-----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, JIHY9sB8fiI3LDRIdgkmW9YwIlbiUjJrkP2STX5MJ/i7kM/ESYmXsf2fhdxRdgo0 yHTcTo3SLU0nEoidzsxCdA== 0000914317-02-001553.txt : 20021213 0000914317-02-001553.hdr.sgml : 20021213 20021213105922 ACCESSION NUMBER: 0000914317-02-001553 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20021031 FILED AS OF DATE: 20021213 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15535 FILM NUMBER: 02856521 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 CITY: RONKONKOMA STATE: NY ZIP: 11779 10-Q 1 form10q-48200_lakeland.txt FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2002 ---------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ---------------- Commission File Number: 0-15535 LAKELAND INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 13-3115216 - ------------------------- ------------------------------------- (State of incorporation) (IRS Employer Identification Number) 711-2 Koehler Ave., Ronkonkoma, New York 11779 - -------------------------------------------------------------------------------- (Address of principal executive offices) (631) 981-9700 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.01 par value, outstanding at December 13, 2002 - 2,966,357 shares. LAKELAND INDUSTRIES, INC. INDEX FORM 10-Q The following information of the Registrant and its subsidiaries is submitted herewith:
PART I - FINANCIAL INFORMATION: Item 1. Financial Statements: Page Introduction ....................................................................................1 Condensed Consolidated Balance Sheets - October 31, 2002 and January 31, 2002.......................2 Condensed Consolidated Statements of Income - Three Months and Nine Months Ended October 31, 2002 and 2001.....................................................3 Condensed Consolidated Statement of Stockholders' Equity for the Nine Months Ended October 31, 2002..........................................................4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended October 31, 2002 and 2001.....................................................................5 Notes to Condensed Consolidated Financial Statements................................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............9 Item 4. Controls and Procedures............................................................................11 PART II - OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K .................................................................11 Signatures ...................................................................................12 Certifications ................................................................................13-16
LAKELAND INDUSTRIES, INC. PART I - FINANCIAL INFORMATION --------------------- Item 1. Financial Statements: Introduction ------------ CAUTIONARY STATEMENTS This report may include "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 heading "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 the 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. 1
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS October 31, January 31, ASSETS 2002 2002 ----------- ----------- (unaudited) Current Assets: Cash and cash equivalents......................................$ 1,990,167 $ 1,760,635 Accounts receivable, net of allowance for and doubtful accounts of $320,000 and $221,000 at October 31, 2002 and January 31, 2002, respectively ......... 9,001,292 9,600,738 Inventories ................................................... 25,495,486 26,529,150 Prepaid income taxes .......................................... -- 242,029 Deferred income taxes ......................................... 888,000 888,000 Other current assets .......................................... 519,752 524,274 ----------- ----------- Total current assets................................. 37,894,697 39,544,826 Property and equipment, net of accumulated depreciation of $3,560,000 at October 31, 2002 and $3,113,000 at January 31, 2002........................... 2,127,234 2,218,459 Construction in progress....................................... 644,657 -- Other assets................................................... 731,437 654,200 ----------- ----------- $41,398,025 $42,417,485 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable............................................... $3,209,575 $4,759,373 Current portion of long-term liabilities....................... 15,351,752 17,028,032 Accrued expenses and other current liabilities................. 1,201,198 991,021 Due to Affiliate............................................... 168,099 -- ----------- ----------- Total current liabilities................................. 19,930,624 22,778,426 Long-term liabilities ......................................... 467,501 609,105 Deferred income taxes ......................................... 303,000 303,000 ------- ------- 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; 2,966,357 and 2,684,600 shares issued and outstanding at October 31, 2002 and January 31, 2002, respectively....... 29,663 26,846 Additional paid-in capital..................................... 8,753,951 6,360,741 Retained earnings.............................................. 11,913,286 12,339,367 ----------- ----------- Total stockholders' equity................................ 20,696,900 18,726,954 ----------- ----------- $41,398,025 $42,417,485 =========== =========== See notes to condensed consolidated financial statements. 2
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED October 31, October 31, 2002 2001 2002 2001 Net Sales ................................................... $ 18,534,900 $ 19,205,554 $ 58,142,368 $ 56,572,147 Cost of Goods Sold .......................................... 15,083,441 16,201,359 46,873,895 46,958,134 ------------ ------------ ------------ ------------ Gross Profit ................................................ 3,451,459 3,004,195 11,268,473 9,614,013 Operating Expenses .......................................... 2,445,343 2,127,275 7,880,146 6,708,113 ------------ ------------ ------------ ------------ Operating Profit ............................................ 1,006,116 876,920 3,388,327 2,905,900 Other Income, net ........................................... 4,090 88,634 44,593 100,139 Interest Expense ............................................ (146,325) (201,369) (491,153) (698,862) ------------ ------------ ------------ ------------ Income before Income Taxes .................................. 863,881 764,185 2,941,767 2,307,177 Provision for Income Taxes .................................. 368,274 380,281 991,483 704,000 ------------ ------------ ------------ ------------ Net Income .................................................. $ 495,607 $ 383,904 $ 1,950,284 $ 1,603,177 ============ ============ ============ ============ Net Income per common share adjusted for the 1 for 10 Stock distribution to shareholders of record on July 31, 2002: Basic .................................................. $ .17 $ .13 $ .66 $ .55 ============ ============ ============ ============ Diluted ................................................ $ .17 $ .13 $ .66 $ .54 ============ ============ ============ ============ Weighted average common shares outstanding adjusted for the 1 for 10 Stock distribution to shareholders of record on July 31, 2002: Basic .................................................. 2,966,357 2,943,857 2,963,597 2,922,260 ============ ============ ============ ============ Diluted ................................................ 2,975,303 2,974,156 2,974,958 2,946,780 ============ ============ ============ ============
See notes to condensed consolidated financial statements. 3
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) Nine months ended October 31, 2002 Additional Common stock paid-in Retained Shares Amount capital earnings Total ------ ------ ------- -------- ----- Balance, January 31, 2002 2,684,600 $26,846 $6,360,741 $12,339,367 $18,726,954 Net income 1,950,284 1,950,284 Exercise of stock options 7,350 73 19,589 19,662 10% Stock dividend 274,407 2,744 2,373,621 (2,376,365) -- --------- ------- ---------- ----------- ----------- Balance, October 31, 2002 2,966,357 $29,663 $8,753,951 $11,913,286 $20,696,900 ========= ======= ========== =========== ===========
See notes to condensed consolidated financial statements. 4
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED October 31, 2002 2001 ---- ---- Cash Flows from Operating Activities: Net income $ 1,950,284 $ 1,603,177 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for bad debts 245,042 79,576 Depreciation and amortization 447,430 450,820 (Increase) decrease in accounts receivable 354,404 437,218 (Increase) decrease in inventories 1,033,664 (823,049) (Increase) decrease in prepaid income taxes and other current assets 246,551 400,291 (Increase) decrease in other assets (77,237) (329,064) Increase (decrease) in accounts payable, accrued expenses and other liabilities (1,134,022) (3,115,656) ---------- ---------- Net cash provided by (used in) operating activities 3,066,116 (1,296,687) ---------- ---------- Cash Flows from Investing Activities: Construction in progress (644,657) -- Purchases of property and equipment (356,205) (376,124) ---------- ---------- Net cash provided by (used in) investing activities (1,000,862) (376,124) ---------- ---------- Cash Flows from Financing Activities: Proceeds from exercise of stock options 19,662 126,250 Net borrowings (reductions) under loan agreements (1,049,432) 2,866,797 Repayments of term loan (805,952) (576,852) ---------- ---------- Net cash provided by (used in) financing activities (1,835,722) 2,416,195 ---------- ---------- Net increase in cash 229,532 743,384 Cash and cash equivalents at beginning of period 1,760,635 784,578 ---------- ---------- Cash and cash equivalents at end of period $ 1,990,167 $ 1,527,962 =========== =========== Supplemental disclosures of cash flow information: Cash paid during period for: Interest $ 491,153 $ 698,847 =========== =========== Income taxes $ 460,000 $ 357,500 =========== =========== Non-cash Financing Activity: Issuance of Stock Dividend 2,376,365 --
5 LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Business Lakeland Industries, Inc. and Subsidiaries (the "Company"), a Delaware corporation is engaged primarily in the manufacture of personal safety protective work clothing. The principal market for the Company's products is the United States. No customer accounted for more than 10% of net sales during the nine-month periods ended October 31, 2002 and 2001. Qing Dao Maytung Healthcare Co., Ltd. is a real estate holding company that was formed during the nine months ended October 31, 2002 for the purpose of constructing a building in the People's Republic of China. 2. Basis of Presentation The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to present fairly the consolidated financial information required therein. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. While the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended January 31, 2002. The results of operations for the three-month and nine-month periods ended October 31, 2002 and 2001 are not necessarily indicative of the results to be expected for the full year. 3. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Laidlaw, Adams & Peck, Inc., Lakeland Protective Wear, Inc. (a Canadian corporation), Lakeland de Mexico S.A. de C.V. (a Mexican corporation), Weifang Lakeland Safety Products, Co., Ltd. (a Chinese corporation) and Qing Dao Maytung Healthcare Co., Ltd. (a Chinese corporation). All significant intercompany accounts and transactions have been eliminated. 4. Inventories
Inventories consist of the following: October 31, January 31, 2002 2002 ---- ---- Raw materials........................................... $ 8,634,326 $ 6,248,990 Work-in-process......................................... 1,874,476 3,997,470 Finished goods.......................................... 14,986,684 16,282,690 ----------- ----------- $25,495,486 $26,529,150
Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out method. 5. Stockholders Equity (a) Stock Split On June 24, 2002, the Company announced a 1-for-10 Stock Split in the form of a 10% stock dividend to Shareholders of record on July 31, 2002 with a distribution date of August 30, 2002. Share and per share amounts have been restated to reflect the stock split for all periods presented. (b) 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 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 period. 6
The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended Nine Months Ended October 31, October 31, 2002 2001 2002 2001 ---- ---- ---- ---- Numerator Net income $ 495,607 $ 383,904 $1,950,284 $1,603,177 ========= ========== ========== ========== Denominator Denominator for basic earnings per share (weighted-average shares) 2,966,357 2,943,857 2,963,597 2,922,260 Effect of dilutive securities: Stock options 8,946 30,299 11,361 24,520 --------- --------- --------- --------- Denominator for diluted earnings per share (adjusted weighted-average shares) and assumed conversions 2,975,303 2,974,156 2,974,958 2,946,780 ========= ========= ========= ========= Basic earnings per share $.17 $.13 $.66 $.55 ========= ========= ========= ========= Diluted earnings per share $.17 $.13 $.66 $.54 ========= ========= ========= =========
Excluded from the calculation of earnings per share are options to purchase 1,100 and 3,300 shares at October 31, 2002 and 2001, respectively, as their inclusion would have been anti dilutive. 6. Credit Facility At October 31, 2002, the balance outstanding under the Company's secured $18 Million revolving credit facility amounted to $14,904,000. This facility, which is based on a percentage of eligible accounts receivable and inventory, as defined, expires on July 31, 2003. Borrowings under the facility bear interest at a rate per annum equal to the one-month LIBOR rate plus 2%. At October 31, 2003, the balance outstanding under the Company's term loan is $447,752. The term loan is payable in monthly installments of $89,500, plus interest payable at the thirty day commercial paper rate plus 2.45% and expires on March 31, 2003. The credit facility and term loan are collateralized by substantially all 7 of the assets of the Company and guaranteed by certain of the Company's subsidiaries. The credit facility and term loan contain financial covenants, including, but not limited to, minimum levels of earnings and maintenance of minimum tangible net worth and certain other ratios. 7. Major Supplier The Company purchased approximately 74% of its raw materials from DuPont. The Company has been purchasing such raw materials from DuPont for over twenty years, and as one of its largest customers in Tyvek, considers its relationship with this supplier to be excellent. 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. 8. Effects of Recent Accounting Pronouncements In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 145, "Rescission of FASB Statements No. 4, 44, and 64 Amendment of FASB Statement No. 13, and Technical Corrections". This statement eliminates the current requirement that gains and losses on debt extinguishments must be classified as extraordinary items in the income statement. Instead, such gains and losses will be classified as extraordinary items only if they are deemed to be unusual and infrequent, in accordance with the current GAAP criteria for extraordinary classification. In addition, SFAS 145 eliminates an inconsistency in lease accounting by requiring that modifications of capital leases that result in reclassification as operating leases be accounted for consistent with sale-leaseback accounting rules. The statement also contains other nonsubstantive corrections to authoritative accounting literature. The rescission of SFAS 4 is effective in fiscal years beginning after May 15, 2002. The amendment and technical corrections to SFAS 13 are effective for transactions occurring after May 15, 2002. All other provisions of SFAS 145 are effective for financial statements issued on or after May 15, 2002. Management believes that the adoption of SFAS No. 145 will not have a material impact on its financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issue Task Force Issue No. 94-3. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amount recognized. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. Management believes that the adoption of SFAS No. 146 will not have a material impact on its financial position or results of operations. 8 LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2. Nine months ended October 31, 2002 compared to the nine months ended October 31, 2001. Net Sales. Net sales for the nine months ended October 31, 2002 increased $1,570,000, (or 2.8%) to $58,142,000 from $56,572,000 reported for the nine months ended October 31, 2001. The increase in sales was principally attributable to improving economic conditions and to the Company's April 1, 2002 sales price increase. This industry continues to be highly competitive. Gross Profit. Gross profit for the nine months ended October 31, 2002, increased by $1,654,000, (or 17.2%)to $11,268,000 from $9,614,000 for the nine months ended October 31, 2002. Gross profit as a percentage of net sales increased to 19.4% for the nine months ended October 31, 2002 from 17.0% reported for the prior year principally due to the increase in selling prices and additionally by a decrease in labor and overhead costs. Commencing in March 2002 the company incurred an increase in the price of raw materials, (from DuPont), which have an effect on margins for the remainder of this fiscal year. Operating Expenses. Operating expenses for the nine months ended October 31, 2002 increased by $1,172,000, (or 17.5%) to $7,880,000, (or 13.6%) of net sales from $6,708,000, (or 11.9%) of net sales for the nine months ended October 31, 2001. Operating expenses increased principally as a result of increased freight costs, insurance costs, computer costs, bad debt expense, professional fees, sales and use taxes, and commission expense. Interest Expense. Interest expense decreased primarily due to lower interest costs reflecting a decrease in average borrowings under the company's credit facilities and decreasing interest rates. Income Tax Expense. The effective tax rate for the nine months ended October 31, 2002 and 2001 of 33.7% and 30.5%, respectively, deviates from the Federal statutory rate of 34.0%, which is primarily attributable to differing foreign tax rates and state income taxes. Net Income. As a result of the foregoing, net income increased to $1,950,000 for the nine months ended October 31, 2002, (or up 21.6%) from net income of $1,603,000 for the nine months ended October 31, 2001. Three months ended October 31, 2002 compared to the three months ended October 31, 2001. Net Sales. Net sales for three months ended October 31, 2002 decreased $671,000, (or 3.6%) to $18,535,000 from $19,206,000 reported for the three months ended October 31, 2001. The decrease in sales was principally attributable to the prior year period sales benefiting from increased short term demand for certain products due to the tragic events of September 11, 2001. This industry continues to be highly competitive. Gross Profit. Gross profit for the quarter ended October 31, 2002 increased by $447,000, (or 14.9%) to $3,451,000 from $3,004,000 for the quarter ended October 31, 2001. Gross profit as a percentage of net sales increased to 18.6% for the three months ended October 31, 2001 from 15.6% reported for the prior year, principally due to the increase in selling prices, and in addition by a decrease in material usage and overhead costs. The Company incurred an increase in the cost of raw materials, (from DuPont), which had a negative effect on margins during the quarter. Operating Expenses. Operating expenses for the quarter ended October 31, 2002 increased by $318,000, (or 15%)to $2,445,000, (or 13.2%) of net sales from $2,127,000, (or 11.1%) of net sales for the quarter ended October 31, 2001. Operating expenses increased principally as a result of increased sales salaries, commissions, freight, travel, professional fees, and insurance. Interest Expense. Interest expenses decreased primarily due to lower interest costs reflecting a decrease in average borrowing under the Company's credit facilities and decreasing interest rates. 9 Income Tax Expense. The effective tax rate for the three months ended October 31, 2002 and 2001 of 42.6% and 49.8% respectively, deviates from the Federal statutory rate of 34%, which is primarily attributable to a differing mixture of foreign profits and tax rates and state and local income taxes, than in the comparable quarter last year. Net Income. As a result of the foregoing net income increased to $496,000 for the three months ended October 31, 2002, (or up 29.1%) from net income of $384,000 for the three months ended October 31, 2001. LIQUIDITY and CAPITAL RESOURCES - ------------------------------- Liquidity and Capital Resources. The Company's working capital is equal to $17,964,073 at October 31, 2002. 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 provided by operating activities was $3,066,116 for the nine months ended October 31, 2002 and was due primarily to a decrease in inventories of $1,033,664, net income of $1,950,284, offset by a decrease in accounts payable of $1,134,022. The Company used net cash in investing activities of $1,000,862 during the nine months ended October 31, 2002 in connection with the purchase of equipment of $356,205 and the construction of a building in the People's Republic of China amounting to $644,657. Net cash used in financing activities of $1,835,722 was primarily attributable to reductions of $1,049,432 in connection with the revolving credit facility, and repayments under the term loan of $805,952 during the nine months ended October 31, 2002. The revolving credit facility permits the Company to borrow up to a maximum of $18 million. The revolving credit agreement expires on July 31, 2003 and has therefore been classified as a short-term liability in the accompanying balance sheet at October 31, 2002. Borrowings under the revolving credit facility amounted to $14,904,000 at October 31, 2002. The $3 million term-loan agreement entered into in November 1999 has an outstanding balance of $447,752 and expires on March 31, 2003. The Company believes that cash flow from operations and the revolving credit facility, upon its anticipated renewal, will be sufficient to meet its currently anticipated operating, capital expenditures and debt service requirements for at least the next 12 months. Historically, the Company has been able to renew its credit facility on acceptable terms, however there can be no assurance that such financing will continue to be available. Foreign Currency Activity. The Company's foreign exchange exposure is principally limited to the relationship of the U.S. Dollar to the Mexican Peso, the Chinese RMB and the Canadian Dollar. Sarbanes-Oxley Act of 2002. In the summer of 2002, the Sarbanes-Oxley Act (the Act) of 2002 was enacted into law. The goals of the Act are to increase corporate responsibility, provide enhanced penalties for accounting and auditing improprieties at publicly traded companies and protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. Among other mandates, the Act establishes new disclosure requirements and corporate governance rules. While some of these mandates were made effective when the Act was adopted, others require the SEC to take action before they will become effective. The Company has taken steps to ensure that it complies with the portions of the Act that are already in effect as well as to prepare for those which will become effective in the future. The Company will continue to monitor all developments in the securities laws, including those imposed by the Act, and will comply with such regulations as mandated. The Act will require the Company's Audit Committee to pre-approve all audit and non-audit services performed by the Company's independent accountant. Furthermore, the Company will be required to disclose in its periodic reports the approval by the Audit Committee of non-audit services to be performed by its independent accountant. The Company's Audit Committee has reviewed the nature of all significant audit and non-audit services which are currently performed by PricewaterhouseCoopers LLP (PwC), its independent accountant. 10 ITEM 4. Controls and Procedures Pursuant to rules adopted by the SEC as directed by Section 302 of the Sarbanes-Oxley Act of 2002, the Company has performed an evaluation of its disclosure controls and procedures (as defined by Exchange Act Rules 13a-14) within 90 days of the date of the filing of this report. Based on this evaluation, the Company's Chief Executive Officer and Principal Accounting Officer have concluded that these procedures are effective in ensuring that information required to be disclosed by the Company is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. In addition, there have not been any significant changes in internal controls or other factors that could significantly affect internal controls subsequent to the date of the Company's most recent evaluation. ITEM 6. Exhibits and Reports on Form 8-K: a - 10(g) Employment Agreement between The Company and Raymond J. Smith dated December 1,2002. 10(k) Employment Agreement between The Company and Christopher J. Ryan dated November 29,2002. 10(r) Employment Agreement between The Company and James M. McCormick dated December 1,2002 b -Reports on Form 8-K filed during the three month period ended October 31, 2002: Change in Certifying Accountants filed October 21, 2002 Amendment #1 filed October 25, 2002 Change in Certifying Accountants filed October 31, 2002 11 ----------------SIGNATURES---------------- Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LAKELAND INDUSTRIES, INC. --------------------------------------- (Registrant) /s/Raymond J. Smith Date: December 13, 2002 --------------------------------------- Raymond J. Smith, President and Chief Executive Officer /s/Christopher J. Ryan --------------------------------------- Date: December 13, 2002 Christopher J. Ryan Executive Vice President, Secretary and General Counsel /s/James M. McCormick Date: December 13, 2002 --------------------------------------- James M. McCormick, Vice President and Treasurer (Principal Accounting Officer) 12 Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 And Securities and Exchange Commission Release 34-46427 I, Raymond J. Smith, the president and chief executive officer of Lakeland Industries, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lakeland Industries, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made,not misleading with respect to the period covered by the report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report fairly present in all material respects the financial condition, result of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrar's ability to record, process, summarize and report financial data and have identified for the registrant's auditors, any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in registrant's internal controls; 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 13 ,2002 /s/Raymond J. Smith --------------------------------------- Raymond J. Smith President and Chief Executive Officer 13 Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 And Securities and Exchange Commission Release 34-46427 I, James M. McCormick, the principal accounting officer of Lakeland Industries, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lakeland Industries, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report fairly present in all material respects the financial condition, result of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrar's ability to record, process, summarize and report financial data and have identified for the registrant's auditors, any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in registrant's internal controls; 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 13 ,2002 /s/James M. McCormick --------------------------------------- James M. McCormick Vice President, Treasurer and Principal Accounting Officer 14 Certification of Executive Vice President, Secretary and General Counsel Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 And Securities and Exchange Commission Release 34-46427 I, Christopher J. Ryan, Executive Vice President, Secretary and General Counsel of Lakeland Industries, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lakeland Industries, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report fairly present in all material respects the financial condition, result of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrar's ability to record, process, summarize and report financial data and have identified for the registrant's auditors, any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in registrant's internal controls; 7. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 13 ,2002 /s/Christopher J. Ryan --------------------------------------- Christopher J. Ryan Executive Vice President, Secretary and General Counsel 15 CERTIFICATION OF CHIEF EXECUTIVE OFFICER Pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of Lakeland Industries, Inc. (the "Company") on Form 10-Q for the period ending October 31, 2002 (the "Report"), I Raymond J. Smith, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents in all material respects, the financial condition and results of operations of the Company. /s/Raymond J. Smith - ------------------- Raymond J. Smith Chief Executive Officer December 13 , 2002 CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER Pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of Lakeland Industries, Inc. (the "Company") on Form 10-Q for the period ending October 31, 2002 (the "Report"), I James M. McCormick, Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents in all material respects, the financial condition and results of operations of the Company. /s/James M. McCormick - --------------------- James M. McCormick Principal Accounting Officer December 13, 2002 CERTIFICATION OF EXECUTIVE VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL Pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of Lakeland Industries, Inc. (the "Company") on Form 10-Q for the period ending October 31, 2002 (the "Report"), I Christopher J. Ryan Executive Vice President, Secretary and General Counsel of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents in all material respects, the financial condition and results of operations of the Company. /s/Christopher J. Ryan - ---------------------- Christopher J. Ryan Executive Vice President, Secretary And General Counsel December 13, 2002 EX-10 3 exhibit10g.txt December 1, 2002 EXHIBIT 10(g) Mr. Raymond J. Smith 34 Riverview Terrace Smithtown, NY 11787 Dear Mr. Smith: The purpose of this letter is to confirm your continuing employment with Lakeland Industries Inc. on the following terms and conditions: 1. THE PARTIES ----------- This is an agreement between Raymond J. Smith residing at 34 Riverview Terrace, Smithtown, New York 11787 (hereinafter referred to as "you") and Lakeland Industries, Inc., a Delaware corporation, with principal place of business located at 711-2 Koehler Avenue, Ronkonkoma, NY 11779-7410 (hereinafter the Company). 2. TERM; RENEWAL ------------- The term of the agreement shall be for a 3 year period from February 1, 2003 through and including January 31, 2005 which term shall be automatically renewed for a maximum of 2 successive annual periods unless either party notifies the other 120 days prior to the expiration of the original term or renewal thereof, that the agreement will not be renewed. 3. CAPACITY -------- You shall be employed in the capacity of President of Lakeland Industries, Inc. and such other senior executive title or titles as may from time to time be determined by the Board of Directors of the Company. You shall be nominated for election to serve as a member of the Board of Directors of the Company, so long as this agreement shall remain in effect. You shall be directly responsible to the Board of the Directors of the Company. You agree to devote your full time and attention and best efforts to the faithful and diligent performance of your duties to the Company and shall serve and further the best interests and enhance the reputation of the company to the best of your ability. You shall be the Chief Operating and Administrative Officer of the Company. All employees of the Company shall report or be ultimately responsible to you. 4. COMPENSARTION ------------- As full compensation for your services you shall receive following from the Company: (a) A base annual salary of $276,000 year payable bi-weekly (the "Base Salary"); and (b) Payments, compensation, and reimbursements equal to such payments, compensation and reimbursements as are paid to the members of the Board of Directors from time to time; and (c) Participation when eligible in any of the Company's Pension, profit Sharing Plans, medical and disability plans, stock appreciation rights plan or stock option plans and ESOP. 401(K) plans when any such plans become effective; and (d) A group term life policy insuring your life, the beneficiary of whom shall be designated by you, with a face amount of no less than $1,000,000.00, provided you meet the insurance company's reasonable medical qualifications; and (e) Such other benefits as are provided from time to time by the Company to its officers and employees; provided however that your vacation shall be for a period of no less than 5 weeks; and (f) The use of an appropriate new luxury automobile furnished by the Company on a bi-annual basis, or an automobile allowance to be paid to you in an amount sufficient to pay for the lease of such an automobile; and (g) Reimbursement for any dues and expenses incurred by you that are necessary and proper in the conduct of the Company's business; and (h) An annual bonus as set forth in this agreement as set forth in Section 5 of this Agreement (the "Annual Bonus"). 5. ANNUAL BONUS ------------ In May of each year commencing in 2003, you shall be awarded an annual bonus based on the achievement of specific goals in the previous Fiscal Year. The annual bonus to be awarded in May shall be based upon the following performance goals. If the company achieves .50 per share in the fiscal years covered by this contract the bonus is computed as follows: Base .50* bonus amounts to $25,000 and for each .01 earning per share an additional $2500 to be added to the base of the $25,000 mentioned above. *Subject to recalculation of earnings per share as the result of the implementation of SFAS 128 (earning per share). The earnings per share shall be the earnings per share of common stock of the Company as determined by the Company's independent auditors as set forth in the annual audited financial statements and reported to the Company's shareholders. If during the fiscal year commencing February 1, 2003 the Company acquires all of the stock and/or assets of a separate business entity or divests itself of one or more subsidiaries or is involved in a recapitalization or other public offering of the Company's securities, then in that event the amount of the annual bonus will be appropriately adjusted to reflect such change or changes. The adjustment to the annual bonus and any additional discretionary bonus will be made by the Compensation Committee of the Board of Directors of the Company. The decision of the Compensation Committee of the Board of Directors as to any matter relating to the annual bonus shall be final, binding and conclusive and shall not be subject to any further review. 6. NON-COMPETITION --------------- During the term of this Agreement and for one year thereafter you shall not either directly or indirectly as an agent, employee, partner stockholder, director, investor or otherwise engage in any activities in competition with the activities of the Company. 7. CONFIDENTIALITY --------------- Except as require in your duties to the Company you shall not at any time during your employment and for a period of twelve months thereafter, directly or indirectly, use or disclose any confidential information relating to the Company or its business which is disclosed to you or known by you as a consequence of or through your employment by the Company. As used in this Agreement, "confidential information" means any information relating to the business of the Company which is not publicly known or readily ascertainable by proper means. 8. CHANGE IN CONTROL ----------------- Upon the occurrence of a change in control (as hereinafter defined) you shall have the right to terminate at your option this agreement within 30 days after the occurrence of such change in control (provided such thirty day period shall not begin to run until you have actual knowledge of the change in control). Upon the effective date of such termination, you shall be entitled to receive a lump sum severance payment in an amount equal to the greater of the present value (determined by applying a discount factor of 6% effective annual interest rate) of (i) the balance of your Base Salary of the Term of the Agreement, plus your estimated Annual Bonus for the fiscal year in which such termination occurs, or (ii) two times your Base Salary, plus your estimated Annual Bonus for the fiscal year in which such termination occurs. The estimated amount of your Annual Bonus in this Agreement for the fiscal year during which the termination occurs shall be determined in good faith by the Compensation Committee of the Board of Directors of the Company based upon the Company's results of operations for the partial fiscal year through the effective date of the termination and the Company's historical results of operations. A "change of control" shall have occurred (i) upon any person or group becoming directly or indirectly, the beneficial owner of 50% or more of the Company's then outstanding securities or (ii) upon the disposition by the Company (whether direct or indirect by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of the company's business and/or assets. For purposes of this paragraph, "person" means such term as used in Section 13(d) (1) of the Securities Exchange Act of 1934 (the "1934 Act"); "beneficial owner" means such term as defined in Rule 13d-3 of the SEC under the 1934 Act; and "group" means such term as defined in Section 13(d) (3) of the 1934 Act. In the event of a disposition by the Company (where direct or indirect by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets the Company will require any successor to expressly assume and agree to perform this agreement in the same manner and to the same extent that the company would be required to perform, if no such disposition had taken place. 9. TERMINATION ----------- You or the Company may terminate your employment prior to the end of the Term for any reason upon written notice to the other party in accordance with the following provisions; a) Termination of Employment for Cause or Without Good Reason. If, before ----------------------------------------------------------- the end of the Term, the Company terminates your employment for Cause (as defined below) or you quit without Good Reason (as defined below), the Company shall pay you, within thirty days of such termination, (i) that portion of your Base Salary which is accrued but unpaid as of the date of such termination and (ii) any other benefits accrued prior to the date of termination under this Agreement but you will not be entitled to receive any portion of your Annual Bonus for one year in which said termination shall set forth the effective date of your termination (which shall not be prior to the date such notice is delivered) and a reasonable detailed description of the facts and circumstances giving rise to the Cause for termination." "Cause" means a written finding by the Board or the Company, acting through an authorized officer, that you were convicted of, or entered a plea of nolo contendere to a charge of, committing a felony involving moral turpitude or you were grossly negligent in performing your duties and responsibilities (other than on account of "total disability" as referred to in sub-Paragraph (c) below), or that you committed an act of fraud, embezzlement, or gross neglect of duty. Cause shall not mean (i) the exercise of bad judgment alone, (ii) negligence not amounting to gross negligence (iii) any act or omission believed by you in good faith to have been in or not opposed to the interest of the company (without intent of you to gain therefrom directly or indirectly, a profit to which you were not legally entitled), or (iv) any act or omission with respect to which notice of the termination of your employment is given to you more than 12 months after the earliest date on which any member of the Board who is not a party to the act or omission, knew of such act or omission. "Good Reason" means any of the following events: (i) the assignment to you of any duties materially and adversely inconsistent with your position responsibilities duties, or officerships, as required under Section 3 hereof, (ii) the liquidation or dissolution of the company, (iii) any material breach by the Company of the provisions of this Agreement, or (iv) the Company's requiring, without your written consent, that you be based in an office or location other than the Company's principal business location at Ronkonkoma, New York. b) Death. Your employment shall terminate on the date of your death. Your Base Salary (as in effect on the date of death) shall continue through the last day of the month in which your death occurs. Payment of your Base Salary shall be made to your estate or your beneficiary as designated in writing to the Company. Your estate or designated beneficiaries as applicable, shall also receive a pro-rata portion of the Annual Bonus, if any, determined for the fiscal year up to and including the date of death which shall be determined in good faith by the compensation Committee of the Board of Directors. Your beneficiaries shall also be entitled to all other benefits generally paid by the company on an employee's death. c) Total Disability. Your employment shall terminate if you become totally disabled. You shall be deemed to be totally disabled if you are unable, for any reason, to substantially perform your duties to the Company for a period of (ninety consecutive days). In the event of your Total Disability, you shall receive 100% of your Base Salary for the greater of (i) the remainder of the Term of this Agreement or (ii) one year. Such amount shall be reduced by the amount of any disability insurance. d) Termination Without Cause or Good Reason. If, before the end of the ----------------------------------------- Term, the company terminates your employment without Cause or you quit wit Good Reason, the Company shall: (i) Pay you within 10 days of the termination of your employment, a lump sum amount equal to the then present value of your Base Salary (as in effect on the date of your termination) though the remainder of the Term, determined by applying a discount factor of 6% effective annual interest rate. (ii) Pay you within 10days of the termination of your employment, a lump sum amount equal to a pro-rata portion of the Annual Bonus, if any, that you would have received for the fiscal year in which such termination occurs determined in good faith by the Compensation Committee of the Board of Directors. (iii) Pay you within 10 days of the termination of your employment, a slump sum amount equal to the present value of (three) times your Base Salary (as in effect of the date of your termination), determined by applying a discount factor of 6% effective annual interest rate. (iv) Continue to provide to you for a period equal to the greater of (i) the remainder of the Term of this Agreement or (ii) one year, benefits under any of the following welfare benefit programs of the company as in effect from time to time during the Term of this Agreement: long term disability insurance, life insurance, accidental death and dismemberment insurance and health and major medical benefits, pursuant to COBRA. 10.TAX GROSS-UP ------------ If is determined that as a result of any payments provided to you under this Agreement, you will incur an excise tax under Section 4999 of the Internal Revenue Code on "excess parachute payments" or any similar tax payable under any federal, state, local or other law, as a result of payments made to you under this Agreement, then the Company shall pay to you an amount necessary to reimburse you for such excise taxes and the tax due on such reimbursement payments. All determinations and payments hereunder shall be made in adequate time to permit you to prepare and file your individual tax returns in a timely fashion. 11.MITIGATION ---------- In no event shall you, subsequent to the termination of your employment, be obligated to seek other employment arrangements or take any other action by way of mitigation of the amounts payable to you under and provision of this Agreement, nor shall the amount of any payment, hereunder be reduced by any compensation earned by you as a result of a subsequent contract with or employment by another employer. 12.ASSIGNMENT AND SUCCESSORS ------------------------- The rights and obligations of the company under this Agreement shall inure to the benefit of and shall be binding upon the successors of the company. This Agreement may not be assigned by the Company unless the assignee or successor (as the case may be) expressly assumes the Company's obligations hereunder in writing or unless, in the opinion of counsel for the company addressed to you, the obligations of the Company by operation of law. In the event of a successor to the Company or the assignment of the Agreement the term "Company" as used herein shall include any such successor or assignee. 13.CONSTRUCTION ------------ This Agreement shall be interpreted and construed in accordance with the laws of the State of New York without regard to its choice of law principles. In case of any dispute or disagreement arising out of or connected with this Agreement, the parties hereto hereby agree to resolve such dispute or disagreement in a court of competent jurisdiction within the State of New York. The Company shall reimburse you for all reasonable legal fees and expenses incurred by you in an effort to establish entitlement to fees and benefits under this Agreement. If you do not prevail (after exhaustion of all available judicial remedies), and a court of competent jurisdiction decides that you had no reasonable basis for bringing you action or there was an absence of good faith for bring your action no further reimbursement for legal fees and expenses shall be due to you and you shall repay the Company for any amounts previously paid by the Company. It is understood that in all events, the Company shall be responsible for its own legal fees and expenses incurred for any action brought hereunder. 14.NOTICES ------- Any notices required to begin under this Agreement shall unless otherwise agreed to by you and the Company be in writing and by certified mail, return receipt requested and mailed to the Company at its headquarters at 711-2 Koehler Avenue, Ronkonkoma, NY 11779-7410 or to you at your home address at 34 Riverview Terrace, Smithtown, NY 11787. 15.WAIVER OR MODIFICATION ---------------------- No waiver or modification in whole or in part of this agreement or any term or condition hereof shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or right or power by any party on one occasion shall not be construed as a waiver of or a bar to the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. 16.SEPARABILITY ------------ Any provision of this agreement which is unenforceable or invalid in any respect in any jurisdiction shall be ineffective in such jurisdiction to the extent that it is unenforceable or invalid without effecting the remaining provisions hereof, which shall continue in full force and effect. The unenforceability or invalidity of any provision of the agreement in one jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 17.HEADINGS -------- The headings contained in this agreement are for convenience only and shall not effect, restrict or modify the interpretation this agreement. LAKELAND INDUSTRIES, INC. /s/ Raymond J. Smith /s/ John J. Collins - --------------------- ---------------------- Raymond J. Smith By: John J. Collins President /s/ Eric O.Hallman ---------------------- By: Eric O. Hallman /s/ W. James Raleigh ---------------------- By: W. James Raleigh Board of Directors Compensation Committee EX-10 4 exhibit10k.txt Lakeland Industries, Inc. EXHIBIT 10(k) Employment Agreement This agreement ("Agreement") has been entered into this 29th day of November 2002, by and between Lakeland Industries, Inc., a Delaware corporation ("Company"), and Christopher J. Ryan, and individual ("Executive"). IT IS AGREED AS FOLLOWS: SECTION 1: DEFINITIONS AND CONSTRUCTION. 1.1 DEFINITIONS. For purposes of this Agreement, the following words and phrases, whether or not capitalized, shall have the meanings specified below, unless the context plainly requires a different meaning. 1.1 (a) "ACCRUED COMPENSATION" has the meaning set forth in Section 4.5 of this Agreement. 1.1 (b) "ACCRUED OBLIGATIONS" has the meaning set forth in Section 4.1 (a) of this Agreement. 1.1 (c) "ANNUAL BASE SALARY" has the meaning set forth in Section 2.4 (a) of this Agreement. 1.1 (d) "BOARD" means the Board of Directors of the Company. 1.1 (e) "CAUSE" has the meaning set forth in Section 3.3 of this Agreement. 1.1 (f) "CHANGE IN CONTROL" means: (i) The acquisition by any individual, entity or group, or a Person (within the meaning of Section 13 (d) (3) or 14 (d) (2) of the Exchange Act) of ownership of 30% or more of either (a) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); or 1 (ii) Individuals who, as the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, as a member of the Incumbent Board, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (a) more than 50% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors and (c) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) Approval by the stockholders of the Company of (a) a complete liquidation or dissolution of the Company or (b) the sale or other disposition of all or substantially all of the assets of the 2 Company, other than to a corporation, with respect to which following such sale or other disposition, (1) more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sales or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. 1.1 (g) "COMPANY" has the meaning set forth in the first paragraph of this Agreement and, with regard to successors, in Section 6.2 of this Agreement. 1.1 (h) "CODE" shall mean the Internal Revenue Code of 1986, as amended. 1.1 (i) "CURRENT TARGET BONUS" has the meaning set forth in Section 4. (a) of this Agreement. 1.1 (j) "DATE OF TERMINATION" has the meaning set forth in Section 3.6 of this Agreement. 1.1 (k) "DISABILITY" has the meaning set forth in Section 3.2 of this Agreement. 1.1 (l) "DISABILITY EFFECTIVE DATE" has the meaning set forth in Section 3.2 of this Agreement. 1.1 (m) "DISPOSITION OF A MAJOR PART" means: (i) when used with reference to the stock of an Operating Line of Business that is or becomes a separate corporation, limited liability 3 corporation, partnership or other business entity, the sale, exchange, transfer, distribution or other disposition of the ownership, either beneficially or of record or both, by the Company of more than 50% of either (a) the then outstanding shares of common stock (or the equivalent equity interests) of such Operating Line of Business, or (b) the combined voting power of the then outstanding voting securities of such Operating Line of Business entitled to vote generally in the election of the Board or the equivalent governing body of the Operating Line of Business; (ii) when used with reference to the merger or consolidation of an Operating Line of Business that is or becomes a separate corporation, limited liability corporation, partnership or other business entity, any such transaction that results in the Company owning, either beneficially or of record or both, less that 50% of either (a) the then outstanding shares of common stock (or the equivalent equity interests) of such Operating Line of Business, or (b) the combined voting power of the then outstanding voting securities of such Operating Lines of Business entitled to vote generally in the election of the Board or the equivalent governing body of the Operating Line of Business; or (iii) when used with reference to the assets of an Operating Line of Business, the sale, exchange, transfer, liquidation, distribution or other disposition of assets of such Operating Line of Business (a) having a fair market value (as determined by the Incumbent Board) aggregating more than 50% of the aggregate fair market value of all of the assets of such Operating Line of Business as of the Triggering Transaction Date, (b) accounting for more than 50% of the aggregate book value (net of depreciation and amortization) of all of the assets of such Operating Line of Business, as would be shown on a balance sheet for such Operating Line of Business, prepared in accordance with generally accepted accounting principles then in effect, as of the Triggering Transaction Date; or (c) accounting for more than 50% of the net income of such Operating Line of Business, as would be shown on an income statement, prepared in accordance with generally accepted accounting principles then in effect, for the 12 months ending on the last day of the month immediately preceding the month in which the Triggering Transaction Date occurs. 1.1 (n) "EFFECTIVE DATE" means the date of this Agreement. 1.1 (o) "EMPLOYMENT PERIOD" means the period beginning on the Effective Date and ending on the later of (i) January 31, 2006, or (ii) January 31 of any succeeding fiscal year during which notice is given by 4 either party (as described in Section 1.1 (dd) of this Agreement) of such party's intent not to renew this Agreement. 1.1 (p) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 1.1 (q) "EXCISE TAX" has the meaning set forth in Section 4.2 (e) of this Agreement. 1.1 (r) "GOOD REASON" has the meaning set forth in Section 3.4 of this Agreement. 1.1 (s) "GROSS-UP PAYMENT" has the meaning set forth in Section 4.2 (i) of this Agreement. 1.1 (t) "INCENTIVE BONUS" has the meaning set forth in Section 2.4 (b) of this Agreement. 1.1 (u) "NOTICE OF TERMINATION" has the meaning set forth in Section 3.5 of this Agreement. 1.1 (w) "OPERATING LINES OF BUSINESS" means the following lines of business of the Company, whether operated as a division or as a separate subsidiary: (i) provides disposable and woven protective apparel and accessory items manufacturing and marketing, which manufactures and sell uniforms, gloves, chemical suits, fire turnout and aluminized fire protective apparel, PVC aprons, medical disposable gowns and all nature of safety apparel to a wide variety of distributors, institutions and businesses in the United States, Canada and internationally. 1.1 (x) "OTHER BENEFITS" has the meaning set forth in Section 4.1 (d) of this Agreement. 1.1 (y) "OUTSTANDING COMPANY COMMON STOCK" has the meaning set forth in Section 1.1 (f) (i) of this Agreement. 1.1 (z) "OUTSTANDING COMPANY VOTING SECURITIES" has the meaning set forth in Section 1.1 (f) (i) of this Agreement. 1.1 (aa) "PAYMENT" has the meaning set forth in Section 4.2 (e) of this Agreement 1.1 (bb) "PERSON" has the meaning set forth in Sections 13 (d) and 14 (d) of the Exchange Act. 5 1.1 (cc) "SUPPLEMENTAL PLAN" has the meaning set forth in Section 4.2 (e) of this Agreement. 1.1 (dd) "TERM" means the period that begins on the Effective Date and ends on the earlier of: (i) the Date of Termination as defined in Section 3.6 of this Agreement, or (ii) the close of business on the later of January 31,2006 or January 31 of any renewal term as set forth in Section 2.1 of this Agreement. 1.1 (ee) "TRIGGERING TRANSACTION" means (i) a Change of Control of the Company or (ii) a Disposition of a Major Part of two or more of the Company's Operating Lines of Business. 1.1 (ff) "TRIGGERING TRANSACTION DATE" shall mean the date of the Triggering Transaction. 1.2 GENDER AND NUMBER. When appropriate, pronouns in this Agreement used in the masculine gender include the feminine gender, words in the singular include the plural, and words in the plural include the singular. 1.3 HEADINGS. All headings in this Agreement are included solely for ease of reference and do not bear on the interpretation of the text. Accordingly, as used in this Agreement, the terms "Article" and "Section" mean the text that accompanies the specified Article and Section of the Agreement. 1.4 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to its conflict of law principles. SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT. 2.1 PERIOD OF EMPLOYMENT. The Executive shall remain in the employ of the Company throughout the Term of this Agreement in accordance with the terms and provisions of this Agreement. This Agreement will automatically renew for two year periods unless either party gives the other written notice, by October 28, 2005, or October 28 of any succeeding year, of such party's intent not to renew this Agreement. 2.2 POSITIONS AND DUTIES. 2.2 (a) Throughout the Term of this Agreement, the Executive shall serve as a Director of the Board and Executive Vice President, General Counsel and Secretary of the Company, subject to reasonable directions and nominations of the Board. The Executive shall have such authority and shall perform such duties as are specified by the By-laws of the Company for the office to which he has been appointed hereunder and shall so serve, subject to the control exercised by the Board from time to time. 6 Additionally, each year throughout the Term of the Executive's service as a Director, the Executive shall be nominated to serve as member of the Board. 2.2 (b) Throughout the Term of this Agreement (but excluding any periods of vacation and sick leave to which the Executive is entitled), the Executive shall devote reasonable attention and time during normal business hours to the business and affairs of the Company and shall use his reasonable best efforts to perform faithfully and efficiently such responsibilities as are assigned to him under or in accordance with this Agreement; provided that, it shall not be a violation of this paragraph for the Executive to (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures or fulfill speaking engagements, or (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement or violate the Company's conflict of interest policy as in effect immediately prior to the Effective Date. 2.3 SITUS OF EMPLOYMENT. Throughout the Term of this Agreement, the Executive's services shall be performed at the location where the Executive was employed immediately prior to the Effective Date, or any office of the Company which is located in the greater Long Island areas. It is understood and agreed by the Executive that the Executive will be required at the discretion of the Board of Directors, to engage in substantial business travel. 2.4 COMPENSATION. 2.4 (a) ANNUAL BASE SALARY. For the first year within the Term of this Agreement, the Executive shall receive an annual salary ("Annual Base Salary") of ($241,000), between January 31, 2003 and January 31, 2004; $270,000 between January 31, 2004 and January 31, 2005; $302,000 between January 31, 2005 and January 31, 2006 which shall be paid in equal or substantially equal semi-monthly installments. During the Term of this Agreement, the Annual Base Salary payable to the Executive shall be reviewed at least annually and shall be increased at the discretion of the Board or the Compensation Committee of the Board but shall not be reduced. 2.4(b) INCENTIVE BONUSES. In addition to Annual Base Salary, the Executive shall be awarded the opportunity to earn an incentive bonus on an annual basis ("Incentive Bonus") under an incentive compensation plan which equals $1450.00 for each penny of additional after tax earnings incrementally earned over the prior year's fiscal earnings, which shall be calculated from the Company's certified audited financial statements. During the Term of this Agreement, the annual target Incentive Bonus which the Executive will have the opportunity to earn shall be reviewed at least annually and be increased at the discretion of the Board or the Compensation Committee of the Board, but in no case shall such target 7 annual Incentive Bonus which the Executive will have the opportunity to earn be reduced below Twenty Thousand Dollars ($20,000). 2.4 (c) INCENTIVE, SAVINGS AND RETIREMENT PLANS. Throughout the Term of this Agreement, the Executive shall be entitled to participate in all incentive, savings and retirement plans generally available to other peer executives of the Company. 2.4 (d) WELFARE BENEFIT PLANS. Throughout the Term of this Agreement (and thereafter, subject to Sections 4.1 (c) hereof), the Executive and /or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent generally available to other peer executives of the Company. As it affects Sections 2.4(c) and 2.4(d) above, the Company shall always have the right to alter its benefit plan providers. 2.4 (e) EXPENSES. Throughout the Term of this Agreement, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the policies, practices and procedures generally applicable to other peer executives of the Company. The Executive agrees to submit receipts and or vouchers in support of all requests for reimbursement. 2.4 (f) FRINGE BENEFITS. Throughout the Term of this Agreement, the Executive shall be entitled to an automobile allowance of $4000.00 annually and term life insurance of $500,000 paid by the Company. Executive agrees to be solely responsible for any and all federal, state and local taxes owning as a result of such term life insurance being provided. 2.4 (g) VACATION. Throughout the Term of this Agreement, the Executive shall be entitled to paid vacation for four (4) weeks each year. SECTION 3: TERMINATION OF EMPLOYMENT 3.1 DEATH. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. 3.2. DISABILITY. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), the Company may give to the Executive written notice in accordance with Section 7.2 of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the thirtieth (30th) day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, 8 within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean that the Executive has been unable to perform the services required of the Executive hereunder on a full-time basis for a period of one hundred eighty (180) consecutive business days by reason of a physical and/or mental condition. "Disability" shall be deemed to exist when certified by a physician paid for and selected by the Company and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). The Executive will submit to such medical or psychiatric examinations and tests as such physician deems necessary to make any such Disability determination. 3.3 TERMINATION FOR CAUSE. The Company may terminate the Executive's employment during the Employment Period for "Cause", which shall mean termination based upon: (i) the Executive's willful and continued failure to substantially perform his duties with the Company (other than as a result of incapacity due to physical or mental condition), after a written demand for substantial performance is delivered to the Executive by the Company, which specifically identifies the manner in which the Executive has not substantially performed his duties, (ii) the Executive's commission of an act constituting a criminal offense involving moral turpitude, dishonesty, or breach of trust, or (iii) the Executive's material breach of any provision of this Agreement. For purposes of this Section, no act, or failure to act on the Executive's part shall be considered "willful" unless done, or omitted to be done, without good faith and without reasonable belief that the act or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until (i) he receives a Notice of Termination from the Company, (ii) he is given the opportunity, with counsel to be heard before the Board, and (iii) the Board finds, in its good faith opinion, the Executive was guilty of the conduct set forth in the Notice of Termination. 3.4 GOOD REASON. The Executive may terminate his employment with the Company for "Good Reason", which shall mean: 3.4 (a) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2.2 (a) or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose any action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; 3.4 (b) (i) in the event of and after the occurrence of a Triggering Transaction, the failure by the Company to continue in effect any benefit or compensation plan, stock ownership plan, life insurance plan, health and accident plan or disability plan to which the Executive is entitled as specified in Section 2.4, (ii) the taking of any action by the Company which would adversely affect the Executive's participation in, or materially reduce the Executive's benefits under, any plans described in Section 2.4, or 9 deprive the Executive of any material fringe benefit enjoyed by the Executive as described in Section 2.4 (f), or (iii) the failure by the Company to provide the Executive with paid vacation to which the Executive is entitled as described in Section 2.4 (g). 3.4 (c) in the event of and after the occurrence of a Triggering Transaction, the Company's requiring the Executive to be based at any office or location other than that described in Section 2.3; 3.4 (d) a material breach by the Company of any provision of this Agreement; Such breach by the Company shall require Executive to provide the Company a written notice describing with specificity the nature of the contractual breach and the Company shall have 30 days to cure such breach. 3.4 (e) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or 3.4 (f) within a period ending at the close of business on the date one (1) year after the Triggering Transaction Date of any Change in Control, if the Company has failed to comply with and satisfy Section 6.2 on or after such Triggering Transaction Date. For purposes of this Section, any good faith determination of "Good Reason" made by the Executive shall be conclusive. 3.5 NOTICE OF TERMINATION. Any termination by the Company for Cause or Disability, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party, given in accordance with Section 7.2. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined in Section 3.6 hereof) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty (30) days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. 3.6 DATE OF TERMINATION. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the Date of Termination shall be the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, or (iii) if the Executive's 10 employment is terminated by the Company other than for Cause, death, or Disability, the Date of Termination shall be the date of receipt of the Notice of Termination; provided that if within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). SECTION 4: CERTAIN BENEFITS UPON TERMINATION. 4.1 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON NOT IN CONNECTION WITH A TRIGGERING TRANSACTION. If, prior to a Triggering Transaction during the Employment Period (except in the event that one of the following terminations of employment occurs within the six-month period prior to the earlier of (a) a Triggering Transaction or (b) the execution of a definitive agreement or contract that eventually results in a Triggering Transaction, which shall result in the payment of severance benefits set forth in Section 4.2 of this Agreement): (i) the Company shall terminate the Executive's employment without Cause, or (ii) the Executive shall terminate employment with the Company for Good Reason, the Executive shall be entitled to the payment of the benefits provided below as of the Date of Termination: 4.1 (a) Accrued Obligations. Within thirty (30) days after the Date of ------------------- Termination, the Company shall pay to the Executive the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not previously paid, (2) the accrued benefit payable to the Executive under any deferred compensation plan, program or arrangement in which the Executive is a participant subject to the computation of benefits provisions of such plan, program or arrangement, and (3) any accrued vacation pay; in each case to the extent not previously paid (the "Accrued Obligation"). In addition, on the date that Incentive Bonuses are paid to other peer executives for the year in which the Executive's employment is terminated, the Executive will be paid an amount equal to the product of the Current Target Bonus multiplied by a fraction, the numerator of which is the number of days during the fiscal year for which the Incentive Bonus is paid prior to the Date of Termination and denominator of which is 365. For purposes of this Agreement, the term "Current Target Bonus" means the Incentive Bonus that would have been paid to the Executive for the fiscal year in which the termination of employment occurred, if the Executive's employment had not been so terminated and the Executive had earned 100% of the Incentive Bonus that he could have earned for that year. 4.1 (b) Annual Base Salary and Target Bonus Continuation. For the ------------------------------------------------- remainder of the Employment Period, the Company shall pay to the Executive, the Executive's then-current Annual Base Salary and Current Target Bonus as would have been paid to the Executive had the Executive 11 remained in the Company's employ throughout the Employment Period; provided that in all cases the Executive shall receive, at minimum, the then-current Annual Base Salary and Current Target Bonus for the remainder of the Employment Period, or for a period beginning on the Date of Termination and ending two years thereafter, whichever is longer. The Company at any time may elect to pay the balance of such payments then remaining in a lump sum, in which case the total of such payments shall be discounted to present value on the basis of the applicable Federal short-term monthly rate as determined according to Code Section 1274 (s) for the month in which the Executive's Date of Termination occurred. 4.1 (c) Medical and Health Benefit Continuation. For a period of two ---------------------------------------- years beginning on the Date of Termination, or such longer period as any plan, program, practice or policy may provide, the Company shall continue medical and health benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 2.4 (d) if the Executive's employment had not been terminated, in accordance with the plans, practices, programs or policies of the Company as those provided generally to other peer executives and their families; provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive medical or health benefits under another employer-provided plan, the medical and health benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. In the event Executive is able to obtain medical and health care coverage from a third party for the duration of such coverage period that is at least as good in all material respects as that described in the immediately preceding sentence, Executive agrees to accept, in lieu of such Company provided medical and health benefits, a lump sum cash payment in an amount equal in value to the entire cost to Executive on an after-tax basis of such alternate medical and health care coverage. 4.1 (d) Other Benefits. To the extent not previously paid or provided, --------------- the Company shall timely pay or provide to the Executive and/or the Executive's family any other amounts or benefits required to be paid or provided for which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company as those provided generally to other peer executives and their families ("Other Benefits"). 4.2 BENEFITS UPON TERMINATION IN CONNECTION WITH A TRIGGERING TRANSACTION. If (a) a Triggering Transaction occurs during the Employment Period and within three years after the Triggering Transaction Date (i) the Company shall terminate the Executive's employment without Cause, or (ii) the Executive shall terminate employment with the Company for Good Reason, or alternatively, (b) if one of the above- 12 described terminations of employment occurs within the six-month period prior to the earlier of (i) a Triggering Transaction or (ii) the execution of a definitive agreement or contract that eventually results in a Triggering Transaction, then the Executive shall become entitled to the payment of the benefits as provided below as of either (y) the Date of Termination, in the case where the sequence of the requisite events is as set forth in subsection (a) above or (z) the Triggering Transaction Date, in the case where the sequence of the requisite events occurred as set forth in subsection (b) above (the relevant date for purposes of entitlement to the benefits set forth in this Section 4.2 is hereinafter referred to as the "Entitlement Date"): 4.2 (a) Accrued Obligations. Within thirty (30) days after the -------------------- Entitlement Date, the Company shall pay to the Executive the Accrued Obligation. In addition, on the date that Incentive Bonuses are paid for the year in which the Executive's employment is terminated, the Executive will be paid an amount equal to the product of the Current Target Bonus multiplied by a fraction, the numerator of which is the number of days during the fiscal year for which the Incentive Bonus is paid prior to the Date of Termination and the denominator of which is 365. 4.2 (b) Severance Amount. Within thirty (30) days after the ----------------- Entitlement Date, the Company shall pay to the Executive as liquidated damages severance pay in a lump sum, in cash, an amount equal to 2.99 times an amount equal to his then-current Annual Base Salary and Current Target Bonus. 4.2 (c) Stock Options. To the extent not otherwise provided for under -------------- the terms of the Company's stock option plans or the Executive's stock option agreements, all stock options held by the Executive that have not expired in accordance with their respective terms shall vest and become fully exercisable as of the Entitlement Date. 4.2 (d) Other Benefits. To the extent not previously paid or provided, --------------- the Company shall timely pay or provide to the Executive and/or the Executive's family any Other Benefits required to be paid or provided for which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company to be implemented by the Company during the term of this Agreement, such as deferred compensation or retirement plans. 4.2 (e)Excess Parachute Payment. Anything in this Agreement to the ------------------------- contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or 13 for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise but determined without regard to any additional payments required under this Section 4.2 (e) (a "Payment") would be subject to the excise tax imposed by Code Section 4999 (or any successor provision) or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-up Payment:) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest or penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment on an after-tax basis equal to the Excise Tax imposed upon the Payment. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than thirty (30) business days after the Executive is informed in writing of such claim by the Internal Revenue Service and the notification shall apprise the Company of the nature of the claim and the date on which such claim is required to be paid. The Executive shall not pay such claim prior to the expiration of a thirty (30) day period following the date on which the Executive has given such notification to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is required). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall cooperate with the Company in so contesting; provided, however, that the Company shall bear and pay all costs and expenses, (including additional interest and penalties) incurred in connection with such contest, on an after-tax basis to the Executive. 4.3 DEATH. If the Executive's employment is terminated by reason of the Executive's death during the employment Period (either prior or subsequent to a Triggering Transaction), this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for (i) payment of Accrued Obligations (as defined in Section 4.1 (a)) (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days of the Date of Termination) and (ii) the timely payment or provision of Other Benefits (as defined in Section 14 4.1 (d)), including death benefits pursuant to the terms of any plan, policy, or arrangement of the Company. 4.4 DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period (either prior or subsequent to a Triggering Transaction), this Agreement shall terminate without further obligations to the Executive, other than for (i) payment of Accrued Obligations as defined in Section 4.1 (a)) which shall be paid to the Executive in a lump sum in cash within thirty (30) days of the Date of Termination) and (ii) the timely payment or provision of Other Benefits (as defined in Section 4.1 (d)) including Disability benefits pursuant to the terms of any plan, policy or arrangement of the Company. 4.5 TERMINATION FOR CAUSE; OTHER THAN GOOD REASON. If the Executive's employment shall be terminated for Cause during the Employment Period (either prior or subsequent to a Triggering Transaction), this Agreement shall terminate without further obligations to the Executive other than the obligations to pay to the Executive his Accrued Compensation (as defined in this Section). If the Executive terminates employment with the Company during the Employment Period, (excluding a termination for Good Reason), this Agreement shall terminate without further obligations to the Executive, other than for the payment of Accrued Compensation (as defined in this Section) and the timely payment or provision of Other Benefits (as defined in Section 4.1 (d)). In such case, all Accrued Compensation shall be paid to the Executive in a lump sum in cash within thirty (30) days of the Date of Termination. For the purpose of this Section, the term "Accrued Compensation" means the sum of (i) the Executive's Annual Base Salary through the Date of Termination to the extent not previously paid, (ii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon), and (iii) any accrued vacation pay in each case to the extent not previously paid. 4.6 NON-EXCLUSIVITY OF RIGHTS; SUPERSESSION OF CERTAIN BENEFITS. Except as provided in Section 4.1 (c) and in this Section 4.6, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company. Amounts which are vested benefits of which the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement with, the Company at or subsequent to the Date of Termination, shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 4.7 FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation 15 of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Sections 4.1 (c), such amounts shall not be reduced whether or not the Executive obtains other employment. In the event of and after the occurrence of a Triggering Transaction, the Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive regarding the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Code Section 7872 (f) (2) (A). 4.8 RESOLUTION OF DISPUTES. If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, non-appealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 4.1 as though such termination were by the Company without Cause or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this Section except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. SECTION 5: NON-COMPETITION. 5.1 NON-COMPETE AGREEMENT 5.1(a) It is agreed that during the period beginning on the date the Term of this Agreement expires and ending two (2) years thereafter, the Executive shall not, without prior written approval of the Board, become an officer, employee, agent, partner, consultant, beneficial/owner, agent, investor, or director or any business enterprise in substantial direct competition (as defined in Section 5.1 (b)) with the Company; provided that, if the Executive is terminated by the Company without Cause or if the Executive terminates his employment for Good Reason, then he will not be subject to the restrictions of this Section. 5.1 (b) For purposes of Section 5.1, a business enterprise with which the Executive becomes associated as an officer, employee, agent, partner, consultant, beneficial/owner, agent, investor or director shall be considered in substantial direct competition, if such entity competes with the Company in any business in which the Company is engaged and is within the Company's market area as of the date that the Employment Period expires. 16 5.1 (c) The above constraint shall not prevent the Executive from making passive investments, not to exceed five percent (5%), in any enterprise. 5.1 (d) The Executive agrees that the foregoing restrictions, in the absence of a Triggering Transaction, are reasonable and may not prevent the Executive from earning a livelihood, and further more, if any court of competent jurisdiction deems any of the provisions of the foregoing invalid, this Agreement shall be enforced to the full extent that such other provisions are valid and such court may modify such restrictions to afford the Company the maximum applicable protection permitted under the law. 5.1(e) Should Executive be adjudicated by a court of competent jurisdiction to be in violation of this Section 5.1, all amounts owed Executive pursuant to this Agreement shall be forfeited, and the Company shall be entitled to injunctive or such other equitable relief as is necessary to restrain Executive's breaching conduct. 5.2 CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. SECTIONS 6: SUCCESSORS. 6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal to the Executive and , without the prior written consent of the Company, the rights (but not the obligations) shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. 6.2 SUCCESSORS OF COMPANY. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to terminate the Agreement at his option on or after the Triggering Transaction Date for Good Reason. As used in this Agreement, "Company" shall 17 mean the Company as hereinbefore defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. SECTION 7: MISCELLANEOUS. 7.1 OTHER AGREEMENTS. The Board may, from time to time, in the future, provide other incentive programs and bonus arrangements to the Executive with respect to the occurrence of a Triggering Event that will be in addition to the benefits required to be paid in the designated circumstances in connection with the occurrence of a Triggering Transaction. Such additional incentive programs and/or bonus arrangements will affect or abrogate the benefits to be paid under this Agreement only in the manner and to the extent explicitly agreed to by the Executive in any such subsequent program or arrangement. 7.2 NOTICE. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses as set forth below; provided that all notices to the Company shall be directed to the attention of the Chairman of the Board, or to such other address as one party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. Notice to Executive: ------------------------ Christopher J. Ryan 136 West Bayberry Road Islip, NY 11751 Notice to Company: ----------------------- Lakeland Industries, Inc. 711-2 Koehler Ave. Ronkonkoma, NY 11779 7.3 VALIDITY. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforce ability of any other provision of this Agreement. 7.4 WAIVER. The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 3.4 shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. 18 IN WITNESS WHEREOF, the Executive and, the Company, pursuant to the authorization from its Board, have caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. By: /s/Christopher J. Ryan ---------------------- Christopher J. Ryan Members BOD Compensation Committee By: /s/Eric O. Hallman ---------------------- Eric O. Hallman By: /s/John J. Collins ---------------------- John J. Collins By: /s/ Walter J. Raleigh ---------------------- Walter J. Raleigh EX-10 5 exhibit10r.txt December 1, 2002 EXHIBIT 10(r) Mr. James M. McCormick 414 Sunrise Ave. Sayville, NY 11782 Dear Mr. McCormick: The purpose of this letter is to confirm your continuing employment with Lakeland Industries Inc. on the following terms and conditions: 1. THE PARTIES ----------- This is an agreement between James M. McCormick residing at 414 Sunrise Ave., Sayville, NY 11782 (hereinafter referred to as "you") and Lakeland Industries, Inc., a Delaware corporation, with principal place of business located at 711-2 Koehler Avenue, Ronkonkoma, NY 11779-7410 (hereinafter the Company). 2. TERM ---- The term of the agreement shall be for a 1 year period commencing February 1, 2003, which term shall be automatically renewed for a maximum of two (2) successive annual periods unless either party notifies the other 120 days prior to the expiration of the original term or renewal thereof, that the agreement will not be renewed. Termination outside of the contract period by the Company shall only be for cause, and cause is defined as conviction for a felony or you were grossly negligent in performing your duties and responsibilities, as determined by the Board of Directors. 3. CAPACITY -------- You shall be employed in the capacity of Vice President and Treasurer of Lakeland Industries, Inc. and such other titles as may from time to time be determined by the Board of Directors. You shall be directly responsible to the Board of Directors of the Company. 4. COMPENSATION ------------ As full compensation for your services you shall receive following from the Company: (a) A base annual salary of $152,000 for fiscal 2004, $170,000 for 1st successive annual renewal and $190,000 for 2nd successive annual renewal payable bi-weekly; and (b) Participation when eligible in any of the Company's Pension, Profit Sharing Plans, Stock Option and ESOP - 401(K) when any such plans are presently or become effective; and (c) Such other benefits as are consistent with the personnel benefits provided by the Company to its officers and employees; provided however that your vacation shall be for a period of no less than four (4) weeks; and (d) You shall be entitled to a leased automobile or allowance amounting to $550 monthly; and (e) Reimbursement for any expenses incurred by you that are necessary and proper in the conduct of the Company's business; and (f) An annual bonus as set forth below. In May of each year commencing in 2004, you shall be awarded an annual bonus based on the positive current year performance of the Company as compared to the prior Fiscal Year. The bonus to be awarded in May 2004 and upon the successive annual renewals, shall be based under an incentive compensation plan which equals $1,000.00 for each penny of additional after tax earnings incrementally earned over the prior years fiscal earnings. The E.P.S. shall be the basic earnings per share of common stock of the Company as determined by the Company's auditors in the preparation of the annual audit and reported to the Company's shareholders. If during the fiscal year commencing February 1, 2003 or thereafter, the Company acquires all of the stock and/or assets of a separate business entity or divests itself of one or more subsidiaries or is involved in a recapitalization or other public offering of the Company's securities, then in that event the amount of the aforesaid annual bonus will be adjusted to reflect such change or changes. The adjustment to the annual bonus and any additional discretionary bonus will be made by the Compensation Committee of the Board of Directors of the Company. The decision of the Compensation Committee of the Board of Directors as to any matter relating to the annual bonus or any additional discretionary bonus shall be final, binding and conclusive and shall not be subject to any further review. 5. DISABILITY ---------- In the event that you shall incur a total disability which renders you unable to substantially perform your duties to the Company as determined by the Board of Directors you shall receive 100% of your base annual salary for the first year of such total disability reduced by the amount of any disability insurance payments received under a disability insurance policy maintained by the Company or you (Disability Insurance). Thereafter, and for the following six months you shall receive 50% of your base annual salary during the period of such total disability reduced by the amount of any such Disability Insurance. If such disability continues after such 18 month period your employment hereunder shall terminate. 6. CONFIDENTIALITY --------------- Except as required in your duties to the Company, you shall not at any time during your employment and for a period of six months thereafter, directly or indirectly, use or disclose any confidential information relating to the Company or its business which is disclosed to you or known by you as a consequence of or through your employment by the Company. As used in this Agreement, "confidential information" means any information relating to the business of the Company which is not publicly known or readily ascertainable by proper means. 7. CHANGE IN CONTROL ----------------- Upon the occurrence of a change in control (as hereinafter defined) you shall have the right to terminate at your option this agreement within 30 days after the occurrence of such change in control. Upon the effective date of such termination you shall be entitled to receive a lump sum severance amount equal to the sum of (i) the greater of the present value of your base salary in effect at the time of the change of control for 2 years or the present value of your base salary in effect at the time of the change of control for the remainder of the term and (ii) the estimated amount which would have been payable to you pursuant to the bonus as set forth in this agreement for the fiscal year during which the change of control occurred as determined in good faith by the Compensation Committee of the Board of Directors of the Company based upon the Company's results of operations for the fiscal year through the effective date of the termination and its historical results of operations and pro-rated to the effective date of termination. You shall not be required to mitigate the amount of termination payment provided pursuant to this section nor will such payment be reduced by reason of your securing other employment. A change of control shall have occurred (i) upon the acquisition of any person (as such term is defined in sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 as amended), directly or indirectly of securities of the Company representing 66 2/3% or more of the combined voting power of the Company's then outstanding securities or (ii) upon the future disposition by the Company (whether direct or indirect by sale of assets or stock merger consolidation or otherwise) of all or substantially all of the Company's business and/or assets in the transaction. In the event of a future disposition by the Company (whether direct or indirect by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets the Company will require any successor to expressly assume and agree to perform this agreement in the same manner and to the same extent that the Company would be required to perform, if no such disposition had taken place. 8. NOTICES ------- Any notices required to be give Under this Agreement shall unless otherwise agreed to by you and the Company be in writing and by certified mail return receipt requested and mailed to the Company at its headquarters at 711-2 Koehler Avenue Ronkonkoma, NY 11779-7410 or to you at your home address at 414 Sunrise Ave., Sayville, NY 11782. 9. WAIVER OR MODIFICATION ---------------------- No waiver or modification in whole or in part of this agreement or any term or condition hereof shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or right or power by any party on one occasion shall not be construed as a waiver of or a bar to the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. 10.SEPARABILITY ------------ Any provision of this agreement which is unenforceable or invalid in any respect in any jurisdiction shall be ineffective in such jurisdiction to the extent that it is unenforceable or invalid without effecting the remaining provisions hereof which shall continue in full force and effect. The unenforceability or invalidity of any provision of the agreement in one jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.HEADINGS --------- The headings contained in this agreement are for convenience only and shall not affect restrict or modify the interpretation this agreement. 12.CONTROLLING LAW ---------------- This agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed therein, and you agree to the exclusive jurisdiction and venue of all State and Federal Courts sitting in the State of New York in connection with any claim, dispute, or controversy arising under or in connection with this Agreement. LAKELAND INDUSTRIES, INC. /s/ James M. McCormick /s/ John J.Collins - ---------------------- ----------------------------- James M. McCormick By: John J. Collins Vice President & Treasurer /s/ Eric O.Hallman ---------------------------- By: Eric O. Hallman /s/ W. James Raleigh ----------------------------- By: W. James Raleigh Board of Directors Compensation Committee -----END PRIVACY-ENHANCED MESSAGE-----