,294 $446,550 Income taxes paid 693,456 1,387,778 825,648 9. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of trade receivables. Concentration of credit risk with respect to these receivables is generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across geographic areas principally within the United States. The Company routinely addresses the financial strength of its customers and, as a consequence, believes that its receivable credit risk exposure is limited. 10. Foreign Operations and Foreign Currency Translation The Company maintains manufacturing operations and uses independent contractors in Mexico and the People's Republic of China. It also maintains a sales and distribution entity located in Canada. The Company is vulnerable to currency risks in these countries. The monetary assets and liabilities of the Company's foreign operations are translated into U.S. dollars at current exchange rates, while nonmonetary items are translated at historical rates. Revenues and expenses are generally translated at average exchange rates for the year. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. 13 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE A (continued) 11. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at year-end and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates include the allowance for doubtful accounts and inventory reserves. It is reasonably possible that events could occur during the upcoming year that could change such estimates. NOTE B - INVENTORIES Inventories consist of the following at January 31: 2000 1999 ------------ ------------ Raw materials $ 3,180,556 $ 2,461,225 Work-in-process 5,538,608 3,618,901 Finished goods 13,748,231 10,030,784 ---------- ---------- $22,467,395 $16,110,910 ========== ========== NOTE C - PROPERTY AND EQUIPMENT Property and equipment consist of the following at January 31:
Useful life in years 2000 1999 ----------- ----------- ---------- Machinery and equipment 3 - 10 $3,993,315 $3,432,145 Furniture and fixtures 3 - 10 255,790 249,423 Leasehold improvements Lease term 666,692 263,269 ---------- ---------- 4,915,797 3,944,837 Less accumulated depreciation and amortization 3,063,833 2,618,576 --------- --------- $1,851,964 $1,326,261 ========== =========
14 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE D - FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's principal financial instrument consists of its outstanding revolving credit facility and term loan. The Company believes that the carrying amount of such debt approximates the fair value as the variable interest rates approximate the current prevailing interest rate. NOTE E - LONG-TERM LIABILITIES Long-term liabilities consist of the following at January 31: 2000 1999 ----------- ----------- Revolving credit facility $11,069,681 $10,727,863 Term loan 2,900,000 Pension liability (Note H) 458,643 514,762 ------------ ------------ 14,428,324 11,242,625 Less current portion 11,719,681 10,777,863 ---------- ---------- Long-term liabilities $ 2,708,643 $ 464,762 =========== ============ During 1997, the Company entered into a $10,000,000 secured revolving credit facility (the "credit facility") with a financial institution with an initial expiration date of November 30, 1999. On May 1, 1998, the credit facility was increased to $13,000,000. Effective September 23, 1998, the credit facility was amended to provide for a temporary increase to $16,000,000 through August 31, 1999. Amounts outstanding under the $3,000,000 temporary credit facility were repaid on August 31, 1999. In November 1999, the $13,000,000 credit facility was renewed for one year, and a $3,000,000, five-year term loan (the "term loan") was entered into, which replaced the repaid temporary credit facility. Borrowings under the credit facility bear interest at a rate per annum equal to the one-month LIBOR or the 30-day commercial paper rate, as defined, plus 1.75%, with interest payable monthly. At January 31, 2000, interest on outstanding credit facility borrowings was based on the commercial paper rate option (7.47% at January 31, 2000). The term loan is payable in monthly installments of $50,000 plus interest payable at the 30-day commercial paper rate plus 2.45% (8.03% at January 31, 2000). The credit facility and term loan are collateralized by substantially all the assets of the Company and guaranteed by certain of the Company's subsidiaries. The credit facility and term loan require the Company to maintain a minimum tangible net worth, at all times. The maximum amounts borrowed under the credit facility during the fiscal years ended January 31, 2000 and 1999 were $12,900,000 and $12,800,000, respectively, and the average interest rates during the periods were 7.3% and 7.1%, respectively. 15 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE F - STOCKHOLDERS' EQUITY AND STOCK OPTIONS The Nonemployee Directors' Option Plan (the "Directors' Plan") provides for an automatic one-time grant of options to purchase 5,000 shares of common stock to each nonemployee director elected or appointed to the Board of Directors. Under the Directors' Plan, 60,000 shares of common stock have been authorized for issuance. Options are granted at not less than fair market value, become exercisable commencing six months from the date of grant and expire six years from the date of grant. In addition, all nonemployee directors re-elected to the Company's Board of Directors at any annual meeting of the stockholders will automatically be granted additional options to purchase 1,000 shares of common stock on each of such dates. In April 1997, the Company extended the term on 5,000 expiring options for an additional six years. The Company's 1986 Incentive and Nonstatutory Stock Option Plan (the "Plan") provides for the granting of incentive stock options and nonstatutory options. The Plan provides for the grant of options to key employees and independent sales representatives to purchase up to 400,000 shares of the Company's common stock, upon terms and conditions determined by a committee of the Board of Directors, which administers the plan. Options are granted at not less than fair market value (110 percent of fair market value as to incentive stock options granted to ten percent stockholders) and are exercisable over a period not to exceed ten years (five years as to incentive stock options granted to ten percent stockholders). The Company has adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans and does not recognize compensation expense for its stock-based compensation plans. If the Company had elected to recognize compensation expense based upon the fair value at the date of grant for awards under these plans, consistent with the methodology prescribed by SFAS 123, the effect on the Company's net income and earnings per share as reported would be reduced for the years ended January 31, 1999 and 1998 to the pro forma amounts indicated below: 1999 1998 ----------- -------------- Net income As reported $2,080,085 $1,599,874 Pro forma 2,073,495 1,584,144 Basic earnings per common share As reported $.79 $.63 Pro forma .79 .62 Diluted earnings per common share As reported $.77 $.61 Pro forma .77 .60 The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for the years ended January 31, 1999 and 1998, respectively: expected volatility of 60% and 52%; risk-free interest rates of 5.6% and 6.5%; and expected life of six years for all periods. 16 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE F (continued) Additional information with respect to the Company's plans for the fiscal years ended January 31, 2000, 1999 and 1998 is summarized as follows:
2000 ---------------------------------------------------------------- Directors' Plan Plan ---------------------------- -------------------------- Weighted- Weighted- Number average Number average Of exercise of exercise Shares price shares price ------ ----- ------ ----- Shares under option Outstanding at beginning of year 8,000 $4.81 52,500 $3.06 ----- ------ Outstanding and exercisable at end of year 8,000 4.81 52,500 3.06 ===== ====== Weighted-average remaining contractual life of options outstanding 2.6 years 5 years
1999 ---------------------------------------------------------------- Directors' Plan Plan ---------------------------- -------------------------- Weighted- Weighted- Number average Number average Of exercise of exercise Shares price shares price -------- -------------- --------- ----------- Shares under option Outstanding at beginning of year 10,000 $ 3.85 99,528 $2.77 Granted 1,000 10.75 - - Exercised (3,000) 3.58 (47,028) 2.47 ------- ------- Outstanding and exercisable at end of year 8,000 4.81 52,500 3.06 ======= ======= Weighted-average remaining contractual life of options outstanding 3.6 years 6 years Weighted-average fair value per share of options granted during 1999 $ 6.59 -
17 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE F (continued)
1998 ---------------------------------------------------------------- Directors' Plan Plan ---------------------------- ------------------------- Weighted- Weighted- Number average Number average Of exercise of exercise Shares price shares price -------- -------------- --------- ----------- Shares under option Outstanding at beginning of year 18,000 $1.90 150,000 $2.36 Granted 7,000 3.78 - - Exercised (10,000) 1.44 (50,472) 1.54 Expired (5,000) 1.56 - - -------- ------------- Outstanding and exercisable at end of year 10,000 3.85 99,528 2.77 ======= ======== Weighted-average remaining contractual life of options outstanding 4.5 years 3.5 years Weighted-average fair value per share of options granted during 1998 $2.25 -
Summarized information about stock options outstanding under the two plans at January 31, 2000 is as follows:
Options outstanding and exercisable -------------------------------------------------------- Weighted- Number average Outstanding remaining Weighted- at contractual average Range of January life in exercise exercise prices 31, 2000 years price --------------- ------------- ----------- ---------- $2.25 - $3.38 21,500 3.90 $2.39 3.39 - 5.12 38,000 5.10 3.61 10.75 1,000 4.50 10.75 ------ $2.25 - $10.75 60,500 4.69 3.29 ======
18 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE G - INCOME TAXES The provision for income taxes is summarized as follows:
Year ended January 31, -------------------------------------------------- 2000 1999 1998 ----------- ----------- ---------- Current Federal $ 756,000 $1,116,000 $ 938,000 State 100,000 97,000 105,000 -------- ----------- ---------- 856,000 1,213,000 1,043,000 Deferred (95,000) (71,000) (53,000) ------- ----------- ----------- $ 761,000 $1,142,000 $ 990,000 ======== ========= ==========
The following is a reconciliation of the effective income tax rate to the Federal statutory rate:
Year ended January 31, ---------------------------------------------- 2000 1999 1998 --------- --------- ------ Statutory rate 34.0% 34.0% 34.0% State income taxes, net of Federal tax benefit 2.7 2.0 2.7 Nondeductible expenses .8 .3 .5 Foreign operating results generating no current tax (provision) benefit (2.4) (.6) 2.5 Change in deferred assets (3.8) (2.0) Other (.5) (.3) .5 ------ ---- ------ Effective rate 30.80% 35.4% 38.2% ===== ==== ====
19 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE G (continued) The tax effects of temporary differences which give rise to deferred tax assets at January 31, 2000 and 1999 are summarized as follows:
January 31, ------------------------------ 2000 1999 --------- --------- Deferred tax assets Inventories $385,000 $265,000 Net operating loss carryforward - foreign subsidiaries 89,000 102,000 Accounts receivable 76,000 75,000 Accrued compensation and other 111,000 125,000 ------- ------- Gross deferred tax assets 661,000 567,000 ------- ------- Deferred tax liabilities Depreciation 55,000 56,000 -------- -------- Gross deferred tax liabilities 55,000 56,000 -------- -------- Net deferred tax asset $606,000 $511,000 ======= =======
Net operating loss carryforwards of $255,000 applicable to the foreign subsidiaries expire in fiscal 2002 through 2007. 20 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE H - BENEFIT PLANS Defined Benefit Plan The Company has a frozen defined benefit pension plan that covers former employees of an acquired entity. The Company's funding policy is to contribute annually the recommended amount based on computations made by its consulting actuary. The following table sets forth the plan's funded status for the fiscal years ended January 31:
2000 1999 ---------- ------- Change in benefit obligation Benefit obligation at beginning of year $ 960,634 $ 917,791 Service cost 1,613 1,613 Interest cost 70,579 67,649 Actuarial (gain)loss (32,185) 5,202 Benefits paid (39,149) (31,621) ---------- --------- Benefit obligation at end of year $ 961,492 $ 960,634 ======== ======== Change in plan assets Fair value of plan assets at beginning of year $ 445,872 $ 467,354 Actual return on plan assets 87,626 (1,779) Employer contributions 8,500 11,918 Benefits paid (39,149) (31,621) ---------- --------- Fair value of plan assets at end of year $ 502,849 $ 445,872 ======== ======== Funded status (underfunded)/accrued pension liability $(458,643) $(514,762) ======= ========
21 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE H (continued) The components of net periodic pension cost for the fiscal years ended January 31 are summarized as follows:
2000 1999 1998 --------- ---------- ------- Service cost $ 1,613 $ 1,613 $ 1,613 Interest cost 70,579 67,649 63,772 Actual return on plan assets (87,626) 1,779 (16,168) Net amortization and deferral 62,896 (39,469) (10,771) ------- ------- ------- Net periodic pension cost $ 47,462 $ 31,572 $ 38,446 ======= ======= =======
An assumed discount rate of 7.5% was used in determining the actuarial present value of benefit obligations for all periods presented. The expected long-term rate of return on plan assets was 8% for all periods presented. At January 31, 2000, approximately 83% of the plan's assets was held in mutual funds invested primarily in equity securities, 7% was invested in equity securities and debt instruments and 10% was invested in money market and other instruments. Defined Contribution Plan Pursuant to the terms of the Company's 401(k) plan, substantially all U.S. employees over 21 years of age with a minimum period of service are eligible to participate. The 401(k) plan is administered by the Company and provides for voluntary employee contributions ranging from 1% to 15% of the employee's compensation. The Company made discretionary contributions of $57,642, $55,332 and $18,950 in the fiscal years ended January 31, 2000, 1999 and 1998 respectively. NOTE I - MAJOR SUPPLIER The Company purchased approximately 74% of its raw materials from one supplier under licensing agreements for each of the years ended January 31, 2000, 1999 and 1998. The Company expects this relationship to continue for the foreseeable future. If required, similar raw materials could be purchased from other sources; although, the Company's competitive position in the marketplace could be affected. 22 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE J - COMMITMENTS AND CONTINGENCIES 1. Employment Contracts The Company has employment contracts with three principal officers expiring through January 2003. Such contracts are automatically renewable for one- or two-year terms unless, 30 to 120 days' notice is given by either party. Pursuant to such contracts, the Company is committed to aggregate base remuneration of $612,500, $215,000 and $215,000 for the fiscal years ended January 31, 2001, 2002 and 2003, respectively. 2. Leases The Company leases the majority of its premises under various operating leases expiring through fiscal 2005. The leases for the manufacturing facilities (located in Decatur, Alabama) are with two partnerships whose partners are principal officers and stockholders of the Company. One lease expires on August 31, 2004 and requires annual payments of approximately $365,000 plus certain operating expenses and the second lease expires on May 31, 2004 and requires annual payments of $199,104 plus certain operating expenses. The Company also leases one customer service facility pursuant to a one-year lease (renewable at the Company's option for four additional one-year terms), from an officer of the Company. Monthly payments are $1,500. In addition, the Company has several operating leases for machinery and equipment. The Company has a one-year lease with a related partnership for a manufacturing facility in the People's Republic of China. The related lessor is a partnership in which the Company's directors, one officer and four employees hold partnership interests. This related party leasing arrangement requires monthly payments of approximately $4,081. Total rental expense under all operating leases is summarized as follows: Total Rentals Gross Sublease paid to rental Rental related expense income parties -------- ------- -------- Year ended January 31, 2000 $808,852 $10,578 $545,136 1999 643,174 4,611 402,096 1998 621,162 9,704 405,120 23 Lakeland Industries, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) January 31, 2000, 1999 and 1998 NOTE J (continued) Minimum annual rental commitments for the remaining term of the Company's noncancellable operating leases relating to manufacturing facilities, office space and equipment rentals at January 31, 2000 are summarized as follows: Year ending January 31, 2001 $ 794,000 2002 719,000 2003 632,000 2004 607,000 2005 282,000 ---------- $3,034,000 ========== Certain leases require additional payments based upon increases in property taxes and other expenses. 3. Services Agreement Pursuant to the terms of a services agreement with an affiliated entity, principally owned by a principal officer and stockholder of the Company, the affiliate provided professional and/or skilled labor to the Company, as needed, at contractual rates of compensation. Such agreement was cancelable by either the Company or the affiliate upon thirty-days' written notice. Costs incurred by the Company in connection with such agreement aggregated $509,000 and $552,000 for the fiscal years ended January 31, 1999 and 1998, respectively. This agreement was terminated as of February 1, 1999. 4. Litigation The Company is involved in various litigation arising during the normal course of business which, in the opinion of the management of the Company, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. 5. Self-insurance The Company maintains a self-insurance program for that portion of health care costs not covered by insurance. The Company is liable for claims up to defined limits. Self-insurance costs are based upon the aggregate of the liability for reported claims and an estimated liability for claims incurred but not reported. 24 Lakeland Industries, Inc. and Subsidiaries SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions ---------------------------- Balance at Charged to Charged to Balance at beginning costs and other end of of period expenses accounts Deductions period ----------- ---------- ----------- ---------- --------- Year ended January 31, 2000 Allowance for doubtful accounts (a) $200,000 $20,700 $20,700 (b) $200,000 ======= ====== ====== ======= Year ended January 31, 1999 Allowance for doubtful accounts (a) $203,000 $60,263 $63,263 (b) $200,000 ======= ====== ====== ======= Year ended January 31, 1998 Allowance for doubtful accounts (a) $150,000 $69,421 $16,421 (b) $203,000 ======= ====== ====== =======
(a) Deducted from accounts receivable. (b) Uncollectible accounts receivable charged against allowance. 25 EX-20 5 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 [ X ] Filed by the registrant [ ] Filed by a party other than the registrant Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ X ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12 LAKELAND INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) May 12, 2000 Dear Stockholder, I am pleased to extend to you my personal invitation to attend the 2000 Annual Meeting of Stockholders of Lakeland Industries, Inc. (the "Company") on Wednesday, June 21, 2000 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 the Company's performance for its fiscal year ended January 31, 2000 and its 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 Grant Thornton LLP, the Company's 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, /s/ Raymond J. Smith -------------------- Raymond J. Smith President and Chairman of the Board LAKELAND INDUSTRIES, INC. NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS June 21, 2000 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 21, 2000 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 II members of the Board of Directors, and 2. 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 29, 2000 will be entitled to notice and to vote at the meeting. May 12, 2000 BY ORDER OF THE BOARD OF DIRECTORS Christopher J. Ryan, Secretary PLEASE DATE, VOTE AND SIGN THE ENCLOSED PROXY AND RETURN PROMPTLY. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE. LAKELAND INDUSTRIES, INC. 711-2 Koehler Ave. Ronkonkoma, New York 11779 PROXY STATEMENT 2000 Annual Meeting of Stockholders June 21, 2000 GENERAL INFORMATION This proxy statement is 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 2000 Annual Meeting of Stockholders to be held on June 21, 2000, and at any adjournment thereof (the "Annual Meeting"). This proxy statement, the accompanying form of proxy and the Company's 2000 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 12, 2000. The accompanying proxy may be revoked by the person giving it at any time prior to its being voted; such revocation may be accomplished by a letter, or by a properly signed proxy bearing a later date, filed with the Secretary of the Company prior to the Annual Meeting. If the person giving the proxy is present at the meeting and wishes to vote in person, he or she may withdraw his or her proxy at that time. The Company has borne all costs of solicitation of proxies. In addition to solicitation by mail, there may be incidental personal solicitations made by directors, officers and regular employees of the Company and its subsidiaries. The cost of solicitation, including the payments to nominees who at the request of the Company mail such material to their customers, will be borne by the Company. VOTING SECURITIES AND STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS All holders of record of the Common Stock at the close of business on April 29, 2000, are entitled to notice of and to vote at the Annual Meeting. At the close of business on April 29, 2000, there were 2,644,000 shares of outstanding Common Stock, each entitled to one vote per share on all matters to be voted upon at the Annual Meeting. The Company's stockholders do not have cumulative voting rights. 2 The following table sets forth information as of April 29, 2000, with respect to beneficial ownership of the Company's Common Stock by all persons known by the Company 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.
Name and Address Number of Common Percent of Beneficial Owner Shares Beneficially Owned of Class ------------------- ------------------------- ----------- Raymond J. Smith 579,500 (1) 21.92% 711-2 Koehler Ave. Ronkonkoma, NY 11779 Christopher J. Ryan 251,977 (2) (6) 9.53% 711-2 Koehler Ave. Ronkonkoma, NY 11779 Joseph P. Gordon 134,500 5.09% 177-23 Union Tpke., Flushing, NY 11366 John J. Collins, Jr. 123,400 (3) 4.67% Eric O. Hallman 47,500 (3) 1.80% Walter J. Raleigh 7,000 (4) .27% All officers and directors as a group (7 persons) 1,063,827 (5) 40.24%
- -------------------------- Included in the above are fully exercisable options to purchase the Company's common stock, as follows: (1) 9,000 shares granted on June 5, 1996; (2) 4,050 shares granted on January 1, 1994; (3) 1,000 shares granted on June 15, 1994 and 1,000 shares granted on June 18, 1997 to each of Mr. Hallman and Mr. Collins; (4) 3,000 shares granted on April 18, 1997 and 1,000 shares granted June 17, 1998; (5) 60,500 shares granted between January, 1, 1994 and June 17, 1998 (6) Mr. Ryan disclaims beneficial ownership of 15,000 shares owned by his wife. 3 Proposal 1 - ELECTION OF DIRECTORS The Company's Certificate of Incorporation provides for three classes of directors with staggered terms of office and provides that upon the expiration of the terms 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. The Company currently has one Class I director, two Class II directors and two Class III directors. At the 2000 Annual Meeting there are two nominees for director in Class II. The incumbent Class III and Class I directors have one year and two years, respectively, remaining on their terms of office. The Company has no reason to believe that either of 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 the 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 election as director of the nominees for Class II named 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 II directors. The table also sets forth the names of the two directors in Class III and the one directors in Class I 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 II (Nominee for three year Term Expiring in June, 2003) ------------------------------------------ John J. Collins, Jr. 57 Director 1986 Eric O. Hallman 56 Director 1982 INCUMBENT DIRECTORS - CLASS III (One year remaining on Term Expiring in June, 2001) ----------------------------------------- Raymond J. Smith 61 Chairman of the Board, 1982 President and Director Walter J. Raleigh 72 Director 1991 INCUMBENT DIRECTOR - CLASS I (Two years remaining on Term Expiring in June, 2002) ----------------------------------------- Christopher J. Ryan 48 Executive Vice President 1986 Finance, Secretary and Director 4 The principal occupations and employment of the nominees for director and for the directors continuing in office are set forth below: 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. Eric O. Hallman has been a director of the Company since its incorporation. He was President of Naess Hallman Inc., a shipbrokering firm, between 1984 and 1991. Mr. Hallman was also affiliated between 1991 and 1992 with Finanshuset (U.S.A.), Inc., a shipbrokering and international financial services and consulting concern, and was an officer of Sylvan Lawrence, a real estate development company, between 1992 and 1998. Mr. Hallman is presently President of PREMCO, a real estate management company. Raymond J. Smith, a co-founder of the Company, has been Chairman of the Board of Directors and President since its incorporation in 1982. 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 now is a Senior Adviser to CMI Industries, Inc. Mr. Raleigh is a former director of Kerry Petroleum Company, an oil and gas development company. Christopher J. Ryan has served as Executive Vice President-Finance and director since May, 1986 and Secretary since April 1991. 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 he was employed as the Managing Director of Corporate Finance for Brean Murray, Foster Securities, Inc. He was employed from June, 1985 to March, 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 been a director of Auerback, Pollack & Richardson and Lessing, Inc. since 1996. During the year ended January 31, 2000, the Board of Directors of the Company met two times, and four of the five members of the Board of Directors attended at least 75% of the aggregate of (1) the total number of meetings of the Board of Directors held during the period when he was a director, and (2) the total number of meetings held by all committees of the Board of Directors on which he served (during the periods when he served). Potential Anti-Takeover Effect The Board of Directors has the authority, without further approval of the Company's 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, the Company is 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 the Company's securities and can limit shareholders' ability to receive a premium on their shares by discouraging takeover and tender offer bids. 5 The Directors of the Company serve staggered three-year terms. The Company's Restated Certificate of Incorporation sets forth a provision that requires certain business combinations to be approved by at least 66.66% of the Company's voting securities, unless 66.66% of the members of the Board of Directors have approved the transaction, and require approval of holders of 66.66% of the Company's voting shares to amend these provisions. In addition, the Company has 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 the Company's shareholders. 6 Committees of the Board of Directors are as follows: 1- The Stock Option and Compensation Committee is responsible for evaluating the performance of the Company's management, fixing or determining the method of fixing compensation of the Company's salaried employees, administering the Company's Stock Option and 401K/ESOP Plans, and reviewing significant amendments to a subsidiary's employee pension benefit plan. The Committee also, in conjunction with the Chief Executive Officer, considers the qualifications of prospective Directors of the Company and, as vacancies occur, recommends nominees to the Board of Directors. The Stock Option and Compensation Committee (which also functions as a nominating committee for nominations to the Board) will consider nominees to the Board recommended by stockholders. Such recommendations must be in writing and sent to the Secretary of the Company no later than January 31st of the year in which the Annual Meeting is to be held, accompanied by a brief description of the proposed nominee's principal occupation and his or her other qualifications which, in the stockholder's opinion, make such person a suitable candidate for nomination to the Board. This Committee met once during the year ended January 31, 2000. The committee members are: John J. Collins, Jr., Eric O. Hallman, and Walter J. Raleigh Compensation Committee Interlocks and Insider Participation Members of the Stock Option and Compensation Committee are outside directors who do not serve in any other capacity with respect to the Company or any of its subsidiaries. Messrs. Collins and Hallman are partners of POMS Holding Co. See "Certain Relationships and Related Transactions". 2- 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, and reviewing with the Company's financial management and its independent auditors other matters relating to audits and to the adequacy of the Company's internal control structure. This Committee met once during the year ended January 31, 2000. The committee members are: John J. Collins, Jr., Eric O. Hallman, and Christopher J.Ryan COMPENSATION OF EXECUTIVE OFFICERS The table below sets forth all salary, bonus and all other compensation paid to the Company's chief executive officer and each of the Company's other executive officers (who earned more than $100,000 per year in salary and bonus) for the years ended January 31, 2000, 1999 and 1998: Name and All Other Principal Position Year Salary Bonus Compensation Raymond J. Smith, 2000 $262,500 $92,500 $6,716 Chairman, President and CEO 1999 262,500 25,000 5,899 1998 225,000 3,089 Christopher J. Ryan, 2000 $175,000 $16,000 $3,252 Executive V.P.-Finance 1999 175,000 20,000 3,724 and Secretary 1998 169,003 7,750 1,262 Harvey Pride, Jr. 2000 $135,000 $12,800 $3,864 Vice President- 1999 135,000 3,465 Manufacturing 1998 115,000 23,000 910 James M. McCormick 2000 $115,000 $16,500 $4,139 VP - Treasurer 1999 115,000 13,500 4,214 1998 115,000 8,450 2,138 7 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 2000. The Company has entered into employment contracts with certain executive officers providing for annual compensation of $262,500 for Mr. Smith and $215,000 for Mr. Ryan and $135,000 for Mr. Pride. Messrs. Smith and Pride each have a three year contract which expires on January 31, 2001, Mr. Ryan has a three year contract which expires on February 13, 2001. All contracts are automatically renewable for one or two 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 has made a contribution to this plan totaling $57,642, during the plan year ended December 31, 1999. 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 and Pride'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, 2000 (for payment in May 2000) for Messrs. Smith, Ryan and Pride were $62,500, $0 and $0, respectively. All contracts provide for lump sum payments of contracted salaries pursuant to various formulas should there be a change in control of the Company. STOCK OPTION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Policies: The compensation policy of the Company is to provide its executive officers and management with a level of pay and benefits that will assure the Company's competitiveness and continued growth, and allow the Company to retain key executives critical to this long-term success and attract and retain qualified personnel. The Company competes for talented executives in a market segment where successful entrepreneurial executives are highly compensated. It also competes for executives with a background in manufacturing and selling protective safety garments. As a result, to obtain and retain highly qualified and motivated executives, the Compensation Committee has deemed it desirable to structure employment arrangements which compensate highly for high profitability and performance and to enter into written employment agreements with its senior executive officers. The Compensation Committee's responsibilities include overseeing the Company's compensation policies, supervising compensation for management and employee benefits and administering the Company's 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 production 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 both the profitability of the Company as a whole and the productivity of their individual departments. Particulars: Messrs. Eric O. Hallman, John J. Collins, Jr. and Walter J. Raleigh were members of the Company's Stock Option and Compensation Committee when it ratified Mr. Smith's and Mr. Pride's employment contracts in January 1998, and Mr. Ryan's which was ratified on February 14, 1997. Mr. Walter J. Raleigh joined the Board of Directors on April 18, 1991, as a third outside director and with Messrs. Hallman and Collins, these three outside directors presently make up the Stock Option and Compensation Committee. 8 Messrs. Smith, Pride and Ryan were awarded base compensations of $262,500, $215,000 and $135,000, for fiscal 2001, respectively. In addition, the Committee reviewed what was normally paid the President and Chairman in Mr. Smith's case and Executive Vice President Finance and In-House Counsel in Mr. Ryan's case and the Chief Manufacturing Executive in Mr. Pride's case, in public companies of Lakeland's size and concluded that the compensation package represented close to the median of what other officers were being compensated in like public companies of comparable size after reviewing Growth Resources Officer Compensation Report Eleventh Edition - Panel Publications. 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 15 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/ESOP Plan, the latter of which went into effect 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 the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. Performance Graph The Corporate Performance Graph, appearing on the following page, obtained from Media General Financial Services of Virginia, compares the five year cumulative total return of the Company's common stock with that of a broad equity market index, including dividend reinvestment and with that of a peer group: COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
FISCAL YEAR ENDING ------------------------------------------------------------------------------- COMPANY/INDEX/MARKET 1/31/1995 1/31/1996 1/31/1997 1/30/1998 1/29/1999 1/31/2000 Lakeland Industries 100.00 90.13 66.45 171.05 134.21 90.79 Customer Selected Stock List 100.00 66.38 70.52 79.53 63.18 47.77 S&P Industrials 100.00 137.27 173.41 218.77 300.28 339.59
Option/SAR Grants in Last Fiscal Year - No stock options were granted to any employee in fiscal 2000 and no SAR grants have been made since inception of the Stock Option Plan. See "Directors' Compensation". Stock Option Plan Messrs. Smith, Ryan, Pride and McCormick participate in the Company's Incentive Stock Option Plan (common stock). The outstanding incentive stock options as of January 31, 2000 are as follows:
No. of Date(s) Grant Name of Shares Option of Expiration Date Executive Granted Price Grant Date(s) Value - ----------------------------------------------------------------------------------------------------------- Mr. Smith 9,000 $ 3.50 6/5/96 6/4/06 $31,500 Mr. Ryan 4,050 $2.25 1/1/94 1/1/04 $9,113 Mr. Pride 29,600 $2.25 - 3.50 6/5/96 & 1/1/94 6/4/06 & 1/1/04 $91,600 Mr. McCormick 9,850 $2.25 - 3.50 6/5/96 & 1/1/94 6/4/06 & 1/1/04 $28,413
There are currently 250,000 option shares available for future grant under this plan. During the year ended January 31, 2000, no stock options were granted or exercised. 9 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 $750 for each meeting as compensation for serving on the Board. There are no charitable award or director legacy programs. Messrs. Collins, Hallman and Raleigh participate in the Company's Non-employee Directors' Option Plan as follows: # of Option Date of Expiration Director Shares Price Grant Date Mr. Collins 1,000 $5.125 6/18/97 6/18/2003 Mr. Collins 1,000 3.88 6/15/94 6/15/2000 Mr. Hallman 1,000 5.125 6/18/97 6/18/2003 Mr. Hallman 1,000 3.88 6/15/94 6/15/2000 Mr. Raleigh 3,000 3.25 4/18/97 4/18/2003 Mr. Raleigh 1,000 10.75 6/17/98 6/17/2004 There are currently 39,000 option shares available for future grant under this plan. During the year ended January 31, 2000, no stock options were granted or exercised. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS POMS Holding Co. ("POMS", a partnership consisting of Raymond J. Smith, Eric O. Hallman, John J. Collins, Jr., Joseph P. Gordon, Harvey Pride, Jr. and certain other stockholders of the Company) leases to the Company a 91,788 square foot disposable garment manufacturing facility in Decatur, Alabama. Under a lease effective September 1, 1999 and expiring on August 31, 2004, the Company pays an annual rent of $364,900 and is the sole occupant of the facility. On March 1, 1999, the Company entered into a one year (renewable for four additional one year terms) lease agreement with Harvey Pride, Jr., an officer of the Company, for 2400 sq. ft. customer service office. This is located next to the existing Decatur, Alabama facility mentioned above. On June 1, 1999, the Company entered into a five year lease agreement with River Group Holding Co., L.L.P. for a 40,000 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 made up of the Directors and certain officers of the Company. The annual rent for this facility is $199,100 and the Company is the sole occupant of the facility. During November 1999 Highland and Chemland divisions relocated from Somerville, Alabama to the above mentioned Decatur facility. Highland had paid $1,500 on a month to month lease for 12,000 sq. ft. of manufacturing space. Chemland had paid $1,600 on a month to month lease, also for 12,000 sq. ft. That Somerville facility was owned by Harvey Pride, Jr., an officer of the Company. The Company believes that all rents paid to POMS, River Group Holding Co., L.L.P. and Harvey Pride, Jr. by the Company, Highland and Chemland Divisions are comparable to what would be charged by an unrelated third party. The net rent paid to POMS, River Group Holding Co., L.L.P. by the Company for the year ended January 31, 2000, amounted to $497,636 and the total rent paid to Harvey Pride, Jr. by the Company for use by its Highland, Chemland divisions and the customer service office, for the year ended January 31, 2000, amounted to $47,500. An Qiu Holding Co., LLC ("An Qiu" a partnership consisting of all the Directors of the Company and one officer) entered into a eight month lease expiring April 2000 through its majority ownership interest in a Chinese Foreign Joint Venture Holding Company, leasing a 46,000 square foot building in China at an annual rental fee of $48,972 to the Company. The Company paid or accrued legal fees of $843 for the fiscal year ended January 31, 2000 to the Law Offices of Thomas J. Smith, the Company's General Counsel. Mr. Thomas J. Smith, is the brother of Raymond J. Smith. 10 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. STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING Stockholder proposals for inclusion in the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders must be received by the Company not later than January 31, 2001. 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 /s/ Christopher J. Ryan, ------------------------ Christopher J. Ryan, Secretary May 12, 2000 11 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 Raymond J. Smith 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 29, 2000 at the annual meeting of stockholders to be held on June 21, 2000 or any adjournment there of. 1. Election of Directors John J. Collins, Jr. and Eric O. Hallman With- For All [ ] For [ ] hold [ ] Except INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For All Except" and write that nominee's name in the space provided below. - -------------------------------------------------------------------------------- 2. Other Business 1. 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 PROPOSAL 1. 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. Please be sure to sign and date this Proxy in the box below. ----------------------------------- Date ----------------------------------- Stockholder sign above ----------------------------------- Co-holder (if any) sign above 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 EX-27 6
5 YEAR YEAR JAN-31-1999 JAN-31-2000 JAN-31-1999 JAN-31-2000 1,436,083 650,541 0 0 6,743,341 8,379,477 0 0 16,110,910 22,467,395 25,318,565 32,460,111 1,326,261 1,851,964 0 0 27,160,471 34,770,250 12,915,201 16,601,223 0 0 0 0 0 0 26,605 26,440 13,697,903 15,378,944 27,160,471 34,770,250 54,655,135 58,644,181 54,655,135 58,644,181 44,281,126 48,155,753 6,451,354 7,190,951 (26,968) (7,346) 0 0 727,538 795,617 3,222,085 2,509,206 1,142,000 761,000 2,080,085 1,748,206 0 0 0 0 0 0 2,080,085 1,748,206 .79 .66 .77 .65
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