Exchange Act of 1934 (Amendment No. )
I am pleased to extend to you
my personal invitation to attend the 2017 Annual Meeting of Stockholders of Lakeland Industries, Inc. (the “Company”)
on Wednesday, June 21, 2017 at 10:00 a.m. at the Hilton Garden Inn, 3485 Veterans Memorial Highway, Ronkonkoma, NY 11779.
The accompanying Notice of
Annual Meeting and Proxy Statement contain a description of the formal business to be acted upon by the stockholders. At the meeting,
we intend to discuss our performance for the fiscal year ended January 31, 2017 and our plans for the current fiscal year. Certain
officers of the Company will be available to answer any questions you may have.
While I am looking forward
to seeing you at the meeting, it is very important that those of you who cannot personally attend assure your shares are represented.
I urge you therefore to sign and date the enclosed form of proxy and return it promptly in the accompanying envelope if you received
the proxy statement in the mail, or follow the instructions contained in the Notice of Internet Availability of Proxy Materials
to vote on the Internet. If you attend the meeting, you may, if you wish, withdraw any proxy previously given and vote your shares
in person.
To Our Stockholders:
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WHAT:
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Our 2017 Annual Meeting of Stockholders
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WHEN:
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Wednesday, June 21, 2017, at 10:00 a.m., local time
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WHERE:
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Hilton Garden Inn
3485 Veterans Memorial Highway
Ronkonkoma, NY 11779
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PURPOSE:
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At this meeting, you
will be asked to:
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1.
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Elect two directors to serve for a term of three years
or until his successor has been duly elected and qualified;
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2.
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Ratify the selection of Friedman LLP as our independent
registered public accounting firm for the fiscal year ending January 31, 2018;
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3.
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Approve, on an advisory basis, compensation of our named
executive officers;
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4.
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Approve the Lakeland Industries, Inc. 2017 Equity Incentive
Plan; and
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5.
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Transact any other business as may properly come before
the Annual Meeting of Stockholders or any adjournments, postponements or rescheduling of the Annual Meeting of Stockholders.
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Only stockholders
of record at the close of business on April 21, 2017 and owners of restricted stock granted pursuant to our stock plans will receive
notice of, and be eligible to vote at, the Annual Meeting of Stockholders or any adjournment thereof. The foregoing items of business
are more fully described in the Proxy Statement accompanying this notice.
Your
vote is important, regardless of the number of shares you own. Please carefully read the Proxy Statement and the voting instructions
on the enclosed proxy card. Whether or not you plan to attend the Annual Meeting of Stockholders, you are respectfully requested
by the Board of Directors to sign, date and return the enclosed proxy card promptly in the accompanying postage prepaid envelope
if you received this Proxy Statement in the mail, or follow the instructions contained in the Notice of Internet Availability
of Proxy Materials to vote on the Internet.
INTERNET AVAILABILITY
OF PROXY MATERIALS
Important Notice
Regarding the Availability of Proxy Materials for the 2017 Annual Meeting of Stockholders to be held on Wednesday, June 21, 2017
at 10:00 a.m.
Pursuant to Securities and Exchange Commission rules we have elected to utilize the “notice and access”
option of providing proxy materials to our stockholders whereby we are delivering to all stockholders electronic copies of all
of our proxy materials, including a proxy card, as well as providing access to our proxy materials on a publicly assessable website.
Lakeland’s Notice of Annual Meeting, Proxy Statement and Annual Report to Stockholders for the fiscal year ended January
31, 2017 are available on the Internet at www.proxyvote.com.
This Notice and Proxy
Statement are first being sent or given to stockholders of record on or about May 5, 2017.
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Ronkonkoma, New York
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By Order of the Board of Directors,
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May 5, 2017
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Christopher J. Ryan
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Secretary
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Lakeland Industries, Inc.
3555 Veterans Memorial Highway, Suite
C
Ronkonkoma, New York 11779
(631) 981-9700
PROXY STATEMENT
Annual Meeting of Stockholders to be
Held on Wednesday, June 21, 2017
GENERAL INFORMATION
This proxy statement
and accompanying proxy are being furnished in connection with the solicitation by the Board of Directors (the “Board”)
of Lakeland Industries, Inc., a Delaware corporation (“Lakeland,” the “Company,” “we,” “our,”
or “us”), of proxies to be used at the annual meeting of stockholders of Lakeland to be held on Wednesday, June 21,
2017 (the “Annual Meeting”), and at any adjournment or postponement thereof. Lakeland will bear the costs of this
solicitation. The mailing address of our principal executive offices is Lakeland Industries, Inc., 3555 Veterans Memorial Highway,
Suite C, Ronkonkoma, New York 11779. This proxy statement and accompanying proxy are first being sent or given to our stockholders
on or about May 5, 2017.
Who may vote
The Board established
the close of business on April 21, 2017 as the record date for determining the stockholders of record entitled to notice of and
to vote at the Annual Meeting. As of the record date, 7,263,774 shares of common stock were outstanding, which number excludes
32,399 shares of unvested restricted stock that have voting rights and that are held by members of the Board. Each share of common
stock entitles the record holder thereof to one vote on each matter brought before the Annual Meeting.
How proxies work
The Board is asking for your proxy. Giving
us your proxy means you authorized us to vote your shares at the Annual Meeting in the manner you direct. You may vote or withhold
your vote in respect of each of our director nominees. You may also vote for or against each of the other proposals or abstain
from voting.
All proxies properly signed will, unless
a different choice is indicated, be voted “FOR” the election of the two nominees for director proposed by our Nominating
and Corporate Governance Committee, “FOR” the ratification of Friedman LLP as our independent registered public accounting
firm for fiscal year ending January 31, 2018, “FOR” the resolution approving the compensation of our named executive
officers, and “FOR” the Lakeland Industries, Inc. 2017 Equity Incentive Plan (the “Incentive Plan Proposal”).
You may receive more than one proxy or
voting card depending on how you hold your shares. Shares registered in your name are covered by one card. If you hold shares
through someone else, such as a stockbroker or bank, you may get material from them asking how you want to vote. Specifically,
if your shares are held in the name of your stockbroker or bank and you wish to vote in person at the meeting, you should request
your stockbroker or bank to issue you a proxy covering your shares.
If any other matters come before the Annual
Meeting or any postponement or adjournment, each proxy will be voted in the discretion of the individuals named as proxies on
the card.
Revoking a proxy
You may revoke your proxy at any time
before the vote is taken by submitting a new proxy with a later date, by voting via the Internet or by telephone at a later time,
by voting in person at the meeting or by notifying Lakeland’s Secretary in writing at the address under “Questions”
on page 32.
Attending in Person
Only stockholders, their proxy holders
and Lakeland guests, each of which must be properly registered as described in the Notice, may attend the Annual Meeting.
Quorum
In order to carry on the business of the
Annual Meeting, we must have a quorum. The presence at the Annual Meeting, in person or by proxy, of the holders of a majority
of the shares eligible to vote constitutes a quorum. If a share of common stock is represented for any purpose at the Annual Meeting,
it is deemed to be present for quorum purposes and for all other matters as well. Shares of common stock represented by a properly
executed proxy will be treated as present at the Annual Meeting for purposes of determining a quorum, without regard to whether
the proxy is marked as casting a vote or abstaining.
How votes are counted
and how are brokers non-votes treated?
Votes will be counted
by the inspector of election appointed for the Annual Meeting, who will separately count “for” votes, “against”
votes, abstentions, and broker non-votes.
Abstentions and broker
non-votes are counted as present and entitled to vote for purposes of determining a quorum. A broker non-vote occurs when a broker,
bank or other nominee has not received voting instructions from the beneficial owner of shares held in “street name”
and the broker, bank or other nominee does not have, or declines to exercise, discretionary authority to vote on a particular
matter. Brokers, banks or other nominees have discretionary authority to vote shares in the absence of specific instructions on
“routine” matters, but will not be allowed to vote your shares without specific instructions with respect to certain
“non-routine” matters. Under current Nasdaq Stock Market rules, the ratification of the selection of independent registered
public accountants (Proposal No. 2) is considered routine and your broker, bank or other nominee will be able to vote on that
proposal even if it does not receive instructions from you. However, they do not have discretionary authority to vote on the election
of directors (Proposal No. 1), on the approval (on an advisory basis) of named executive officer compensation (Proposal No. 3),
or on the Incentive Plan Proposal (Proposal No. 4), so we encourage you to provide instructions to your broker, bank or other
nominee regarding the voting of your shares.
What vote is required to approve each
proposal?
Proposal No. 1,
the election of two directors requires a plurality vote of the shares present in person or represented by proxy and entitled to
vote at the Annual Meeting. The two nominees receiving the most “for” votes will be elected. Any shares not voted
“for” a particular nominee (whether as a result of stockholder withholding or a broker non-vote) will not be counted
in any nominee’s favor and will have no affect the outcome of the election.
Proposal No. 2, the
ratification of the selection of Friedman LLP as our independent registered public accounting firm, requires the affirmative vote
of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting.
If you “abstain” from voting with respect to this proposal, your vote will have the same effect as a vote “against”
the proposal.
Proposal
No. 3, the advisory vote on named executive officer compensation will be considered approved by the affirmative vote of a majority
of the shares present in person or represented by proxy and entitled to vote on the matter. If you “abstain” from
voting with respect to this proposal, your vote will have the same effect as a vote “against” the proposal. Broker
non-votes will have no effect on the vote for this proposal. Although this vote is non-binding, the Board and the Compensation
Committee of the Board, which is comprised of independent directors, expect to take into account the outcome of the vote when
considering further executive compensation decisions to the extent they can determine the cause or causes of any significant negative
voting results.
Proposal No. 4, the Incentive Plan Proposal
requires the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled
to vote at the Annual Meeting. If you “abstain” from voting with respect to this proposal, your vote will have the
same effect as a vote “against” the proposal. Broker non-votes are not applicable to this proposal.
How can I find out the results of the voting at the Annual
Meeting?
We will announce preliminary
voting results at the Annual Meeting. Final voting results will be published in the Company’s Current Report on Form 8-K,
which the Company is required to file with the Securities and Exchange Commission (“SEC”) within four business days
following the conclusion of our Annual Meeting.
Householding
of proxy material.
Some banks, brokers and other nominee
record holders may be participating in the practice of “householding,” which the SEC has approved. Under this procedure,
you may only receive one copy of the Notice of Internet Availability of Proxy Materials and, if applicable, this Proxy Statement
and our annual report, for multiple stockholders in your household. Upon written or oral request, we will deliver promptly another
copy of the Notice of Internet Availability of Proxy Materials and, if applicable, this Proxy Statement and our annual report
to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy,
please contact our Corporate Secretary at Lakeland Industries, Inc., 3555 Veterans Memorial Highway, Suite C, Ronkonkoma, New
York, 11779, by mail. If you want to receive separate copies of our proxy statements and annual reports in the future, or if you
are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker,
or other nominee record holder.
Has the Lakeland Board made a recommendation
regarding the matters to be acted upon at the Annual Meeting?
Lakeland Board recommends
that you vote “FOR” the election of the two directors proposed by the Nominating and Governance Committee (Proposal
No. 1), “FOR” the ratification of the selection of Friedman LLP as our independent registered public accounting firm
for the fiscal year ended January 31, 2018 (Proposal No. 2), “FOR” the approval, on an advisory basis of the named
executive officer compensation (Proposal No. 3), and “FOR” the Incentive Plan Proposal (Proposal No. 4).
PROPOSAL NO. 1
ELECTION OF DIRECTORS
As permitted by Delaware
law, the Board is divided into three classes, the classes being divided as equally as possible and each class having a term of
three years. Each year the term of office of one class expires. A director elected to fill a vacancy, including a vacancy resulting
from an increase in the number of directors constituting the Board, serves for the remaining term of the class in which the vacancy
exists. The Board presently consists of five members, with two directors serving in Class I, one director serving in Class II,
and two directors serving in Class III.
The Board proposed that Messrs. Ryan and
Kreft, whose terms expire at the Annual Meeting, each be elected as director to serve for a term expiring at the 2020 annual meeting
of stockholders and until their successors are duly elected and qualified or until such director’s earlier resignation or
removal. Unless otherwise indicated, the enclosed proxy will be voted for the election of Messrs. Ryan and Kreft as nominees,
to serve for the terms as set forth above. Should either nominee become unable to serve for any reason, which is not anticipated,
the Board may designate a substitute nominee, in which event the persons named in the enclosed proxy will vote for the election
of such substitute nominee. Each person nominated by the Board for election has agreed to serve if elected. We have no reason
to believe that any Board nominee will be unavailable or, if elected, will decline to serve.
Vote
Required
The directors are elected by a plurality
of the votes properly cast in person or by proxy at the Annual Meeting. With respect to the election of directors, you may vote
“for” or “withhold” authority to vote for each of the nominees. Any shares not voted “for”
a particular nominee (whether as a result of stockholder withholding or a broker non-vote) will not be counted in any nominee’s
favor and will have no effect on the outcome of the election.
NOMINEE DIRECTORS - CLASS I
Terms Expiring in 2020
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Name
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Age
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Position
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Director Since
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Christopher J. Ryan
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65
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Chief Executive Officer, President, Secretary and Director
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1986
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A. John Kreft
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Director
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2004
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Christopher
J. Ryan
has served as our Chief Executive Officer and President since November 2003, Secretary since April 1991, and a
director since May 1986. Mr. Ryan was our Executive Vice President - Finance from May 1986 until becoming our President in November
2003. Mr. Ryan also worked as a Corporate Finance Partner at Furman Selz Mager Dietz & Birney, Senior Vice President-Corporate
Finance at Laidlaw Adams & Peck, Inc., Managing-Corporate Finance Director of Brean Murray Foster Securities, Inc. and Senior
Vice President-Corporate Finance of Rodman & Renshaw, respectively, between 1983-1991. Mr. Ryan served as a Director of Lessing,
Inc., a privately held restaurant chain based in New York, from 1995-2008. Mr. Ryan received his BA from Stanford University,
his MBA from Columbia Business School and his J.D. from Vanderbilt Law School. Mr. Ryan’s qualifications to serve on our
board include his business and legal education as well as his lengthy experience as a director at our Company and at other companies.
A. John Kreft
has served as a director since 2004 and our Chairman of the Board since June 2016. Mr. Kreft has been President of Kreft
Interests, a Houston based private investment firm, since 2001. Between 1998 and 2001, he was the Chief Executive Officer of Baker
Kreft Securities, LLC, a NASD broker-dealer. From 1996 to 1998, Mr. Kreft was a co-founder and manager of TriCap Partners, a Houston
based venture capital firm. From 1994 to 1996, he was employed as a director at Alex Brown and Sons. Mr. Kreft has also held senior
positions at CS First Boston, including as a managing director from 1989 to 1994. Mr. Kreft received his MBA from the Wharton
School of Business. Mr. Kreft’s qualifications to serve on our board include his extensive capital markets experience with
debt and equity financings and bank facilities. In addition, his familiarity with acquisition due diligence and integration issues
assists him in his directorship of our company.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR”
EACH OF THE NOMINEES FOR DIRECTOR
INCUMBENT DIRECTORS
- CLASS III
Terms Expiring in
2019
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Name
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Age
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Position
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Director Since
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Thomas J. McAteer
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64
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Director
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2011
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James M. Jenkins
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52
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Director
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2015
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Thomas J. McAteer
has served as a director since 2011. Mr. McAteer has served as Executive Vice President of Management Development and Strategic
Initiatives of Suffolk Transportation since March 2013 and Chairman of the Board of New World Medical Network, a private healthcare
organization, since 2015. He also served as the Vice Chair of the Board and Chair of the Compensation and Personnel Committee for
the Long Island Power Authority since December 2014. He served as the Senior Vice President and Regional Market Head for Aetna's
Medicaid Division from March 2007 until March 2013. Prior to joining Aetna Medicaid, Mr. McAteer served as the President and CEO
of Vytra Health Plans. In a thirteen year career at Vytra, Mr. McAteer played an executive leadership role in growing Vytra from
annual revenues of $70 million in 1993 to over $375 million in 2005. In 2001, Mr. McAteer facilitated the sale of Vytra to HIP
Health Plans and, thereafter assumed the additional responsibilities of Executive Vice President for Brand Leadership, as well
as joining the Executive Committee of the enterprise. Before joining Vytra, Mr. McAteer served as the Chief Deputy County Executive
in Suffolk County, New York and prior to that as the Director of Human Resources for the Metropolitan Transportation Authority.
Mr. McAteer's qualifications to serve on our Board include his business experience and multiple prior executive positions.
James M. Jenkins
is a
partner at Harter Secrest & Emery LLP, a regional law firm located in Western New York. Mr.
Jenkins’s practice is in focused the areas of corporate governance and general corporate law matters, including initial
and secondary public offerings, private placements, mergers and acquisitions, and securities law compliance. Mr. Jenkins joined
the firm in 1989 as an associate and was elected a partner effective January 1, 1997. He has served as the Chair of the
firm's Securities Practice Group since 2001 and served as a member of the firm’s Management Committee from January 2007
to January 2013. He was recently named the Partner in Charge of the firm's New York City office. Mr. Jenkins holds a B.A from
Virginia Military Institute and a J.D. from West Virginia University College of Law. Mr. Jenkins previously served on our Board
from 2012 to 2015 where he also was a member of our Audit and Corporate Governance Committees. Mr. Jenkins’s qualifications
to serve on our Board include his corporate governance experience as well his current business-related experience.
INCUMBENT DIRECTOR
- CLASS II
Term Expiring in 2018
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Name
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Age
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Position
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Director Since
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Stephen M. Bachelder
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66
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COO, Director
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2004
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Stephen M.
Bachelder
has served as a director since 2004. Mr. Bachelder was our Chief Operating Officer from November 2012 to
March 2017. From February 2011 to November 2012, he served as Chairman of our Board of Directors. From March 2011 until November
2012 he served as our National Sales Manager. Mr. Bachelder was an executive and President of Swiftview, Inc., a Portland,
Oregon based software company, from 1999 to 2007. Swiftview, Inc. was sold to a private equity firm in October 2006. From 1991
to 1999, Mr. Bachelder operated a consulting firm advising technology companies in the Pacific Northwest. Mr. Bachelder
was President and owner of an apparel company, Bachelder Imports, from 1982 to 1991, and worked in executive positions for Giant
Foods, Inc. and Pepsico, Inc. between 1976 and 1982. He is a graduate of the Harvard Business School. Mr. Bachelder’s qualifications
to serve on our Board include his business education and multiple prior executive positions at a number of companies, including
Lakeland.
CORPORATE GOVERNANCE
Lakeland operates within a comprehensive plan of corporate
governance for the purpose of defining independence, assigning responsibilities, setting high standards of professional and personal
conduct and assuring compliance with such responsibilities and standards.
Director Independence
The standards relied
upon by the Board in affirmatively determining whether a director is “independent,” in compliance with NASDAQ and
SEC rules, are comprised, in part, of those objective standards set forth in such rules. In addition to these objective standards
and in compliance with NASDAQ and SEC rules, no director will be considered independent who has a relationship which, in the opinion
of the Board, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. The
Board exercises appropriate discretion in identifying and evaluating any such relationship. The Board, in applying the above-referenced
standards and after considering all of the relevant facts and circumstances, has affirmatively determined that the Company’s
independent directors are: A. John Kreft, Thomas J. McAteer, and James M. Jenkins, representing a majority of the members of the
Board.
Lakeland’s independent
directors meet in executive sessions when deemed necessary, but generally no less than twice a year.
Board and Committee Meetings and Attendance
The Board has three standing committees
– the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. Each committee operates
under a written charter adopted by the Board and each charter is available without charge on our website at
www.lakeland.com
under the headings “Investor Relations-Financial Information-Lakeland Board Committee Charters and Governance Guidelines.”
Hard copies may also be obtained, without charge, by writing to our Corporate Secretary at Lakeland Industries, Inc, 3555 Veterans
Memorial Highway, Suite C, Ronkonkoma, New York 11779.
During the fiscal year ended January 31,
2017, there were nine (9) meetings of the Board; six (6) meetings of the Audit Committee; four (4) meetings of the Compensation
Committee; and one (1) meeting of the Nominating and Governance Committee. Each director attended at least 75% of the aggregate
number of meetings of the Board, and the respective committees of which he is a member, during the period for which he was a director
during fiscal year ended January 31, 2017.
Audit Committee
As of fiscal year ended
January 31, 2017 and as of the record date, the members of our Audit Committee consisted of A. John Kreft (Chairman), Thomas McAteer,
and James Jenkins. Duane Albro was a member of the committee until his resignation as a director on June 15, 2016. Each member
of the Audit Committee has been determined by the Board, as reviewed on an annual basis, to meet the standards for independence
required of audit committee members by the NASDAQ listing standards and applicable SEC rules. Our Board has determined that Mr.
Kreft is an “audit committee financial expert,” within the meaning of applicable SEC rules based upon, among other
things, his MBA in finance from the Wharton School of Business, four and a half years’ experience with two “Big 4”
accounting firms, eighteen years of investment banking, underwriting and advisory services experience with several brokerage firms
such as Credit Suisse and Alex Brown and three years as Chief Executive Officer of a NASD broker dealer. Mr. Kreft has held five
levels of security licenses at various times including General Securities Principal.
The formal report of
our Audit Committee is included in this proxy statement. The Audit Committee’s responsibilities include, among other things:
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the
oversight of the quality of our consolidated financial statements and our compliance
with legal and regulatory requirements;
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the
selection, evaluation and oversight of our independent registered public accountants,
including conducting a review of their independence, determining their fees, overseeing
their audit work, and reviewing and pre-approving any non-audit services that may be
performed by them;
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the
oversight of annual audit and quarterly reviews, including review of our consolidated
financial statements, our critical accounting policies and any material related-party
transactions and the application of accounting principles; and
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the
oversight of financial reporting process and internal controls, including a review of
the adequacy of our accounting and internal controls and procedures.
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Compensation Committee
As of fiscal year ended
January 31, 2017 and as of the record date, the members of our Compensation Committee consisted of Thomas McAteer (Chairman),
A. John Kreft, and James Jenkins. Duane Albro was a member of the committee until his resignation as a director on June 15, 2016.
All members of the Compensation Committee have been determined to meet the applicable NASDAQ and SEC standards for independence.
Our Compensation Committee’s role includes setting and administering the policies governing the compensation of executive
officers, including cash compensation and equity incentive programs, and reviewing and establishing the compensation of the Chief
Executive Officer and other executive officers. Our Compensation Committee’s principal responsibilities, which have been
authorized by the Board, are:
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approving
the corporate goals and objectives applicable to the compensation for the Chief Executive
Officer, evaluate at least annually the Chief Executive Officer’s performance in
light of those goals and objects and determine and approve the Chief Executive Officer’s
compensation level based on this evaluation.
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review
and approve other executive officers’ annual base salaries and annual incentive
opportunities (after considering the recommendation of our Chief Executive Officer with
respect to the form and amount of compensation for executive officers other than the
Chief Executive Officer);
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evaluating
the level and form of compensation for Board of Director and committee service by non-employee
members of our Board and recommending changes when appropriate;
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advising
the Board on our compensation and benefits matters, including making recommendations
and decisions where authority has been granted regarding our equity-based compensation
plans and benefit plans generally, including employee bonus and retirement plans and
programs; and
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approving
the amount of and vesting of equity awards;
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evaluating
the need for, and provisions of, any employment contracts/severance arrangements for
the Chief Executive Officer and other executive officers.
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review
and discuss with management our disclosure relating to executive compensation proposed
by management to be included in our proxy statement, recommend that such disclosures
be included in our annual report on Form 10-K and proxy statement.
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Our Compensation Committee
does not delegate any of its responsibilities to other committees or persons. Participation by executive officers in the recommendation
or determination of compensation for executive officers or directors is limited to recommendations by our Chief Executive Officer
to our Compensation Committee regarding the compensation of executive officers other than with respect to himself and (ii) our
Chief Executive Officer’s participation in Board determinations of compensation for the non-employee directors.
Nominating and Governance Committee
As of the fiscal year
ended January 31, 2017 and as of the record date, the members of our Nominating and Governance Committee consisted of James Jenkins
(Chairman), A. John Kreft, and Thomas McAteer. Duane Albro was a member of the committee until his resignation on June 15, 2016.
All of the members of the Nominating and Governance Committee have been determined to meet the applicable NASDAQ and SEC standards
for independence. The purpose of the Nominating and Governance Committee is to identify, screen and recommend to the Board qualified
candidates to serve as directors, to develop and recommend to the Board a set of corporate governance principles applicable to
Lakeland, and to oversee corporate governance and other organizational matters. The Nominating and Governance Committee’s
responsibilities include, among other things:
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reviewing
qualified candidates to serve as directors;
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aiding
in attracting qualified candidates to serve on the Board;
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considering,
reviewing and investigating (including with respect to potential conflicts of interest
of prospective candidates) and either accepting or rejecting candidates suggested by
our stockholders, directors, officers, employees and others;
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recommending
to the full Board nominees for new or vacant positions on the Board and providing profiles
of the qualifications of the candidates;
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monitoring
our overall corporate governance and corporate compliance program;
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reviewing
and adopting policies governing the qualification and composition of the Board;
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reviewing
and making recommendations to the Board regarding Board structure, including establishing
criteria for committee membership, recommending processes for new Board member orientation,
and reviewing and monitoring the performance of incumbent directors;
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recommending
to the Board action with respect to implementing resignation, retention and retirement
policies of the Board;
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reviewing
the role and effectiveness of the Board, the respective Board committees and the directors
in our corporate governance process; and
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reviewing
and making recommendations to the Board regarding the nature and duties of Board committees,
including evaluating the committee charters, recommending appointments to committees,
and recommending the appropriate chairperson for the Board.
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Director Nomination Procedures
Nominating and Governance
Committee will consider individuals recommended by stockholders for nomination as candidates for election to the Board at annual
meetings of stockholders. Such suggested nominees will be considered in the context of the Nominating and Governance Committee’s
determination regarding all issues relating to the composition of the Board, including the size of the Board, any criteria the
Nominating and Governance Committee may develop for prospective Board candidates and the qualifications of candidates relative
to any such criteria. The Nominating and Corporate Governance Committee may also take into consideration the number of shares
held by the recommending stockholder and the length of time that such shares have been held. Any stockholder who wants to nominate
a candidate for election to the Board must delivery timely notice to our Secretary at our principal executive offices. In order
to be timely, the notice must be delivered:
|
|
·
|
in
the case of an annual meeting, not less than 90 days nor more than 120 days prior to
the anniversary date of the immediately preceding annual meeting of stockholders, although
if the annual meeting is more than 30 days before or more than 60 days after such anniversary
date, the notice must be received not less than 90 days nor more than 120 days prior
to the date of such annual meeting or, if the first public announcement of the date of
such annual meeting is less than 100 days prior to the date of such meeting, the 10
th
day following the date public disclosure of the annual meeting was made; and
|
|
|
·
|
in
the case of a special meeting, not less than 90 days nor more than 120 days prior to
the date of such special meeting or, if the first public announcement of the date of
such special meeting is less than 100 days prior to the date of such meeting, the 10
th
day following the date public disclosure of the special meeting was made.
|
The stockholder’s
notice to the Secretary must set forth:
|
|
·
|
as
to each person whom the stockholder proposes to nominate for election as a director
|
|
|
o
|
the
nominee’s name, age, business address and residence address;
|
|
|
o
|
the
nominee’s principal occupation and employment;
|
|
|
o
|
the
class and series and number of shares of each class and series of capital stock of Lakeland
which are owned beneficially or of record by the nominee, and any other direct or indirect
pecuniary or economic interest in any capital stock of Lakeland held by the nominee,
including without limitation, any derivative instrument, swap (including total return
swaps), option, warrant, short interest, hedge or profit sharing arrangement, and the
length of time that such interest have been held by the nominee; and
|
|
|
o
|
any
other information relating to the nominee that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange Act, and
the rules and regulations promulgated thereunder.
|
|
|
·
|
as
to the stockholder giving the notice
|
|
|
o
|
the
stockholder’s name and record address;
|
|
|
o
|
the
class and series and number of shares of each class and series of capital stock of Lakeland
which are owned beneficially or of record by the stockholder, and any other direct or
indirect pecuniary or economic interest in any capital stock of Lakeland held by the
stockholder, including without limitation, any derivative instrument, swap (including
total return swaps), option, warrant, short interest, hedge or profit sharing arrangement,
and the length of time that such interest have been held by the stockholder;
|
|
|
o
|
a
description of any proxy, contract, arrangement, understanding, or relationship between
the stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by the stockholder;
|
|
|
o
|
a
representation by the stockholder that the stockholder is a holder of record of stock
of Lakeland entitled to vote at such meeting and that the stockholder intends to appear
in person or by proxy at the meeting to nominate the person or persons named in the stockholder’s
notice; and
|
|
|
o
|
any
other information relating to the stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to section 14 of the Exchange Act and the
rules and regulations promulgated thereunder.
|
A stockholder providing notice of any
nomination proposed to be made at an annual meeting or special meeting shall further be required, for such notice of nomination
to be proper, to update and supplement the notice, if necessary, so that the information provided or required to be provided in
the notice is true and correct as of the record date for the meeting and as of the date that is ten business days prior to the
meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the
principal executive offices of the Company not later than five business days after the record date for the meeting in the case
of the update and supplement requirement to be made as of the record date, and not later than eight business days prior to the
date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as
of ten business days prior to the meeting or any adjournment or postponement thereof.
The notice delivered by a stockholder
must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
The stockholder must be a stockholder of record on the date on which the stockholder gives the notice described above and on the
record date for the determination of stockholders entitled to vote at the meeting.
The Nominating and Governance
Committee believes that the minimum qualifications for serving as a director are that a nominee demonstrate, by significant accomplishment
in his or her field, an ability to make a meaningful contribution to the Board’s oversight of the business and affairs of
Lakeland and have an impeccable record and reputation for honesty and ethical conduct in both his or her professional and personal
activities. In addition, the Nominating and Governance Committee examines a candidate’s specific experiences and skills,
relevant industry background and knowledge, time availability in light of other commitments, potential conflicts of interest,
interpersonal skills and compatibility with the Board, and independence from management and the Company. The Nominating and Governance
Committee also seeks to have the Board represent a diversity of backgrounds and experience. The Nominating and Governance Committee
does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective
nominees. The Nominating and Governance Committee believes that the backgrounds and qualifications of the directors, considered
as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.
The Nominating and Governance
Committee identifies potential nominees through independent research and through consultation with current directors and executive
officers and other professional colleagues. The Nominating and Governance Committee looks for persons meeting the criteria above,
and takes note of individuals who have had a change in circumstances that might make them available to serve on the Board, for
example, retirement as a Chief Executive Officer or Chief Financial Officer of a company. The Nominating and Governance Committee
also, from time to time, may engage firms that specialize in identifying director candidates. As described above, the Nominating
and Governance Committee will also consider candidates recommended by stockholders.
Once a person has been
identified by the Nominating and Governance Committee as a potential candidate, the committee may collect and review publicly
available information regarding the person to assess whether the person should be considered further. If the Nominating and Governance
Committee determines that the candidate warrants further consideration by the committee, the Chairman or another member of the
committee will contact the person. Generally, if the person expresses a willingness to be considered and to serve on the Board,
the Nominating and Governance Committee requests a resume and other information from the candidate, reviews the person’s
accomplishments and qualifications, including in light of any other candidates that the committee might be considering. The Nominating
and Governance Committee may also conduct one or more interviews with the candidate, either in person, telephonically or both.
In certain instances, Nominating and Governance Committee members may conduct a background check, may contact one or more references
provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand
knowledge of the candidate’s accomplishments. The Nominating and Governance Committee’s evaluation process does not
vary based on whether or not a candidate is recommended by a stockholder, although, as stated above, the committee may take into
consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held.
Interested Party Communications
The Board has established
a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties
may contact any member (or all members) of the Board by mail. To communicate with the Board, any individual director or any group
or committee of directors, correspondence should be addressed to the Board or any such individual director or group or committee
of directors by either name or title. All such correspondence should be sent our Corporate Secretary at Lakeland Industries, Inc.,
3555 Veterans Memorial Highway, Suite C, Ronkonkoma, New York 11779.
All communications received
as set forth in the preceding paragraph will be opened by the office of our Corporate Secretary for the sole purpose of determining
whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions
of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications
to the Board or any group or committee of directors, the Corporate Secretary’s office will make sufficient copies of the
contents to send to each director who is a member of the group or committee to which the envelope is addressed.
Director Attendance at Annual Stockholder
Meetings
We expect that each
of our directors attend our annual meetings of stockholders, as provided in our Corporate Governance Guidelines. All of our directors
were in attendance at the annual meeting of stockholders held on June 15, 2016.
Corporate Governance Guidelines and
Practices
We are committed to
good corporate governance practices and as such we have adopted formal Corporate Governance Guidelines. A copy of the Corporate
Governance Guidelines may be found on our website at
www.lakeland.com
under the headings “Investor Relations-Financial
Information-Lakeland Board Committee Charters and Governance Guidelines.” Below are some highlights of our corporate governance
guidelines and practices:
|
|
o
|
Board
Independence
.
We believe that the Board should be comprised of
a majority of independent directors and that no more than two management executives may
serve on the Board at the same time. Currently, the Board has five directors: three of
whom are independent directors under the applicable Nasdaq Marketplace Rules, one of
whom is a current member of management, and one of whom is a former member of management.
|
|
|
o
|
Board
Committees
.
All of our Board committees consist entirely of independent
directors as defined under the applicable Nasdaq Marketplace Rules.
|
|
|
o
|
Chairman,
CEO and Position Separation; Leadership Structure
.
Although we do not
have an official policy requiring separation of the offices of the Chairman of the Board
and Chief Executive Officer, we currently have a different person serving in each such
role—Mr. John Kreft is our Chairman, and Mr. Christopher J. Ryan is our Chief Executive
Officer. The decision whether to combine or separate these positions depends on what
our Board deems to be in the long-term interest of stockholders in light of prevailing
circumstances. Mr. Kreft has served as Chairman of the Board since June 2016. Mr. Ryan
has served as our Chief Executive Officer since November 2003. This arrangement has allowed
our Chairman to lead the Board, while our Chief Executive Officer has focused primarily
on managing the operations of the Company. The separation of duties provides strong leadership
for the Board while allowing the Chief Executive Officer to be the leader of the Company,
focusing on its customers, employees, and operations. Our Board believes the Company
is well-served by this flexible leadership structure and that the combination or separation
of these positions should continue to be considered on an ongoing basis.
|
|
|
o
|
Independent
Advisors
.
The Board and each committee have the power to hire independent
legal, financial or other advisors at any time as they deem necessary and appropriate
to fulfill their Board and committee responsibilities.
|
|
|
o
|
Directors
Are Subject to our Code of Conduct
.
Board members must act at all
times in accordance with the requirements of our Code of Conduct. This obligation includes
adherence to our policies with respect to conflicts of interest, ethical conduct in business
dealings and respect for and compliance with applicable law. Any requested waiver of
the requirements of the Code of Conduct with respect to any individual director or executive
officer must be reported to, and subject to, the approval of the Board, or the Audit
Committee.
|
|
|
o
|
Board
Engagement
.
The Board has regularly scheduled presentations from
our finance and major business operations personnel.
|
|
|
o
|
No
Corporate Loans
.
Our stock plans and practices prohibit us from
making corporate loans to employees for the exercise of stock options or for any other
purpose.
|
Risk Oversight
Management is responsible for the day-to-day
management of risks for Lakeland, while our Board, as a whole and through its committees, is responsible for the oversight of
risk management. The Board sets our overall risk management strategy and our risk appetite and ensures the implementation of our
risk management framework. Specific committees of the Board are responsible for overseeing specific types of risk. Our Audit Committee
periodically discusses risks as they relate to the Company’s financial statements, the evaluation of the effectiveness of
internal control over financial reporting, compliance with legal and regulatory requirements including Sarbanes-Oxley Act, and
related party transactions, among other responsibilities set forth in the Audit Committee’s charter. Our Audit Committee
also periodically may review our tax exposures and our internal processes to ensure compliance with applicable laws and regulations.
Our Board monitors risks as they may be related to financing matters such as acquisitions and dispositions, our capital structure,
credit facilities, equity issuances, and liquidity. Our Compensation Committee establishes our compensation policies and programs
in such a manner that our executive officers are not incentivized to take on an inappropriate level of risk. Our Audit Committee
Chairman reviews any employee reports regarding suspected violations of our Code of Conduct. Each of our committees of the Board
regularly delivers reports to the members of the Board, in order to keep the Board informed about what transpires at committee
meetings. In addition, if a particular risk is material or where otherwise appropriate, the full Board may assume oversight over
such risk, even if the risk was initially overseen by a committee.
Code of Ethics
The Board adopted our
Code of Ethics, as amended, on June 19, 2015 that applies to all officers, directors and employees. The Code of Ethics sets forth
information and procedures for employees to report ethical or accounting concerns, misconduct or violations of the Code in a confidential
manner. The Code of Ethics is available on our website at
www.lakeland.com
under the headings Investor Relations-Financial
Information-Code of Ethics Policy 2015. Amendments to, and waivers from, the Code of Ethics will be disclosed at the same website
address provided above and in such filings as may be required pursuant to applicable law or listing standards. We intend to satisfy
the disclosure requirement under Item 5.05(c) of Form 8-K regarding certain amendments to, or waivers from a provision of this
code of ethics by posting such information on our website at
www.lakeland.com
under the headings “Investor Relations-Financial
Information-Code of Ethics Policy 2015.”
Compensation Committee Interlocks and
Insider Participation
No member of our Compensation Committee
is an officer or employee of Lakeland, and none of our executive officers serves as a member of a compensation committee of any
entity that has one or more executive officers serving as a member of our Compensation Committee.
DIRECTOR COMPENSATION
Non-employee directors
each received $33,750 quarterly as compensation for serving as a member of the Board and on its committees during the period commencing
January 31, 2016 through April 30, 2016. Effective as of June 15, 2016, the fee was revised to $75,000 annually payable to each
director plus an additional annual fee of $10,000 for each of the Chairman of the Board and Chairman of the Audit Committee and
$5,000 for each other committee chair position held. Three of the independent directors chose to receive a percentage of their
compensation in company restricted stock rather than all cash compensation. Members of the Board of Directors are reimbursed for
all travel-related expenses to and from meetings of the Board and committees. Directors who are also officers of the Company are
not compensated for their duties as directors.
The following table
sets forth compensation paid by the Company to non-employee directors during the fiscal year ended January 31, 2017. Disclosures
relating to the compensation of Christopher J. Ryan and Stephen M. Bachelder can be found in the “Executive Officer Compensation”
section below.
DIRECTOR COMPENSATION - FISCAL 2017
|
Name
|
|
Fees Earned
or Paid in
Cash
($)
|
|
|
Stock
Awards
(1)
($)
|
|
|
Option
Award
($)
|
|
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
Duane W. Albro
(2)
|
|
|
50,625
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,625
|
|
|
A. John Kreft
|
|
|
72,501
|
|
|
|
16,875
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
89,376
|
|
|
Thomas McAteer
|
|
|
32,500
|
|
|
|
67,500
|
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
James Jenkins
(5)
|
|
|
36,875
|
|
|
|
20,000
|
(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,875
|
|
|
|
(1)
|
Represents the aggregate grant date fair value of restricted
stock granted to the director during fiscal year ended January 31, 2017. The amounts in this column do not necessarily correspond
to the actual value that will be realized by the director. The assumptions used to calculate the fair value are set forth in the
footnotes to the Consolidated Financial Statements included in our Annual Report on Form 10-K, as amended, for the fiscal year
ended January 31, 2017, as filed with the SEC. As of January 31, 2017, stock awards or options held by independent directors were
as follows: (i) Mr. McAteer held 18,359 restricted common shares, (ii) Mr. Kreft held 8,819 restricted common shares, and (iii)
Mr. Jenkins held 5,221 restricted common shares, as of that date.
|
|
|
(2)
|
Mr. Albro resigned from the Board on June 15, 2016.
|
|
|
(3)
|
Mr. Kreft was paid a percentage of his fees in restricted
common stock totaling $16,875, subject to two-year vesting.
|
|
|
(4)
|
Mr. McAteer was paid a percentage of his fees in restricted
common stock totaling $67,500, subject to two-year vesting.
|
|
|
(5)
|
Mr. Jenkins joined the Board on June 15, 2016.
|
|
|
(6)
|
Mr. Jenkins was paid a percentage of his fees in restricted
common stock totaling $20,000, subject to two-year vesting.
|
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF FRIEDMAN
LLP
AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Our Audit Committee
has selected Friedman LLP (“Friedman”) as our independent registered public accounting firm to audit our consolidated
financial statements for the fiscal year ending January 31, 2018, and has directed that management submit the selection of
Friedman as our independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Friedman
was retained as our independent auditors on July 14, 2016. A representative of Friedman is expected to be present or available
by phone at the Annual Meeting and will be available to respond to appropriate questions from our stockholders and will be given
an opportunity to make a statement if he or she desires to do so.
Neither our Bylaws nor
other governing documents or applicable law require stockholder ratification of the selection of Friedman as our independent registered
public accounting firm. However, the Audit Committee seeks to have the selection of Friedman ratified as a matter of good corporate
governance. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Audit Committee may in its discretion direct the appointment of different independent
registered public accountants at any time during the year if they determine that such a change would be in the best interests
of the Company and its stockholders.
Vote Required
The affirmative vote
of the holders of a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting will be
required to ratify the selection of Friedman. You may vote “for,” “against” or “abstain.”
If you “abstain” from voting with respect to this proposal, your vote will have the same effect as a vote “against”
this proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THIS PROPOSAL
Change in independent registered public accountants
United States
As reported in the Company’s Current
Report on Form 8-K filed on July 18, 2016, we engaged Friedman as our independent registered public accountants on July 14, 2016.
On the same date, the Company dismissed WeiserMazars (“WeiserMazars”) as its independent registered public accountants,
effective immediately. This change of independent registered public accountants was approved by our Audit Committee.
The audit reports of WeiserMazars on the
Company’s consolidated financial statements as of and for the fiscal years ended January 31, 2016 and 2015 did not contain
an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting
principles, however, the audit reports make reference to other auditors in both years. During the two most recent fiscal years
ended January 31, 2016 and 2015, and during the subsequent interim period preceding such dismissal, there were no disagreements
with WeiserMazars on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of WeiserMazars, would have caused it to make reference to the subject
matter of the disagreements in connection with its audit reports for such years. In addition, during that time there were no “reportable
events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.
China
Also on July 14, 2016, the Company dismissed
Shanghai Mazars Certified Public Accountants (“Shanghai Mazars”), the independent registered public accounting firm
for the Company’s China subsidiaries, Lakeland (Beijing) Safety Products Co., Ltd. (“Lakeland Beijing”) and
Weifang Lakeland Safety Products Co Ltd. (“Weifang Lakeland”). The decision was approved by the Audit Committee.
The audit reports of Shanghai Mazars on
each of Lakeland Beijing’s and Weifang Lakeland’s financial statements as of and for the fiscal years ended January
31, 2016 and 2015 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles. During the two most recent fiscal years ended January 31, 2016 and 2015, and during the
subsequent interim period preceding such dismissal, there were no disagreements with Shanghai Mazars on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Shanghai Mazars, would have caused it to make reference to the subject matter of the disagreements in connection
with its audit reports on the financial statements for such years. In addition, during that time there were no “reportable
events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.
AUDIT COMMITTEE REPORT
The following is the
report of the Audit Committee of the Board of Directors of Lakeland Industries, Inc., describing the Audit Committee’s responsibilities
and practices, specifically with respect to matters involving Lakeland’s accounting, auditing, financial reporting and internal
control functions. Among other things, the Audit Committee reviews and discusses with management and with Lakeland’s independent
registered public accounting firm the results of Lakeland’s year-end audit, including the audit report and audited financial
statements. The members of the Audit Committee of the Board are presenting this report for the fiscal year ended January 31,
2017.
The Audit Committee
acts pursuant to a written charter. The Nominating and Governance Committee and the Board consider membership of the Audit Committee
annually. The Audit Committee reviews and assesses the adequacy of its charter annually. The Audit Committee held six meetings
during the fiscal year ended January 31, 2017.
All members of the Audit
Committee are independent directors, qualified to serve on the Audit Committee pursuant to the applicable Nasdaq Marketplace Rules.
In accordance with its charter, the Audit Committee oversees accounting, financial reporting, internal control over financial
reporting, financial practices and audit activities of Lakeland and its subsidiaries. The Audit Committee provides advice, counsel,
and direction to management and the independent registered public accounting firm, based on the information it receives from them.
The
Audit Committee relies, without independent verification, on the information provided by Lakeland and on the representations made
by management that the financial statements have been prepared with integrity and objectivity, on the representations of management,
and the opinion of the independent registered public accounting firm that such financial statements have been prepared in conformity
with accounting principles generally accepted in the United States, or GAAP.
In connection with its
review of Lakeland’s audited financial statements for the fiscal year ended January 31, 2017, the Audit Committee reviewed
and discussed the audited financial statements with management and discussed with Friedman, Lakeland’s independent registered
public accounting firm, the matters required to be discussed by PCAOB standards. The Audit Committee received the written disclosures
and the letter from Friedman required by the applicable requirements of the PCAOB and discussed with Friedman its independence
from Lakeland. The Audit Committee has also considered whether the provision of certain permitted non-audit services by Friedman
is compatible with their independence.
Based on the reviews
and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements
be included in Lakeland’s Annual Report on Form 10-K for its fiscal year ended January 31, 2017 for filing with
the SEC.
During fiscal 2017,
the Audit Committee met with management and Lakeland’s independent registered public accountants and received the results
of the audit examination, evaluations of Lakeland’s internal controls and the overall quality of Lakeland’s financial
organization and financial reporting. The Audit Committee also meets at least once each quarter with Lakeland’s independent
registered public accountants and management to review Lakeland’s interim financial results before the publication of Lakeland’s
quarterly earnings press releases. The Audit Committee believes that a candid, substantive and focused dialogue with the independent
registered public accountants is fundamental to the committee’s responsibilities. To support this belief, the Audit Committee
meets separately with the independent registered public accountants without the members of management present on at least an annual
basis.
The Audit Committee
has established procedures for the receipt, retention and treatment of complaints received by Lakeland regarding accounting, internal
accounting controls, or auditing matters, including the confidential, anonymous submission by Lakeland employees, received through
established procedures, of concerns regarding questionable accounting or auditing matters. We have established a confidential
email and hotline for employees to report violations of Lakeland’s Code of Ethics or other company policies and to report
any ethical concerns.
The information contained
in this report shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such
information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that Lakeland specifically incorporates it by reference into such filing.
|
|
The Audit Committee:
|
|
|
A. John Kreft (Chairman)
|
|
|
Thomas McAteer
|
|
|
James Jenkins
|
INDEPENDENT AUDITOR FEE INFORMATION
The Audit Committee
appointed Friedman as the independent registered public accounting firm to audit the financial statements for the fiscal year
ended January 31, 2017.
Fees billed for services
by Friedman during fiscal 2017 and each of WeiserMazars LLP and Warren Averett, LLC in fiscal 2017 and 2016 are as follows:
|
|
|
Friedman
LLP
|
|
|
WeiserMazars
LLP
|
|
|
WeiserMazars
LLP
|
|
|
Warren Averett,
LLC
|
|
|
Warren Averett,
LLC
|
|
|
|
|
Fiscal 2017
|
|
|
Fiscal 2017
|
|
|
Fiscal 2016
|
|
|
Fiscal 2017
|
|
|
Fiscal 2016
|
|
|
Audit Fees
|
|
$
|
100,000
|
|
|
$
|
197,650
|
|
|
$
|
500,896
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Audit-Related Fees
|
|
$
|
9,850
|
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Tax Fees
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
165,553
|
|
|
$
|
224,594
|
|
|
All Other Fees
|
|
$
|
—
|
|
|
$
|
18,400
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total
|
|
$
|
119,850
|
|
|
$
|
226,050
|
|
|
$
|
500,896
|
|
|
$
|
165,553
|
|
|
$
|
224,594
|
|
Audit Fees
Includes fees billed for professional
services rendered for audit of our annual financial statements in compliance with Section 404 of the Sarbanes-Oxley Act of 2002
and review of financial statements included in our Forms 10-Q and other filings with the SEC.
Audit-Related Fees
Includes certain services that are reasonably
related to the performance of the audit or review of Lakeland’s consolidated financial statements. There were no such fees
in fiscal 2016.
Tax Fees
Includes tax preparation including audits,
quarterly estimates and resolutions of various notices from taxing authorities.
All Other Fees
Includes fees billed for services not
classified in any of the above categories. There were no such fees in fiscal 2016.
Audit Committee Pre-Approval Policy
In accordance with applicable
laws and regulations, the Audit Committee reviews and pre-approves any non-audit services to be performed by our independent registered
public accounting firm to ensure that the work does not compromise their independence in performing their audit services. The
Audit Committee generally also reviews and pre-approves all audits, audit related, tax and all other fees, as applicable. In some
cases, pre-approval may be provided by the full committee for up to a year, and relates to a particular category or group of services
and is subject to a specific budget and SEC rules. In other cases, the chairman of the Audit Committee has the delegated authority
from the committee to pre-approve additional services, and such pre-approvals are then communicated to the full Audit Committee
at its next meeting.
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required by Section 14A of the Securities
and Exchange Act of 1934 (the “Exchange Act”), the Company is providing stockholders with an advisory (non-binding)
vote on compensation programs for our named executive officers (sometimes referred to as “say on pay”). Accordingly,
you may vote on the following resolution at the Annual Meeting:
RESOLVED, that the compensation paid
to the Named Executive Officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure
rules (which disclosure includes the compensation tables and the narrative discussion that accompanies the compensation tables),
is hereby approved.
This non-binding advisory vote on executive
compensation will be considered approved by the affirmative vote of a majority of the shares present in person or represented
by proxy and entitled to vote on the matter. You may vote “for,” “against” or “abstain.” If
you “abstain” from voting with respect to this proposal, your vote will have the same effect as a vote “against”
the proposal. Broker non-votes will have no effect on the vote for this proposal. Although this vote is non-binding, the Board
and the Compensation Committee, which is comprised of independent directors, expect to take into account the outcome of the vote
when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant
negative voting results.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THIS PROPOSAL
EXECUTIVE OFFICERS
Our Executive Officers
are appointed by our Board and serve at its discretion. Set forth below is information regarding our current Executive Officers:
|
NAME
|
|
POSITION
|
|
AGE
|
|
Christopher J. Ryan
|
|
Chief Executive Officer, President and Secretary
|
|
65
|
|
Teri W. Hunt
|
|
Chief Financial Officer
|
|
55
|
|
Charles D. Roberson
|
|
Senior Vice President, International Sales
|
|
54
|
|
Daniel L. Edwards
|
|
Senior Vice President Sales North America
|
|
50
|
Mr. Ryan’s biography
is included under the heading “Election of Directors.”
Teri W. Hunt
has served as our Chief Financial Officer since November 10, 2015 after serving as the Acting Chief Financial Officer of the Company
since July 17, 2015. Ms. Hunt has also served as our Vice President of Finance since November 2010, before which time she served
as Corporate Controller from November 2007 to November 2010. Prior to joining Lakeland, Ms. Hunt served in multiple operational
and financial management positions including Corporate Controller for a privately held yarn manufacturer, TNS Mills.
Charles D. Roberson
has served as our Vice President International Sales since March 2009. Mr. Roberson joined our Company in 2004 as Technical
Marketing Manager and later served as International Sales Manager. Prior to joining our Company, Mr. Roberson was employed by
Precision Fabrics Group, Inc. as a Market Manager from 1995-2001 and as a Nonwovens Manufacturing Manager from 1991-1995. He began
his career as a manufacturing manager for Burlington Industries, Inc. in its Menswear Division from 1985-1991.
Daniel L. Edwards
has been our Senior Vice President Sales for North America since March 2017 after most recently serving as our Vice President
of USA Sales since March 2013. Mr. Edwards has been employed by us in various capacities since joining Lakeland in 2005, including
as our National Accounts Manager and Eastern Regional Sales Manager. Prior to joining our Company, Mr. Edwards was a Senior Market
Manager at Precision Fabrics Group, Inc., where he began his career in 1990 and held various roles at that company in manufacturing,
technical and quality management.
EXECUTIVE OFFICER COMPENSATION
We currently qualify
as a “smaller reporting company” as such term is defined in Rule 405 of the Securities Act of 1933, as amended, and
Item 10(f) of Regulation S-K. Accordingly, and in accordance with relevant Securities and Exchange Commission rules and guidance,
we have elected, with respect to the disclosures required by Item 402 (Executive Compensation) of Regulation S-K, to comply, in
some cases, with the requirements applicable to larger companies and, in other cases, with the disclosure requirements applicable
to smaller reporting companies. The following Executive Compensation Overview is not comparable to the “Compensation Discussion
and Analysis” that is required of SEC reporting companies that are not smaller reporting companies.
executive
compensation overview
Compensation Committee
.
The Compensation Committee assists the Board in discharging its responsibilities relating to compensation of the Company’s
executive officers and supervision of the Company’s stock plans and 401(k) Plans. The Compensation Committee reports to
the Board and is responsible for:
|
|
§
|
Reviewing
and recommending the Company’s goals and objectives relevant to executive officer
compensation;
|
|
|
§
|
Evaluating
the executive officers’ performance in light of these goals and objectives;
|
|
|
§
|
Approving
the compensation for the Chief Executive Officer and other executive officers (after
considering the recommendation of our Chief Executive Officer with respect to the form
and amount of compensation for executive officers other than the Chief Executive Officer);
and
|
|
|
§
|
Making
recommendations to the Board regarding the management contracts of executive officers
when they are proposed or renewed.
|
Compensation Philosophy
and Objectives
.
The Company seeks to pay its executive officers total compensation that is competitive with other companies
of comparable size and complexity. Generally, the types of compensation and benefits provided to the Chief Executive Officer and
other executive officers are comparable to those provided to other executive officers of small cap, publicly-traded and similarly
sized companies in the industry in which the Company operates.
The compensation
policies of the Company are designed to:
|
|
§
|
Increase stockholder
value;
|
|
|
§
|
Increase the
overall performance of the Company;
|
|
|
§
|
Attract, motivate
and retain experienced and qualified executives; and
|
|
|
§
|
Incentivize
the executive officers to achieve the highest level of Company financial performance.
|
While the Company seeks
to maintain competitive compensation arrangements for its executives, it also strongly believes that the competitiveness of the
compensation packages should be based on the total compensation achievable by the executive officers and that a portion of that
compensation should be linked to the performance of the Company. Accordingly, the executive compensation packages provided to
the Chief Executive Officer and the other executive officers are structured to include, among other things and in addition to
base salary and benefits, equity incentives. A reasonable portion of the compensation packages for executive officers is in the
form of restricted stock grants, which are intended to provide incentives to executive officers to achieve long-term growth in
the price of the Company’s common stock and additional annual cash bonus opportunities, which are intended to reward executive
officers for meeting annual financial performance goals. Overall compensation levels are set such that, for executive officers
to achieve a competitive compensation level, there must be both growth in the market price of the Company’s common stock
and growth in the Company’s earnings and revenues. The determination that such goals have been met and merit pay-outs pursuant
to the incentive portion of the overall compensation rests with the Compensation Committee.
The Compensation Committee
believes that executive officer compensation should seek to align the interests of executives with those of the Company’s
stockholders, by seeking to reward long-term growth (not short-term) in the value of the Company’s common stock and to reward
the achievement of annual financial goals by the Company. The incentive components of compensation restricted stock grants and
annual cash bonuses for executive officers are linked to corporate financial performance. This is intended to keep the executive
team focused on the core goal of overall long-term corporate performance.
When setting or recommending
compensation levels, the Compensation Committee considers the overall performance of the Company, the individual performance of
each of the executive officers, and their individual contributions to and ability to influence the Company’s performance,
and also seeks to encourage teamwork amongst the executives. The Compensation Committee believes that the level of total compensation,
including base salary, bonus, restricted stock grants and benefits of executives should generally be maintained to compete with
other public and private companies of comparable size and complexity. The Compensation Committee bases its determinations on a
variety of factors, including the personal knowledge of market conditions that each member of the Compensation Committee has gained
in his own experience managing businesses, salary surveys available to the Company, the knowledge of the Chief Executive Officer
and other executives as to local market conditions, and information learned regarding the compensation levels at other small cap
companies in the industrial apparel industry and other similarly sized businesses. The Compensation Committee periodically evaluates
the types and levels of compensation paid by the Company to ensure that it is able to attract and retain qualified executive officers
and that their compensation remains comparable to compensation paid to similarly situated executives in comparable companies.
The following describes
in more specific terms the elements of compensation that implement the compensation philosophy and objectives described above,
with specific reference to compensation earned by the named executive officers for the fiscal year ended January 31, 2017. “Named
executive officers” refers to those executive officers named in the Summary Compensation Table that immediately follows
this discussion.
Base Salaries
.
The base salary of each of our named executive officers is fixed pursuant to the terms of their respective employment agreements
with us at the time a person initially becomes an executive officer by evaluating the responsibilities of the position, the experience
and knowledge of the individual and the competitive marketplace at that time for executive talent, including a comparison to base
salaries for comparable positions (considered in the context of the total compensation paid by such companies). Salaries are reviewed
from time to time thereafter, generally in connection with the expiration of employment agreements or when other considerations
warrant such review in the discretion of the Compensation Committee and Board, considering the foregoing factors as well as the
executive’s performance and the other factors considered in setting total compensation described above.
When salary adjustments
are considered, they are made in the context of the total compensation for executive officers, consistent with the core principles
discussed above. In each case, the participants involved in recommending and approving salary adjustments consider the performance
of each executive officer, including consideration of new responsibilities and the previous year’s corporate performance.
Individual performance evaluations take into account such factors as achievement of specific goals that are driven by the Company’s
strategic plan and attainment of specific individual objectives. The factors impacting base salary levels are not assigned specific
weights but are considered as a totality, against the backdrop of the Company’s overall compensation philosophy, and salary
adjustments are determined in the discretion of the Compensation Committee and the Board.
Bonuses
. The
Company has historically made its annual bonuses eligible for executive officers based on corporate performance, as measured by
reference to factors which the Compensation Committee believes reflect objective performance criteria over which management generally
has the ability to exert some degree of control. The employment agreements for each of the named executive officers contain specific
provision as to the determination of annual bonuses, as described under “Narrative to Compensation Table.” The Compensation
Committee also considers whether or not bonuses are merited outside of the employment agreements’ terms.
Equity Awards/Restricted
Stock Grants
. A third component of executive officers’ compensation is grants of restricted shares of common stock issued
pursuant to our stock plans then in effect; although the Compensation Committee may consider using other equity-based incentives
in the future. The Compensation Committee grants restricted stock to the Company’s executives in order to align their interests
with the interests of the stockholders. Restricted stock grants are considered by the Company to be an effective long-term incentive
because the executives’ gains are linked to increases in stock value, which in turn provides stockholder gains. Restricted
stock was granted to executive officers in accordance with the terms of our 2015 and 2012 Stock Plans. These restricted stock
grants “cliff” vest at the end of three years, which the Company believes makes the grants a more effective retention
incentive, subject to the performance evaluation made by the Board in their sole discretion, at the end of the three-year performance
period. Restricted stock grants made to the executive officers pursuant to our stock plans reflect the significant individual
contributions the Compensation Committee expects the executive officers will make to the Company’s operations and implementation
of the Company’s development and growth programs, and the amounts of such grants were determined based on the same considerations
discussed above in the context of setting salaries and annual bonuses. The number of shares of restricted stock granted is not
tied to a formula or comparable company target ranges, but rather determined at the end of the three-year performance period or
such other vesting period established in the discretion of the Compensation Committee and the Board consistent with the compensation
philosophy described above. At the end of the applicable performance period, the number of shares (baseline, maximum or zero)
determined by the Board, in its discretion, will then vest. With respect to future restricted stock grants, the Compensation Committee
may set specific performance goals for vesting to be achieved.
Setting Executive
Compensation
.
Base salaries and other compensation for the Chief Executive Officer and other executive officers are
set by the Compensation Committee and reflect a number of elements including recommendations by our Chief Executive Officer, Christopher
J. Ryan, as to the other executive officers based on evaluation of their performance and the other factors described above. The
Compensation Committee works closely with Mr. Ryan in establishing compensation levels for the other executive officers.
Mr. Ryan and the individual executive typically engage in discussions regarding the executive’s salary, and Mr. Ryan
reports on such discussions and makes his own recommendations to the Compensation Committee. The Compensation Committee will separately
discuss with Mr. Ryan any proposed adjustment to his own compensation. The Compensation Committee reports to the Board on
all proposed changes in executive compensation after it has formed a view on appropriate adjustments, and makes recommendations
for consideration of the Board for the Chief Executive Officer and the other executive officers. The Compensation Committee considers
such recommendations and, thereafter, sets the compensation level for Mr. Ryan, and for the other executive officers. Salary
levels and other aspects of compensation for executive officers historically have been set forth in employment agreements having
terms of two to five years.
The Compensation Committee
is charged with the responsibility for approving the compensation package for the Chief Executive Officer. The Chief Executive
Officer is not present during voting or deliberation on his performance or compensation.
Retirement Benefits
.
The Company does not provide any retirement benefits to its executive officers, other than matching from time to time a portion
of employee contributions to the Company’s 401(k) plan. In August 2009, the Board determined to suspend the Company’s
401(k) match which it reinstated effective as of May 1, 2015.
Employment Agreements
.
The Company has entered into employment agreements with its executive officers because, in respect of key executive officers,
there is a value in its competitive markets to setting out compensation and benefit expectations in writing, maintaining appropriate
non-competition, non-solicitation of employees and confidentiality agreements with key executives, and agreeing in advance on
post-termination payments and other obligations. These employment agreements are described in more detail under the caption “Narrative
to Compensation Table” below.
Taxation and Accounting Matters
.
Section 162(m) of the Internal Revenue Code (the “Code”) may impose a limit on the amount of compensation we may
deduct in any one year with respect to certain specified employees. Section 162(m) of the Code denies a federal income tax deduction
for certain compensation in excess of $1.0 million per year paid to the chief executive officer and the three other most highly-paid
executive officers (other than the chief financial officer) of a publicly-traded corporation. Certain types of compensation, including
compensation based on performance criteria that are approved in advance by stockholders, are excluded from the deduction limit.
We believe that Section 162(m) of the Code will not limit our tax deductions for executive compensation for fiscal year 2017.
The Compensation Committee’s policy is to qualify compensation paid to our executive officers for deductibility for federal
income tax purposes to the extent feasible. However, to retain highly skilled executives and remain competitive with other employers,
the Compensation Committee has the right to authorize compensation that would not otherwise be deductible under Section 162(m)
or otherwise.
summary
compensation table
The table below sets forth all salary,
bonus and other compensation paid to our principal executive officer and each of the two highest paid executive officers other
than the principal executive officer (our “named executive officers”) for the fiscal years ended January 31, 2017
and 2016. As used in this Proxy Statement, FY refers to a fiscal year ended January 31. For example, FY17 refers to the fiscal
year ended January 31, 2017.
Name and Principal
Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus ($)
|
|
|
Stock
Awards
(1)
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All other
Compensation
($)
|
|
|
Total
($)
|
|
|
Christopher J. Ryan
|
|
2017
|
|
|
400,000
|
|
|
|
100,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34,500
|
(3)
|
|
|
534,500
|
|
|
Chief Executive Officer
|
|
2016
|
|
|
400,000
|
|
|
|
150,000
|
(2)
|
|
|
90,510
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34,500
|
(3)
|
|
|
675,010
|
|
|
Teri W. Hunt
|
|
2017
|
|
|
215,000
|
|
|
|
17,500
|
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
232,500
|
|
|
Chief Financial Officer
|
|
2016
|
|
|
215,000
|
|
|
|
60,574
|
(4)
|
|
|
99,716
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
375,290
|
|
|
Charles D. Roberson
|
|
2017
|
|
|
215,000
|
|
|
|
17,500
|
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,200
|
(6)
|
|
|
239,700
|
|
|
Sr. VP International Sales
|
|
2016
|
|
|
215,000
|
|
|
|
55,000
|
(5)
|
|
|
99,716
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,200
|
(6)
|
|
|
376,916
|
|
|
Stephen M. Bachelder
|
|
2017
|
|
|
290,000
|
|
|
|
40,000
|
(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,251
|
(9)
|
|
|
355,251
|
|
|
Chief Operating Officer
|
|
2016
|
|
|
290,000
|
|
|
|
85,000
|
(7)
|
|
|
134,498
|
(8)
|
|
|
—
|
|
|
|
—
|
|
|
|
25,251
|
(9)
|
|
|
534,749
|
|
|
|
(1)
|
“Stock Awards”
includes the value of restricted stock awarded based on the aggregate grant date fair
value of the awards. The assumptions used to calculate the fair value are set forth in
Footnote 1 to the Consolidated Financial Statements included in our Annual Report on
Form 10-K for the fiscal year ended January 31, 2017 as filed with the SEC. At grant
date, we had estimated that the maximum level of shares would vest over a two-year cycle
pursuant to the 2015 Stock Plan based on the stock price at date of grant (approximately
$12.93 per share), as reflected in the fair value above. The amounts in this column do
not necessarily correspond to the actual value that will be realized by the named executive
officer. The level of award (zero, target or maximum) and final vesting is based on the
Board of Director’s opinion as to the performance of the Company and management
in the entire two-year cycle.
|
|
|
(2)
|
Represents (i) for fiscal 2017, a discretionary performance
bonus and, (ii) for fiscal 2016, a combined discretionary and contractual performance bonus.
|
|
|
(3)
|
Represents $25,000 in life insurance premiums paid
by the Company and a $9,500 per annum auto allowance.
|
|
|
(4)
|
Represents (i) for fiscal 2017, a discretionary performance
bonus, and (ii) for fiscal 2016, discretionary performance bonuses of $20,000 and $5,574 and a contractual performance bonus of
$35,000.
|
|
|
(5)
|
Represents (i) for fiscal 2017, a discretionary performance
bonus, and (ii) for fiscal 2016, discretionary performance bonus of $20,000 and a contractual performance bonus of $35,000.
|
|
|
(6)
|
Represents an annual auto allowance.
|
|
|
(7)
|
Represents (i) for fiscal 2017, a discretionary performance
bonus, and (ii) for fiscal 2016, a contractual performance bonus.
|
|
|
(8)
|
At the time of Mr. Bachelder’s retirement on
March 10, 2017, the Board agreed that the 10,402 shares of performance-based restricted stock awarded to Mr. Bachelder on July
27, 2015 pursuant to the 2015 Stock Plan, which vest on July 27, 2017, shall continue to vest pursuant to their terms, subject
to Mr. Bachelder’s continued service as a director of the Company.
|
|
|
(9)
|
Represents amount reimbursement for healthcare expenses,
as Mr. Bachelder does not participate in the Company medical plan.
|
NARRATIVE
TO SUMMARY COMPENSATION TABLE
We are party to employment agreements
with our named Executive Officers, a summary of the terms of which are set forth below.
Christopher
J. Ryan
serves as Chief Executive Officer, President and Secretary of the Company. Mr. Ryan also serves as President and
Chief Operating Officer or Director and Secretary/Assistant Secretary of all of the Company’s subsidiaries. Mr. Ryan is
party to an employment agreement with the Company, dated effective as of April 16, 2010, which agreement automatically renews
for successive two year periods, unless notice not to renew is provided by either party pursuant to the terms of the employment
agreement. Pursuant to the agreement, Mr. Ryan was paid an annual base salary of $400,000 in each of FY17 and FY16. Mr. Ryan’s
base salary has not been increased since February 2, 2006. Pursuant to the agreement, Mr. Ryan is eligible to receive an incentive
bonus payment based upon increases in earnings per share (“EPS”) as set by the Compensation Committee, in its discretion,
and be paid an annual bonus calculated based upon $3,000 per each penny of EPS over a predetermined amount set by the Board at
the beginning of each fiscal year, subject to certain limitations. Mr. Ryan was paid a discretionary performance bonus of $100,000
for FY17 and he was paid a combined discretionary and contractual performance bonus of $150,000 for FY16. During fiscal 2017,
Mr. Ryan was not granted any restricted stock. During fiscal 2016, the Board determined that a performance-based restricted stock
award made to Mr. Ryan during fiscal 2013 under the 2012 Stock Incentive Plan was earned at the maximum level; accordingly, during
fiscal 2016, Mr. Ryan was issued 41,719 shares of common stock. The Company granted Mr. Ryan, during fiscal 2016, under the 2015
Stock Plan, a performance-based award of up to 7,000 restricted shares based on maximum performance level, subject to vesting
in fiscal 2018. Mr. Ryan participates in the Company’s benefit plans and is entitled to the benefits available to all other
senior executives, including, without limitation, health insurance coverage, disability and life insurance, and an annual car
allowance. Pursuant to his employment agreement, Mr. Ryan is subject to non-compete and confidentiality restrictions which, in
this case of non-compete, cover the term of his employment and for a period of one year thereafter. Potential payments to Mr.
Ryan in connection with any termination or change of control are discussed below under “Potential Payments Upon Termination.”
Teri W. Hunt
serves as Chief Financial Officer of the Company. Pursuant to the terms of her employment agreement with the Company,
Ms. Hunt’s term of employment is for a period of three years commencing on November 10, 2015 and will expire on November
9, 2018, unless earlier terminated pursuant to the terms of the agreement. Ms. Hunt was paid an annual base salary of $215,000
in FY17 and FY16. Pursuant to her agreement, Ms. Hunt is also eligible to receive an annual bonus under an incentive compensation
plan as finally determined by the Compensation Committee. The annual bonus is between 80% and 120% of Ms. Hunt’s target
bonus amount of $35,000, subject to adjustment from time to time by the Compensation Committee, and calculated based upon the
Company’s actual EPS as compared with an EPS target for such year established by the Board of the Company with Ms. Hunt’s
input. For fiscal 2017, Ms. Hunt was paid a discretionary performance bonus of $17,500. In fiscal 2016, she earned the target
bonus of $35,000 along with a discretionary performance bonuses of $20,000 and $5,573. During fiscal 2016, the Board determined
that a performance-based restricted stock award made to Ms. Hunt during fiscal 2013 under the 2012 Stock Incentive Plan was earned
at the maximum level; accordingly, during fiscal 2016, Ms. Hunt was issued 11,000 shares of common stock. The Company granted
to Ms. Hunt, during fiscal 2016, under the 2015 Stock Plan, a performance-based award for up to 7,712 restricted shares based
on maximum performance level, subject to vesting in fiscal 2018. Ms. Hunt participates in Company’s benefit plans and is
entitled to the benefits available to all other senior executives, including health insurance coverage, disability and life insurance.
Pursuant to her employment agreement, Ms. Hunt is subject to non-compete and confidentiality restrictions which, in the case of
non-compete, cover the term of her employment and for a period of one year thereafter. The potential payments to Ms. Hunt in connection
with any termination are discussed below under “Potential Payments Upon Termination.”
Charles D.
Roberson
serves as our Senior Vice President International Sales. Pursuant to the terms of his employment agreement with
the Company, Mr. Roberson’s term of employment is for a period of three years commencing on July 31, 2015 and will expire
on July 31, 2018, unless earlier terminated pursuant to the terms of the agreement. Mr. Roberson was paid an annual base salary
of $215,000 in FY17 and FY16. Pursuant to his agreement, Mr. Roberson is also eligible to receive an annual bonus under an incentive
compensation plan as finally determined by the Compensation Committee. The annual bonus is between 80% and 120% of Mr. Roberson’s
target bonus amount of $35,000, subject to adjustment from time to time by the Compensation Committee, and calculated based upon
the Company’s actual EPS as compared with an EPS target for such year established by the Board of the Company with Mr. Roberson’s
input. For fiscal 2017, Mr. Roberson was paid a discretionary performance bonus of $17,500. For fiscal 2016, he earned the target
bonus of $35,000 along with a discretionary performance bonus of $20,000. During fiscal 2016, the Board determined that a performance-based
restricted stock award made to Mr. Roberson during fiscal 2013 under the 2012 Stock Incentive Plan was earned at the maximum level;
accordingly, during fiscal 2016, Mr. Roberson was issued 13,500 shares of common stock. The Company granted Mr. Roberson, during
fiscal 2016, under the 2015 Stock Plan, a performance-based award for up to 7,712 restricted shares based on maximum performance
level, subject to vesting in fiscal 2018. Mr. Roberson participates in Company’s benefit plans and is entitled to the benefits
available to all other senior executives, including health insurance coverage, disability and life insurance and an annual car
allowance. Pursuant to his employment agreement, Mr. Roberson is subject to non-compete and confidentiality restrictions which,
in the case of non-compete, cover the term of her employment and for a period of one year thereafter. The potential payments to
Mr. Roberson in connection with any termination are discussed below under “Potential Payments Upon Termination.”
Stephen M.
Bachelder
served as our Chief Operating Officer until his retirement on March 10, 2017. Mr. Bachelder’s employment
agreement with the Company expired on March 1, 2017. Pursuant to the employment agreement, Mr. Bachelder was paid an annual base
salary $290,000 in FY17 and FY16. Mr. Bachelder was also eligible to receive an annual bonus under an incentive compensation plan
as finally determined by the Compensation Committee. The annual bonus was between 80% and 120% of Mr. Bachelder’s target
bonus amount of $85,000, subject to adjustment by the Compensation Committee from time to time, and calculated based upon the
Company’s EPS as compared with an EPS target for such year established by the Compensation Committee with Mr. Bachelder’s
input. For fiscal 2017, Mr. Bachelder was paid a discretionary performance bonus of $40,000. For fiscal 2016, Mr. Bachelder earned
the target bonus of $85,000. During fiscal 2016, the Board determined that a performance-based restricted stock award made to
Mr. Bachelder during fiscal 2013 under the 2012 Stock Incentive Plan was earned at the maximum level; accordingly, during fiscal
2016, Mr. Bachelder was issued 37,672 shares of common stock. Mr. Bachelder also received, during fiscal 2016, under the 2015
Stock Plan, a performance-based award for up to 10,402 shares based on maximum performance level, subject to vesting in fiscal
2018. At the time of Mr. Bachelder’s retirement on March 10, 2017, the Board agreed that the 10,402 shares of performance-based
restricted stock awarded to Mr. Bachelder on July 27, 2015 pursuant to the 2015 Stock Plan, which vest on July 27, 2017, shall
continue to vest pursuant to their terms, subject to Mr. Bachelder’s continued service as a director of the Company. Mr.
Bachelder participates in benefit plans and is entitled to the other benefits available to all other senior executives, including
health insurance coverage, disability and life insurance. Pursuant to his employment agreement, Mr. Bachelder is subject to non-compete
and confidentiality restrictions during the term of his employment and for a period of 18 months and five years, respectively,
thereafter. The potential payments to Mr. Bachelder in connection with any termination are discussed below under “Potential
Payments Upon Termination.”
OUTSTANDING EQUITY
AWARDS AT FISCAL 2017 YEAR-END
The following table
sets forth information with respect to outstanding equity-based awards at January 31, 2017 for our named executive officers.
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock that
have not
Vested (#)
|
|
|
Market
Value of
Shares or
Units of
Stock that
have not
Vested ($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
have not
Vested
(#)
(1)
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout of
Unearned
Shares,
Units or
Other
Rights that
have not
Vested
($)
(1)
|
|
Christopher J. Ryan,
CEO
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,000
|
|
|
$
|
90,510
|
|
Teri W. Hunt,
CFO
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,712
|
|
|
$
|
99,716
|
|
Charles D. Roberson,
Sr. VP International Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,712
|
|
|
$
|
99,716
|
|
Stephen M. Bachelder,
COO
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,402
|
(2)
|
|
$
|
134,498
|
|
|
|
(1)
|
Shares and their values
are reported under SEC rules in this chart reflect the total over the two-years of the
2015 Stock Plan at the stock price at January 31, 2017 of $12.93, and at the maximum
possible level for the plan. The level of award (zero, target or maximum) and final vesting
is based on the Board of Director’s opinion as to the performance of the Company
and management in the entire two-year cycle. Actual total number of shares awarded may
be less, and the awards are spread over the two-year vesting period of the plan, not
just one, as implied by the chart.
|
|
|
(2)
|
At
the time of Mr. Bachelder’s retirement on March 10, 2017, the Board agreed that
10,402 shares of performance-based restricted stock awarded to Mr. Bachelder on July
27, 2015 pursuant to the Company’s 2015 Stock Plan, which vest on July 27, 2017,
shall continue to vest pursuant to their terms, subject to Mr. Bachelder’s continued
service as a director of the Company.
|
POTENTIAL PAYMENTS UPON TERMINATION
Christopher J. Ryan
Pursuant to the terms
of his employment agreement, if Mr. Ryan is terminated by the Company without cause (as defined in the employment agreement) or
he terminates his employment for “good reason” (as defined in the employment agreement), the Company is obligated
to pay him, (a) within 30 days after the date of termination, his accrued and unpaid annual base salary through the date of termination,
and accrued benefits payable under compensation plans, programs or arrangements, and accrued vacation pay (collectively, the “Accrued
Obligations”), (b) at the time incentive bonuses are paid to other executives, his pro rata share of the Current Target
Bonus (as defined in the employment agreement), if any, payable during the year of his termination, and (c) his base salary and
Current Target Bonus as though he had remained in the Company’s employ for the remainder of the Employment Period (as defined
in the employment agreement) or for a period beginning on the date of termination and ending two years thereafter, whichever is
longer. The Company may elect to make the balance of such payments then remaining in a lump sum discounted to present value. In
addition, Mr. Ryan would be entitled to a continuation of his medical and health benefits for a period of two years beginning
on the date of termination.
In the event a Triggering
Transaction” (defined as a “change of control,” as defined in the employment agreement) occurs during the term
of his employment agreement and within four years after the Triggering Transaction, the Company terminates Mr. Ryan without cause
or Mr. Ryan terminates his employment for good reason, or if one of the aforementioned terminations occurs within six months prior
to the earlier of (i) a Triggering Transaction or (ii) the execution of an agreement which eventually results in a Triggering
Transaction, then Mr. Ryan shall be entitled to, as of the date of termination or the date of the Triggering Transaction, as applicable,
(i) the Accrued Obligations, (ii) his pro rata share of the Current Target Bonus, if any, payable during the year of his termination,
and (iii) a severance amount equal to 3.99 times an amount equal to his then current annual base salary and Current Target Bonus.
If any of these payments provided to Mr. Ryan would be subject to the excise tax imposed by Section 4999 of the Code, Mr. Ryan
shall be entitled to a Gross-up Payment (as defined in the employment agreement). In addition, all stock options held by Mr. Ryan
shall immediately vest and be exercisable.
In
the event Mr. Ryan’s employment is terminated as a result of his death or disability (as defined in the employment agreement)
or if Mr. Ryan terminates his employment other than for good reason, the employment agreement shall immediately terminate and
Mr. Ryan or his representatives or beneficiaries shall be entitled to all Accrued Obligations and all other accrued amounts, if
any, to which he is entitled as of the date of termination in connection with any benefits or under any incentive compensation
plan or programs.
Teri W. Hunt
Pursuant to the terms of Ms. Hunt’s
employment agreement, if Ms. Hunt’s employment is terminated “for cause” (as defined in the employment agreement),
her employment agreement would terminate immediately and she would be paid her accrued and unpaid base salary through the date
of termination, any annual bonus earned for the year prior to the year of termination but not yet paid and any other employee
benefits generally paid by the Company through the date of termination (collectively, the “TH Accrued Obligations”).
In the event Ms. Hunt terminates her employment for “good reason” (as defined in the employment agreement) or she
is terminated by the Company without cause, Ms. Hunt is entitled to be paid (a) the TH Accrued Obligations, (b) an additional
twelve months of her then current base salary payable in equal monthly installments, and (c) a pro rata portion of any annual
bonus earned for the year of termination through the date of termination, as determined in good faith by the Compensation Committee.
In the event Ms. Hunt is terminated without cause or if she terminates for good reason within 24 months after a change in control
(as defined in the employment agreement), the Company is obligated to pay her (a) the TH Accrued Obligations, (b) a lump sum amount
equal to 24 months of base salary as in effect at termination or during the year immediately prior to the change in control, whichever
is greater, and (c) two times the Target Bonus Amount (as defined in the employment agreement) in effect at termination or the
year immediately prior to the change in control, whichever is greater. In the event of Ms. Hunt’s death or disability (as
defined in the employment agreement), Ms. Hunt or her beneficiary or estate is entitled to receive the Accrued Obligations and
a pro-rata portion of her annual bonus, if any, for the year of termination through the date of termination. Ms. Hunt has the
right to terminate her agreement at any time on 60 days written notice, in which event she will be entitled to the TH Accrued
Obligations.
Charles D. Roberson
Pursuant
to the terms of Mr. Roberson’s employment agreement, if Mr. Roberson’s employment is terminated “for cause”
(as defined in the employment agreement), his employment agreement would terminate immediately and he would be paid his accrued
and unpaid base salary through the date of termination, any annual bonus earned for the year prior to the year of termination
but not yet paid and any other employee benefits generally paid by the Company through the date of termination (collectively,
the “CR Accrued Obligations”). In the event Mr. Roberson terminates his employment for “good reason” (as
defined in the employment agreement) or he is terminated by the Company without cause, Mr. Roberson is entitled to be paid (a)
the CR Accrued Obligations, (b) an additional twelve months of his then current base salary payable in equal monthly installments,
and (c) a pro rata portion of any annual bonus earned for the year of termination through the date of termination, as determined
in good faith by the Compensation Committee. In the event Mr. Roberson is terminated without cause or if he terminates for good
reason within 24 months after a change in control (as defined in the employment agreement), the Company is obligated to pay him
(a) the CR Accrued Obligations, (b) a lump sum amount equal to 24 months of base salary as in effect at termination or during
the year immediately prior to the change in control, whichever is greater, and (c) two times the Target Bonus Amount (as defined
in the employment agreement) in effect at termination or the year immediately prior to the change in control, whichever is greater.
In the event of Mr. Roberson’s death or disability (as defined in the employment agreement), Mr. Roberson or his beneficiary
or estate is entitled to receive the Accrued Obligations and a pro-rata portion of his annual bonus, if any, for the year of termination
through the date of termination. Mr. Roberson has the right to terminate his agreement at any time on 60 days written notice,
in which event he will be entitled to the CR Accrued Obligations.
Stephen M. Bachelder
Mr. Bachelder’s employment agreement
with us expired on March 1, 2017 and he retired as our Chief Operating Officer on March 10, 2017. At the time of his retirement,
the Board agreed that the outstanding performance-based restricted stock awarded to Mr. Bachelder on July 27, 2015 pursuant to
the Company’s 2015 Stock Plan, which vest on July 27, 2017, shall continue to vest pursuant to its terms, subject to Mr.
Bachelder’s continued service as a director of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth certain information regarding the beneficial ownership of the Company’s outstanding common stock as of April
21, 2017, the record date, including shares as to which a right to acquire ownership within 60 days of the record date exists
(for example, upon vesting of restricted shares) within the meaning of Rule 13d-3(d)(1) under the Exchange Act of 1934, by: (i)
each person who is known by the Company to beneficially own more than 5% of the Common Stock; (ii) each of the named executive
officers of the Company; (iii) each director and nominee for director of the Company; and (iv) all directors and executive officers
of the Company as a group.
Except as otherwise
noted, the persons named in the table have sole voting and investment power with respect to their shares of Common Stock shown
as beneficially owned by them and the address for each beneficial owner, unless otherwise noted, is c/o Lakeland Industries, Inc.,
3555 Veterans Memorial Highway, Suite C, Ronkonkoma, New York 11779.
Directors and Officers
Name
|
|
Amount and Nature of
Beneficial Ownership
(1)
|
|
|
Percent
of Class
|
|
|
Christopher J. Ryan
|
|
|
424,518
|
|
|
|
5.8
|
%
|
|
Stephen M. Bachelder
|
|
|
45,870
|
|
|
|
*
|
|
|
A. John Kreft
|
|
|
34,663
|
(2)
|
|
|
*
|
|
|
Thomas McAteer
|
|
|
43,277
|
(3)
|
|
|
*
|
|
|
Teri W. Hunt
|
|
|
58
|
|
|
|
*
|
|
|
Charles D. Roberson
|
|
|
13,428
|
|
|
|
*
|
|
|
James M. Jenkins
|
|
|
5,221
|
(4)
|
|
|
*
|
|
|
All officers and directors as a group (8 persons)
|
|
|
570,060
|
(5)
|
|
|
7.8
|
%
|
* Less than 1%
|
|
(1)
|
Table does not include performance-based restricted stock
grants under the Company’s 2015 Stock Plan (performance vesting at end of two years, date of grant July 2015) at baseline
or maximum, as the number of restricted shares to be awarded is not determinable at the time of grant and the recipients do not
have the right to vote or other elements of beneficial ownership. Unvested shares of restricted stock included in the footnotes
are deemed beneficially owned because the respective holders thereof have the right to vote such shares.
|
|
|
(2)
|
Includes 8,819 restricted shares issued pursuant to the
2015 Stock Plan, subject to a two-year vesting.
|
|
|
(3)
|
Includes 18,359 restricted
shares issued pursuant to the Director fee in stock program which vest quarterly from
April 30, 2016 to July 31, 2017.
|
|
|
(4)
|
Represents restricted shares issued pursuant to the 2015
Stock plan, subject to two-year vesting.
|
|
|
(5)
|
Includes an aggregate of 32,399 restricted shares.
|
|
Security Ownership of Certain Beneficial Owners
|
|
Amount and Nature
of Beneficial
Ownership
|
|
|
Percent of Shares of
Common Stock
Outstanding
|
|
|
|
|
|
|
|
|
|
Wellington Trust Company, NA
280 Congress Street, Boston, MA 02210
|
|
|
702,639
|
(6)
|
|
|
9.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP
6300 Bee Cave Road, Bldg #1
Austin, Texas 78746
|
|
|
413,627
|
(7)
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Renaissance Technologies LLC
800 Third Avenue
New York, NY 10022
|
|
|
384,802
|
(8)
|
|
|
5.3
|
%
|
|
|
(6)
|
Information obtained from a Schedule 13G/A filed with the
SEC on February 9, 2017 by Wellington Trust Company, NA. According to the Schedule 13/A, the securities to which the Schedule
13G/A relates are owned of record by clients of Wellington Trust Company, NA in its capacity as investment adviser, and those
clients have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such
securities. According to the Schedule 13G/A, no such client is known to have such right or power with respect to more than five
percent of this class of securities except as follows: (i) WTC-CTF Micro Cap Equity, and (ii) Wellington Trust Company, NA, National
Association Multiple Common Trust Funds Trust, Micro Cap Equity Portfolio.
|
|
|
(7)
|
Information obtained from a Schedule 13G/A filed with the
SEC on February 09, 2017 by Dimensional Fund Advisors LP. According to the Schedule 13G/A, Dimensional Fund Advisors LP, an investment
adviser, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves
as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies,
trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund
Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager,
Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment
power over the securities of Lakeland that are owned by the Funds, and may be deemed to be the beneficial owner of the shares
of Lakeland held by the Funds. However, all such securities are owned by the Funds. Dimensional disclaims beneficial ownership
of such securities.
|
|
|
(8)
|
Based on the Schedule 13G/A filed with the Securities and
Exchange Commission on February 14, 2017 by Renaissance Technologies LLC and its majority owner, Renaissance Technologies Holdings
Corporation.
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
It is the Company’s
policy that any material transaction involving our directors, executive officers and any other person that is a “related
person” within the meaning of SEC regulations is required to be reported to our Chief Executive Officer. In addition, pursuant
to Nasdaq Rule 5630(a), all related party transactions are required to be reported to the Audit Committee, which, with the assistance
of legal counsel and such other advisors as it deems appropriate, is responsible for reviewing, approving or ratifying any such
related party transaction. The Audit Committee shall approve only those related party transactions that it believes are in, or
not inconsistent with, the best interests of the Company. A written policy to this effect has been adopted by our Board.
In addition, the Audit
Committee generally conducts an annual review of all such transactions. In addition, every quarter, a report maintained by the
Company’s accounting staff is reviewed and approved by the Chief Executive Officer and Chief Financial Officer.
There were no related party transactions
entered into, or proposed, for either fiscal year ended January 31, 2017 or January 31, 2016.
PROPOSAL NO.
4
APPROVAL OF
2017 EQUITY INCENTIVE PLAN
Our Board has
declared it advisable, has adopted and is submitting for stockholder approval the Lakeland Industries, Inc. 2017 Equity Incentive
Plan (the “Plan”). The purpose of the Plan is to attract and retain key personnel and to provide a means for directors,
officers, and employees to acquire and maintain an interest in our Company and share in our growth and value.
The principal
features of the Plan are summarized below, but the summary is qualified in its entirety by reference to the Lakeland Industries,
Inc. 2017 Equity Incentive Plan, which is attached as Appendix A to this Proxy Statement.
Highlights
of the 2017 Equity Incentive Plan
The Plan permits
the grant of (i) incentive stock options (“ISOs”); (ii) nonqualified stock options (“NQSOs” and, together
with ISOs, “Options”); (iii) restricted stock awards; (iv) restricted stock units (“RSUs”); (v) awards
based upon achievement of specified performance conditions (“Performance Awards”); and (vi) stock appreciation rights
(“SARs”), which we refer to collectively as Awards, as more fully described below.
Some of the key
features of the Plan that reflect our commitment to effective management of incentive compensation are as follows:
No
Repricing of Options and SARs.
The prohibits, without stockholder approval, the repricing of Options and SARs.
No
In-the-Money Options or SARs.
The Plan prohibits the grant of Options or SARs with an exercise price or base price less than
the fair market value of our common stock as of the date of grant.
Section
162(m) Qualification.
The Plan is designed to allow Awards to be made under the Plan to qualify as performance-based compensation
under Section 162(m) of the Code.
Recoupment.
Awards made after the Plan is approved may be subject to rescission, cancellation or recoupment, in whole or in part, under
any current or future “clawback” or similar policy maintained by us that is applicable to any participant.
Independent
Administration.
A committee initially comprised of the Compensation Committee or such other Board committee designated by
the Board of at least two independent directors (the “Committee”) will be responsible for the general administration
of the Plan with respect to Awards granted to employees. In general, the full Board administers the Plan with respect to Awards
made to non-employee directors.
All Awards granted
under the Plan are governed by separate written agreements, or award agreements, between us and the participants. No Awards may
be granted after expiration of the Plan, although Awards granted before that time will remain valid in accordance with their terms.
The Committee
may grant Awards upon such terms and conditions (not inconsistent with the provisions of the Plan) as it may consider appropriate.
Any of our employees, officers and directors or those of our affiliates, are eligible to participate in the Plan if selected by
the Committee. In its discretion, the Committee may delegate all or part of its authority and duties with respect to granting
Awards to one or more individuals, provided applicable law so permits.
Subject to certain
adjustments, the maximum number of shares of common stock that may be issued under the Plan in connection with Awards is 360,000,
all of which shares may be granted as ISOs. Upon stockholder approval of the Plan, no further awards shall be granted pursuant
to either of our 2012 Stock Incentive Plan or 2015 Stock Plan (collectively, the “Prior Plans”), except that any shares
of common stock that are covered under the terms of an award issued pursuant to any of the Prior Plans which would otherwise become
available for reuse under the terms of such Prior Plan, shall instead become available for issuance under the Plan. The aggregate
grant date fair market value of Awards granted under the Plan, together with cash paid, to a non-employee director for services
during any fiscal year shall not exceed $300,000. In accordance with the requirements under Section 162(m) of the Code, the maximum
number of shares of common stock underlying or subject to Awards that may be granted during any calendar year to any individual
participant shall be fifty percent (50%) of the maximum number of shares that may be issued in respect of Awards under the Plan.
In the event of any stock dividend, recapitalization, forward stock split or reverse stock split, reorganization, division, merger,
consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution or other similar
corporate transaction or event that affects our common stock, the Committee shall make appropriate adjustment in the number and
kind of shares authorized by the Plan and covered under outstanding Awards as it determines appropriate and equitable. Shares
of our common stock subject to Awards that expire unexercised or are otherwise cancelled or forfeited, or such Award is settled
in cash in lieu of shares, shall again be available for Awards under the Plan. Except for expired, forfeited or cancelled Shares,
the Plan is intended to restrict the “recycling” of shares of common stock back into the Plan; this means (i) shares
used or withheld in settlement of a tax withholding obligation associated with an Award, (ii) shares tendered or held back upon
the exercise of an Option in satisfaction of the exercise price payable upon exercise of an Option, or (iii) shares subject to
a SAR that are not issued or delivered as a result of the net stock settlement of an outstanding SAR, will not become available
for grant under the Plan.
Options
.
An Option entitles the holder to purchase from us a stated number of shares of common stock. An ISO may only be granted to an
employee of ours or our affiliates (provided applicable law so permits). The Committee will specify the number of shares of common
stock subject to each Option and the exercise price for such Option, provided that the exercise price may not be less than the
fair market value of a share of common stock on the date the Option is granted. Notwithstanding the foregoing, if ISOs are granted
to any participant who holds, directly or indirectly, 10% or more of the total combined voting power of all classes of stock of
the Company (“10% stockholder”), the exercise price shall not be less than 110% of the fair market value of common
stock on the date the Option is granted. Generally, all or part of the exercise price may be paid either by certified or bank
check or such other means as the Committee will accept.
All Options shall
not vest for at least one year after the date the Option is granted, except as (i) the Committee may determine or permit otherwise
in the event of a change in control (as defined in the Plan), or (ii) may be required or otherwise be deemed advisable by the
Committee in connection with Options granted through the assumption of, or substitution for, outstanding awards previously granted
by a company acquired by the Company or any of its affiliates or with which the Company or any of its affiliates combines. The
maximum term of an Option shall be determined by the Committee on the date of grant but shall not exceed 10 years (5 years in
the case of ISOs granted to any 10% stockholder). In the case of ISOs, the aggregate fair market value (determined as of the date
of grant) of common stock with respect to which such ISOs become exercisable for the first time during any calendar year cannot
exceed $100,000. ISOs granted in excess of this limitation will be treated as NQSOs.
If a participant
terminates employment with us (or our affiliates) due to death or disability, the participant’s unexercised Options may
be exercised, to the extent they were exercisable on the termination date, for a period of twelve months from the termination
date or until the expiration of the original Option term, if shorter. If the participant employment with us (or our affiliates)
is terminated for cause (as defined in the Plan), all unexercised Options (whether vested or unvested) shall terminate and be
forfeited on the termination date. If the participant’s employment terminates for any other reason, any vested but unexercised
Options may be exercised by the participant, to the extent exercisable at the time of termination, for a period of 90 days from
the termination date (or such time as specified by the Committee at the time of grant) or until the expiration of the original
Option term, whichever period is shorter. Unless otherwise provided by the Committee, any Options that are not exercisable at
the time of termination of employment shall terminate and be forfeited on the termination date.
Restricted
Stock
. A restricted stock award is a grant of shares of common stock, which may be subject to forfeiture restrictions
during a restriction period. Such restriction period shall be for a minimum of one year, except as (i) the Committee may determine
or permit otherwise in the event of a change in control, or (ii) may be required or otherwise be deemed advisable by the Committee
in connection with restricted stock granted through the assumption of, or substitution for, outstanding awards previously granted
by a company acquired by the Company or any of its affiliates or with which the Company or any of its affiliates combines. The
Committee may condition the expiration of the restriction period, if any, upon: (i) the participant’s continued service
over a period of time with us or our affiliates; (ii) the achievement by the participant, us or our affiliates of any other performance
goals set by the Committee; or (iii) any combination of the above conditions as specified in the award agreement. If the specified
conditions are not attained, the participant will forfeit the portion of the restricted stock award with respect to which those
conditions are not attained, and the underlying common stock will be forfeited to us. At the end of the restriction period, if
the conditions, if any, have been satisfied, the restrictions imposed will lapse with respect to the applicable number of shares.
During the restriction period, at the discretion of the Committee, a participant will have the right to vote the shares underlying
the restricted stock. However, all dividends will remain subject to restriction until the stock with respect to which the dividend
was issued lapses.
RSUs
.
RSUs are granted in reference to a specified number of shares of common stock and entitle the holder to receive, on achievement
of specific performance goals established by the Committee, after a period of continued service with us or our affiliates or any
combination of the above as set forth in the applicable award agreement, one share of common stock for each unit or, at the sole
discretion of the Committee, an amount in cash equal to the fair market value, at the time of distribution, of one share for each
unit. All terms governing RSUs, such as vesting, time and form of payment and termination of units shall be set forth in the applicable
award agreement, provided, however, the period commencing with the date of grant of the RSU and ending at such time or times as
specified by the Committee shall be for a minimum of one year, except as (i) the Committee may determine or permit otherwise in
the event of a change in control, or (ii) may be required or otherwise be deemed advisable by the Committee in connection with
RSUs granted through the assumption of, or substitution for, outstanding awards previously granted by a company acquired by the
Company or any of its affiliates or with which the Company or any of its affiliates combines.
Performance
Awards
. The Committee may grant Performance Awards denominated as a number of shares of common stock or a specified number
of other Awards, which may be earned upon achievement or satisfaction of performance goals as may be specified by the Committee.
The vesting period in respect of any Performance Award shall be for a minimum of one year, except as (i) the Committee may determine
or permit otherwise in the event of a change in control, or (ii) may be required or otherwise be deemed advisable by the Committee
in connection with Performance Awards granted through the assumption of, or substitution for, outstanding awards previously granted
by a company acquired by the Company or any affiliate or with which the Company or any affiliate combines. The Committee may provide
in an award agreement that the performance goals for the Award be adjusted to include or exclude the impact of items such as realized
investment gains and losses, extraordinary, unusual, non-recurring or infrequently recurring items, asset write-downs, effects
of accounting changes, currency fluctuations, acquisitions, divestitures, reserve-strengthening and other non-operating items,
or any other item, event or circumstance that would not cause an Award to fail to qualify as “performance-based compensation”
under Section 162(m) of the Code to the extent such Award is intended to qualify as “performance-based compensation.”
Performance goals
may be linked to a variety of factors including the participant’s completion of a specified period of employment or service
with us or an affiliated company. Additionally, performance goals can include objectives stated with respect to us. The performance
goals shall be limited to specified levels of or increases in the Company’s or subsidiary’s return on equity, diluted
earnings per share, total earnings, earnings growth, return on capital, return on assets, earnings before interest and taxes (“EBIT”),
earnings before interest, taxes, depreciation and amortization (“EBITDA”), sales, sales growth, gross margin, return
on investment, increase in the fair market value of the each share of common stock, share price (including but not limited to,
growth measures and total stockholder return), net earnings, cash flow (including, but not limited to, operating cash flow and
free cash flow), cash flow return on investment (which equals net cash flow divided by total capital), inventory turns, financial
return ratios, total return to stockholders, market share, earnings measures/ratios, economic value added (“EVA”),
balance sheet measurements such as receivable turnover, internal rate of return, increase in net present value or expense targets,
working capital measurements (such as average working capital divided by sales), customer satisfaction surveys and productivity.
Nothing in the
Plan prohibits the Committee from granting any Award subject to performance vesting conditions which is not intended to qualify
as “performance-based compensation” under Section 162(m) of the Code. The participant shall not have any stockholder
rights with respect to the shares of common stock subject to a Performance Award until the shares are actually issued thereunder.
Stock Appreciation
Rights
. A SAR entitles the participant to receive, upon exercise of the SAR, the increase in the fair market value of
a specified number of shares of common stock from the date of the grant of the SAR and the date of exercise payable in cash, in
shares of common stock valued at fair market value, or any combination thereof, as determined by the Committee. Any grant may
specify a waiting period or periods before the SAR may become exercisable and permissible dates or periods on or during which
the SAR shall be exercisable, and may specify the circumstances under which a SAR may vest, including based on achievement of
performance goals and/or future employment or service requirements. A grant may also specify that a SAR may be exercised only
in the event of a change in control or other similar transaction or event. No SAR may be granted with a vesting period that is
shorter than one year, except as (i) the Committee may determine or permit otherwise in the event of a change in control, or (ii)
may be required or otherwise be deemed advisable by the Committee in connection with SARs granted through the assumption of, or
substitution for, outstanding awards previously granted by a company acquired by the Company or any affiliate or with which the
Company or any affiliate combines. The Committee may provide that a SAR is deemed to be exercised at the close of business on
the date the SAR expires if such an exercise would result in payment to the SAR holder.
Transferability
and other Award Restrictions.
The Committee may impose restrictions on the grant, exercise or payment of an Award as it
determines appropriate. Generally, Awards granted under the Plan shall be nontransferable except by will or by the laws of descent
and distribution. For Awards (other than Options as set forth above), in the event of termination of employment by reason of death
or disability of a participant who holds such Award (other than Options) as to which such Award has not been fully vested, the
Committee may, in its sole discretion, take any action that it deems to be equitable under the circumstances or in the best interests
of our Company, including without limitation waiving or modifying any limitation, requirement, performance condition or goal with
respect to any such Award; provided that, the amount of shares or cash obtained by virtue of any accelerated vesting shall not
exceed the number determined by multiplying the number of shares of common stock underlying the Award/or cash value by a fraction,
the numerator of which is the number of full months during the relevant restriction period of such Award during all of which the
participant was an employee or director of the Company or its subsidiaries and the denominator of which is the number of full
calendar months in such restriction period; and provided further that, in the case of any Award subject to Section 409A of the
Code, the Committee shall not take any action unless permissible under Section 409A of the Code. No participant shall have any
rights as a stockholder with respect to shares covered by Options, RSUs, or SARs unless and until such Awards are settled in shares
of common stock.
Compliance
with Law
.
No Option shall be exercisable, no SAR shall be settled, no shares of common stock shall be issued, no certificates
for shares of common stock shall be delivered and no payment shall be made under the Plan except in compliance with all applicable
laws.
Amendment
and Termination
.
The Board may amend, suspend or terminate the Plan and the Committee may amend any outstanding Award
at any time; provided, however, that no such amendment or termination may adversely affect Awards then outstanding without the
holder’s permission.
Change in Control
.
In the
event of a change in control, the Committee may, on a participant-by-participant basis (i) cause any or all outstanding Awards
to become vested and immediately exercisable (as applicable), in whole or in part; (ii) cancel any unvested Award or unvested
portion thereof, with or without consideration; (iii) cancel any Award in exchange for a substitute award; (iv) redeem any restricted
stock or RSU for cash and/or other substitute consideration with value equal to fair market value of an unrestricted share of
common stock on the date of the change in control; (v) cancel any Option in exchange for cash and/or other substitute consideration
with a value equal to: (A) the number of shares subject to that Option, multiplied by (B) the difference, if any, between the
fair market value per share on the date of the change in control and the exercise price of that Option; provided, that if the
fair market value per share on the date of the change in control does not exceed the exercise price of any such Option, the Committee
may cancel that Option without any payment of consideration therefor; (vi) take such other action as the Committee shall determine
to be reasonable under the circumstances; and/or (vii) in the case of any Award subject to Section 409A of the Code, such Award
shall vest and be distributed only in accordance with the terms of the applicable award agreement and the Committee shall only
be permitted to use discretion to the extent that such discretion would be permitted under Section 409A of the Code. In the discretion
of the Committee, any cash or substitute consideration payable upon cancellation of an Award may be subjected to (i) vesting terms
substantially identical to those that applied to the cancelled Award immediately prior to the change in control, or (ii) earn-out,
escrow, holdback or similar arrangements, to the extent such arrangements are applicable to any consideration paid to stockholders
in connection with the change in control. The Committee, in its sole discretion, has the authority to determine the application
of the foregoing provisions.
Effective Date
.
If approved
by our stockholders, the Plan will become effective immediately and will remain available for the grant of Awards until June 21,
2027.
U.S. Federal
Income Tax Consequences
The following
is a general summary of the material U.S. federal income tax consequences of the grant and exercise and vesting of Awards under
the Plan and the disposition of shares acquired pursuant to the exercise of such Awards. This summary is intended to reflect the
current provisions of the Code and the regulations thereunder. However, this summary is not intended to be a complete statement
of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income
tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular
circumstances of such participant.
PARTICANTS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR FEDERAL INCOME TAX CONSEQUENCES TO THEM OF PARTICIPATING
IN THE PLAN, AS WELL AS WITH RESPECT TO ANY APPLICABLE STATE OR LOCAL INCOME TAX OR OTHER TAX CONSIDERATIONS.
Options
.
There are a number of requirements that must be met for a particular Option to be treated as an ISO. One such requirement
is that common stock acquired through the exercise of an ISO cannot be disposed of before the later of (i) two years from the
date of grant of the Option, or (ii) one year from the date of its exercise. Holders of ISOs will generally incur no federal income
tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of
tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the
exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one
year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the
shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction
will be allowed to the Company for federal income tax purposes in connection with the grant or exercise of the ISO. If, within
two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through
the exercise of an ISO disposes of those shares, the participant will generally realize taxable compensation at the time of such
disposition equal to the difference between the exercise price and the lesser of the fair market value of the share on the date
of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by
the Company for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m)
of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise ISO becomes first exercisable
in any one year for shares having an aggregate value in excess of $100,000 (based on the date of grant value), the portion of
the ISO in respect of those excess shares will be treated as a NQSO.
No income will
be realized by a participant upon grant of a NQSO. Upon the exercise of a NQSO, the participant will recognize ordinary compensation
income in an amount equal to the excess, if any, of the fair market value of the underlying exercised shares over the Option exercise
price paid at the time of exercise. Such income will be subject to income tax withholdings, and the participant will be required
to pay to the Company the amount of any required withholding taxes in respect to such income. The Company will be able to deduct
this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the
Code for compensation paid to certain executives designated in those Sections.
Restricted
Stock
. A participant will not be subject to tax upon the grant of an Award of restricted stock unless the participant
otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an Award of restricted stock
becomes transferable or is no longer subject to a substantial risk of forfeiture, the participant will recognize ordinary compensation
income equal to the difference between the fair market value of the shares on that date over the amount the participant paid for
such shares, if any. Such income will be subject to income tax withholdings, and the participant will be required to pay to the
Company the amount of any required withholding taxes in respect to such income. If the participant made an election under Section
83(b) of the Code, the participant will recognize ordinary compensation income at the time of grant equal to the difference between
the fair market value of the shares on the date of grant over the amount the participant paid for such shares, if any, and any
subsequent appreciation in the value of the shares will be treated as a capital gain upon sale of the shares. Special rules apply
to the receipt and disposition of restricted shares received by officers and directors who are subject to Section 16(b) of the
Exchange Act. The Company will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable
compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and
162(m) of the Code for compensation paid to certain executives designated in those Sections.
Restricted
Stock Units
. A participant will not be subject to tax upon the grant of a RSU Award. Rather, upon the delivery of shares
or cash pursuant to a RSU Award, the participant will recognize ordinary compensation income equal to the fair market value of
the number of shares (or the amount of cash) the participant actually receives with respect to the Award. Such income will be
subject to income tax withholdings, and the participant will be required to pay to the Company the amount of any required withholding
taxes in respect to such income. The Company will be able to deduct the amount of taxable compensation recognized by the participant
for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation
paid to certain executives designated in those Sections.
Performance
Awards
.
A participant recognizes no taxable income and our Company is not entitled to a deduction when Performance Awards
are awarded. When Performance Awards vest and become payable upon the achievement of the performance goals, the participant will
recognize ordinary income equal to the fair market value of the shares received minus any amount paid for the shares, and, subject
to Section 162(m) of the Code, our Company will be entitled to a corresponding deduction. A participant’s tax basis in shares
of common stock received upon vesting will be equal to the fair market value of such shares when the participant receives them.
Upon sale of the shares, the participant will recognize short-term or long-term capital gain or loss, depending upon whether the
shares have been held for more than one year at the time of sale. Such gain or loss will be equal to the difference between the
amount realized upon the sale of the shares and the tax basis of the shares in the participant’s hands.
Stock Appreciation
Rights
.
A participant recognizes no taxable income and our Company is not entitled to a deduction when a SAR is granted.
Upon exercising a SAR, a participant will recognize ordinary income in an amount equal to the cash and/or the fair market value
of the shares received minus any amount paid for the shares, and, subject to Section 162(m) of the Code, our Company will be entitled
to a corresponding deduction. A participant’s tax basis in the shares of common stock received upon exercise of a SAR will
be equal to the fair market value of such shares on the exercise date, and the participant’s holding period for such shares
will begin at that time. Upon sale of the shares of common stock received upon exercise of a SAR, the participant will recognize
short-term or long-term capital gain or loss, depending upon whether the shares have been held for more than one year. The amount
of such gain or loss will be equal to the difference between the amount realized in connection with the sale of the shares and
the participant’s tax basis in such shares.
Section
162(m)
. In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income
tax purposes for compensation in excess of $1,000,000 per year per person paid to certain executive officers. The Plan is designed
to permit certain Awards to be awarded as performance compensation awards intended to qualify under the “performance-based
compensation” exception to Section 162(m) of the Code.
New Plan Benefits
Future grants
under the Plan will be made at the discretion of the Committee and, accordingly, are not yet determinable. In addition, the value
of the Awards granted under the Plan will depend on a number of factors, including the fair market value of the shares of common
stock on future dates, the exercise decisions made by the participants and/or the extent to which any applicable performance goals
necessary for vesting or payment are achieved. Consequently, it is not possible to determine the benefits that might be received
by participants receiving discretionary grants under, or having their annual bonus paid pursuant to, the Plan.
Interests
of Directors or Officers
The Company’s
directors may grant Awards under the Plan to themselves as well as to the Company’s officers and other employees.
Vote Required
for Approval
The affirmative vote
of the holders of a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting is required
to approve the Incentive Plan Proposal. You may vote “for,” “against” or “abstain.” If you
“abstain” from voting with respect to this proposal, your vote will have the same effect as a vote “against”
this proposal.
OUR BOARD UNANIMOUSLY
RECOMMENDS THAT OUR STOCKHOLDERS VOTE
“FOR”
THE INCENTIVE PLAN PROPOSAL
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16 (a) of the Exchange Act requires
the Company’s directors, officers and beneficial owners of more than 10% of the Common Stock (“Reporting Persons”)
to file with the SEC initial reports of ownership of the Company’s equity securities and to file subsequent reports when
there are changes in such ownership. Reporting Persons are required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based solely upon our review of the copies of all Forms 3, 4 and 5 and amendments to these forms,
we believe that all Reporting Persons complied on a timely basis with all filing requirements applicable to them with respect
to our fiscal year ended January 31, 2017, except for one Form 4 (reporting one transaction) filed late by Mr. Jenkins, two Form
4s (reporting five transactions) filed late by Mr. Bachelder, one Form 4 (reporting an option exercise and disposition of shares)
filed late by Mr. McAteer, and one Form 4 (reporting one transaction) filed late by Mr. Kreft.
STOCKHOLDER PROPOSALS-2018 ANNUAL MEETING
The submission deadline for stockholder
proposals to be included in our proxy materials for the 2018 annual meeting of stockholders (the “2018 Annual Meeting”)
pursuant to Rule 14a-8 of the Exchange Act is January 8, 2018. All proposals must be received by the Corporate Secretary at Lakeland
Industries, Inc., 3555 Veterans Memorial Highway, Suite C, Ronkonkoma, New York 11779 by the required deadline and must comply
with all other applicable legal requirements in order to be considered for inclusion in the Company’s 2018 Annual Meeting
proxy materials. Any such proposal should be submitted by certified mail, return receipt requested, or other means, including
electronic means, that allow the stockholder to prove the date of delivery.
In addition, our Bylaws require that we
be given advance notice of stockholder nominations for election to the Board and of other matters which stockholders wish to present
for action at an annual meeting of stockholders. The required notice must be delivered to the Secretary of the Company at our
principal offices not less than 90 days and not more than 120 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders. These requirements are separate from and in addition to the SEC requirements that a stockholder
must meet in order to have a stockholder proposal included in our proxy statement.
Pursuant to our Bylaws, if notice of any
stockholder proposal is received prior to February 21, 2018 or after March 23, 2018, the notice will be considered untimely and
we are not required to present such proposal at the 2018 Annual Meeting. If the Board chooses to present a proposal submitted
prior to February 21, 2018 or after March 23, 2018 at the 2018 Annual Meeting, then the persons named in proxies solicited by
the Board for the 2018 Annual Meeting may exercise discretionary voting power with respect to such proposal.
OTHER MATTERS
The Board knows of no
matters other than those described above that have been submitted for consideration at this Annual Meeting. As to other matters,
if any, that properly may come before the Annual Meeting, the Board intends that the proxy cards will be voted in respect thereof
in accordance with the judgment of the person or persons named thereon.
QUESTIONS
For information about
your record holding, call Computershare at (800) 368-5948. We also invite you to visit Lakelands’ Internet site at
www.Lakeland.com
,
under the headings Investor Relations-Lakeland SEC Filings and Reports. Internet site materials are for your general information
and are not part of this proxy solicitation. If your shares are held by your broker or bank as a nominee or agent, you should
follow the instructions provided by your broker or bank.
If you have questions or need more information
about the annual meeting write to be address below. Any written notice of revocation, or later dated proxy card, should be delivered
to Lakeland Industries, Inc., 3555 Veterans Memorial Highway, Suite C, Ronkonkoma, New York 11779, Attn: Secretary.
Lakeland makes available, free of charge
on its website, all of its filings that are made electronically with the Securities and Exchange Commission (“SEC”),
including Forms 10-K, 10-Q and 8-K. These filings are also available on the SEC’s website (
www.sec.gov
). To access
these filings, go to our website (
www.lakeland.com
) and click on the heading Investor Relations-Lakeland SEC Filings and
Reports. Copies of Lakeland’s Annual Report on Form 10-K for the fiscal year ended January 31, 2017, including financial
statements and schedules thereto, filed with the SEC, are also available without charge to stockholders upon written request addressed
to the Corporate Secretary, Lakeland Industries, Inc., 3555 Veterans Memorial Highway, Suite C, Ronkonkoma, New York 11779.
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By Order of the Board of Directors,
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Christopher J. Ryan
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Corporate Secretary
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May 5, 2016
Ronkonkoma, New York
APPENDIX A
LAKELAND INDUSTRIES, INC.
2017 EQUITY INCENTIVE PLAN
Section
1.
Purpose; Definitions
.
The purposes of the Lakeland Industries, Inc. 2017 Equity
Incentive Plan (the “
Plan
”) are to: (a) enable Lakeland Industries, Inc. (the “
Company
”)
and its affiliated companies to recruit and retain highly qualified employees and directors; (b) provide those employees and directors
with an incentive for productivity; and (c) provide those employees and directors with an opportunity to share in the growth and
value of the Company.
For purposes of the Plan, the following
terms will have the meanings defined below, unless the context clearly requires a different meaning:
(a) “
Affiliate
”
means, with respect to a Person, a Person that directly or indirectly controls, is controlled by, or is under common control with
such Person.
(b) “
Applicable
Law
” means the legal requirements relating to the administration of and issuance of securities under stock incentive
plans, including, without limitation, the requirements of state corporations law, federal, state and foreign securities law, federal,
state and foreign tax law, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed
or quoted.
(c) “
Award
”
means an award of Options, Restricted Stock, Restricted Stock Units, Performance Awards, or Stock Appreciation Rights made under
this Plan.
(d) “
Award
Agreement
” means, with respect to any particular Award, the written document that sets forth the terms of that particular
Award.
(e) “
Base
Price
” means the price used as the basis for determining the Spread upon the exercise of Stock Appreciation Right.
(f) “
Board
”
means the Board of Directors of the Company, as constituted from time to time.
(g) “
Cause
”
means with respect to any Participant, unless otherwise defined in the Participant’s employment agreement, Award Agreement,
or signed offer letter: (i) the Participant’s habitual intoxication or drug addiction; (ii) the Participant’s
violation of the Company’s written policies, procedures or codes including, without limitation, those with respect to harassment
(sexual or otherwise) and ethics; (iii) the Participant’s refusal or willful failure by the Participant to perform
such duties as may reasonably be delegated or assigned to him or her, consistent with his or her position; (iv) the Participant’s
willful refusal or willful failure to comply with any requirement of the Securities and Exchange Commission or any securities
exchange or self-regulatory organization then applicable to the Company; (v) the Participant’s willful or wanton misconduct
in connection with the performance of his or her duties including, without limitation, breach of fiduciary duties; (vi) the
Participant’s breach (whether due to inattention, neglect, or knowing conduct) of any of the material provisions of his
or her employment agreement, if any; (vii) the Participant’s conviction of, guilty, no contest or
nolo contendere
plea to, or admission or confession to any felony or any act of fraud, misappropriation, embezzlement or any misdemeanor involving
moral turpitude; (viii) the Participant’s dishonesty detrimental to the best interest of the Company; (ix) the
Participant’s involvement in any matter which, in the opinion of the Company’s Chief Executive Officer (or, in the
case of the Chief Executive Officer, the Board), is reasonably likely to cause material prejudice or embarrassment to the Company’s
business; or (x) solely in the case of a Non-Employee Director, any other action by the Participant which the Board determines
constitutes “cause.” Notwithstanding the foregoing, if a Participant and the Company (or any of its Affiliates) have
entered into an employment agreement or other similar agreement that specifically defines “cause,” then with respect
to such Participant, “Cause” shall have the meaning defined in such other agreement.
(h) “
Change
in Control
” shall mean the occurrence of any of the following events: (i) any “person” (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total power to vote
for the election of directors of the Company; (ii) during any twelve month period, individuals who at the beginning of such period
constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in
Section 1(g)(i)
,
Section 1(g)(iii)
,
Section 1(g)(iv
) or
Section 1(g)(v)
hereof) whose election by the Board or nomination for election by the Company’s stockholders was
approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of
the period of whose election or nomination for election was previously approved, cease for any reason to constitute a majority
thereof; (iii) the merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately
prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling
such stockholders to 50% or more of all votes to which all stockholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote);
(iv) the sale or other disposition of all or substantially all of the assets of the Company; (v) a liquidation or dissolution
of the Company or (vi) acceptance by stockholders of the Company of shares in a share exchange if the stockholders of the Company
immediately before such share exchange do not or will not own directly or indirectly immediately following such share exchange
more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the entity resulting from or
surviving such share exchange in substantially the same proportion as their ownership of the voting securities outstanding immediately
before such share exchange. In no event shall a Change in Control be deemed to occur upon (A) an announcement or commencement
of a tender offer, (B) a “potential” takeover, or (C) stockholder approval of a merger or other transaction.
With respect
to any Award that constitutes a nonqualified deferred compensation plan within the meaning of Section 409A of the Code and provides
for accelerated payment in connection with a change in control (whether or not in conjunction with a termination of employment),
“Change in Control” for purposes of such accelerated payment shall mean a Change in Control as described above in
this Section that is also a “change in the ownership of a corporation,” a “change in the effective control of
a corporation” or a “change in the ownership of a substantial portion of a corporation” within the meaning of
Section 409A of the Code.
(i) “
Code
”
means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
(j)
“
Committee
” means the Compensation Committee of the Board or such other Board committee designated by the
Board to administer the Plan. The Committee shall have at least two members and each member of the Committee shall be a Non-Employee
Director and an Outside Director.
(k) “
Director
”
means a member of the Board.
(l) “
Disability
”
shall mean permanent and total disability as defined by Section 22(e)(3) of the Code. Notwithstanding the foregoing, to the extent
required for exemption from or compliance with Section 409A of the Code, “Disability” shall have the meaning given
such term by Section 409A of the Code, which generally provides that “Disability” of a Participant means either (i)
the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months,
or (ii) the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result
in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits
for a period of not less than three months under an accident and health plan covering the employees of the Participant's employer.
(m) “
Effective
Date
” is defined in
Section 20
hereof.
(n) “
Exchange
Act
” means the Securities Exchange Act of 1934, as amended.
(o) “
Fair
Market Value
” means, as of any date, the value of a Share determined as follows: (i) if the Shares are listed on
any established stock exchange or a national market system, including, without limitation, the Nasdaq Global Market, the Fair
Market Value of a Share will be the closing sales price for such stock as quoted on that system or exchange (or the system or
exchange with the greatest volume of trading in Shares) at the close of regular hours trading on the day of determination; (ii) if
the Shares are regularly quoted by recognized securities dealers but selling prices are not reported, the Fair Market Value of
a Share will be the mean between the high bid and low asked prices for Shares at the close of regular hours trading on the day
of determination; or (iii) if Shares are not traded as set forth above, the Fair Market Value will be determined in good
faith by the Committee taking into consideration such factors as the Committee considers appropriate, such determination by the
Committee to be final, conclusive and binding. Notwithstanding the foregoing, in connection with a Change in Control, Fair Market
Value shall be determined in good faith by the Committee, such determination by the Committee to be final conclusive and binding.
(p) “
Incentive
Stock Option
” means any Option intended to be an “Incentive Stock Option” within the meaning of Section 422
of the Code.
(q) “
Non-Employee
Director
” will have the meaning set forth in Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission
under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission.
(r) “
Non-Qualified
Stock Option
” means any Option that is not intended to qualify as an Incentive Stock Option.
(s)
“
Outside Director
” means a Director who meets the definition of an “outside director” under
Section 162(m) of the Code.
(t)
“
Option
” means any option to purchase Shares (including an option to purchase Restricted Stock, if the
Committee so determines) granted pursuant to
Section 5
hereof.
(u) “
Participant
”
means an employee or Director of the Company or any of its respective Affiliates to whom an Award is granted.
(v) “
Performance
Award
” means any Award that, pursuant to
Section 9
, is granted, vested and/or settled upon the achievement of
specified performance conditions.
(w) “
Performance
Goals
” shall mean the performance goals or objectives established by the Committee pursuant to the Plan for Awards which
are intended to be “qualified performance-based compensation” within the meaning of Section 162(m) of the Code. Performance
Goals may be measured on an absolute or relative basis. Performance Goals shall be limited to specified levels of or increases
in the Company’s or Subsidiary’s return on equity, diluted earnings per share, total earnings, earnings growth, return
on capital, return on assets, earnings before interest and taxes (“EBIT”), earnings before interest, taxes, depreciation
and amortization (“EBITDA”), sales, sales growth, gross margin, return on investment, increase in the fair market
value of the each Share, Share price (including but not limited to, growth measures and total stockholder return), net earnings,
cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on investment (which equals
net cash flow divided by total capital), inventory turns, financial return ratios, total return to stockholders, market share,
earnings measures/ratios, economic value added (“EVA”), balance sheet measurements such as receivable turnover, internal
rate of return, increase in net present value or expense targets, working capital measurements (such as average working capital
divided by sales), customer satisfaction surveys and productivity. The Committee may provide in an Award Agreement that the Performance
Goals for the Award may be adjusted as provided in
Section 9(b)
.
(x) “
Person
”
means an individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated association, or
other entity or association.
(y) “
Plan
”
means the Lakeland Industries, Inc. 2017 Equity Incentive Plan herein set forth, as amended from time to time.
(z) “
Prior
Plans
” means, collectively, the Lakeland Industries, Inc. 2012 Stock Incentive Plan and Lakeland Industries, Inc. 2015
Stock Plan.
(aa) “
Restricted
Stock
” means Shares that are subject to restrictions pursuant to
Section 7
hereof.
(bb) “
Restricted
Stock Unit
” means an Award that is valued by reference to a Share, which value may be paid to the Participant by delivery
of Shares, cash, or other forms of payment, or any combination thereof, as the Committee shall determine and that are issued subject
to certain restrictions pursuant to
Section 8
hereof.
(cc) “
Restriction
Period
” means the period of time during which an Award is subject to forfeiture.
(dd) “
Shares
”
means shares of the Company’s common stock, par value $0.01 per share, subject to substitution or adjustment as provided
in
Section 3(c)
hereof.
(ee) “
Spread
”
means, in the case of a Stock Appreciation Right, the amount by which the Fair Market Value on the date when any such right is
exercised exceeds the Base Price specified in such right.
(ff) “
Stock
Appreciate Right
” means a right granted under
Section 10
hereof.
(gg) “
Subsidiary
”
means, in respect of the Company, a subsidiary company as defined in Sections 424(f) and (g) of the Code.
Section
2.
Administration
.
The Plan shall be administered by the Committee; provided,
however, that with respect to Non-Employee Directors, the Plan shall be administered by the full Board and all references in the
Plan to the Committee shall be deemed to refer to the Board. Any action of the Committee in administering the Plan shall be final,
conclusive and binding on all persons, including the Company, its Subsidiaries, Affiliates, their respect employees, the Participants,
persons claiming rights from or through Participants and stockholders of the Company.
The Committee will have full authority
to grant Awards under this Plan and determine the terms of such Awards. Such authority will include the right to:
(a) select
the individuals to whom Awards are granted (consistent with the eligibility conditions set forth in
Section 4
hereof);
(b) determine
the type of Award to be granted;
(c) determine
the number of Shares, if any, to be covered by each Award;
(d) establish
the terms and conditions of each Award;
(e) subject
to
Section 9
, establish the performance conditions and/or Performance Goals relevant to any Award and certify whether
such performance conditions and/or Performance Goals have been satisfied;
(f) approving
forms of agreements (including Award Agreements) for use under the Plan;
(g) determine
whether and under what circumstances an Option may be exercised without a payment of cash under
Section 5(d)
;
(h) modify
or amend each Award, subject to
Sections 11 and 12
;
(i) extend
the period of time for which an Option is to remain exercisable following a Participant’s termination of service to the
Company from the limited period otherwise in effect for that Option to such greater period of time as the Committee deems appropriate,
but in no event beyond the expiration of the term of the Option; and
(j) with
respect to any employee who resides or works outside of the United States, the Committee may, in its sole and absolute discretion,
amend or supplement the terms of the Plan or Awards with respect to such employee as necessary or appropriate to accommodate the
differences in local law, tax policy, or custom so long as no such amendments or supplements include any provisions that are inconsistent
with the terms of the Plan, as then in effect, unless the Plan could have been amended to eliminate such inconsistency without
the further approval by the stockholders of the Company.
The Committee will have the authority
to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it, from time to time, deems
advisable; to establish the terms and form of each Award Agreement; to interpret the terms and provisions of the Plan and any
Award issued under the Plan (and any Award Agreement); and to otherwise supervise the administration of the Plan. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement in the manner
and to the extent it deems necessary to carry out the intent of the Plan.
The Committee may delegate to one
or more officers of the Company the authority to grant Awards to Participants who are not subject to the requirements of Section
16 of the Exchange Act or Section 162(m) of the Code and the rules and regulations thereunder, provided that the Committee shall
have fixed the total number of Shares subject to such delegation. Any such delegation shall be subject to the applicable state
and corporate laws. The Committee may revoke any such allocation or delegation at any time for any reason with or without prior
notice.
Section
3.
Shares Subject to the Plan
.
(a)
Shares
Subject to the Plan
. Subject to adjustment as provided in
Section 3(c)
of the Plan, the maximum number of Shares that
may be issued in respect of Awards under the Plan is 360,000 Shares, all of which Shares may be granted as Incentive Stock Options.
As of the Effective Date, no further awards shall be granted pursuant to the Prior Plans, but may be awarded under this Plan as
provided in
Section 3(b)
hereof. The aggregate grant date fair market value of Awards granted, together with cash paid,
to a Non-Employee Director for services during any fiscal year shall not exceed $300,00. Any Shares issued hereunder may consist,
in whole or in part, of authorized and unissued Shares or treasury Shares. Any Shares issued by the Company through the assumption
or substitution of outstanding grants in connection with the acquisition of another entity shall not reduce the maximum number
of Shares available for delivery under the Plan. In accordance with the requirements under Section 162(m) of the Code, the maximum
number of Shares underlying or subject to Awards (including Options, Restricted Stock, Restricted Stock Units, Performance Awards,
and Stock Appreciation Rights) that may be granted during any calendar year to any individual Participant shall be fifty percent
(50%) of the maximum number of Shares that may be issued in respect of Awards under the Plan.
(b)
Effect
of the Expiration or Termination of Awards
. If and to the extent that any Award expires or terminates, or is canceled or forfeited
for any reason prior to issuance of the Shares subject thereto, or such Award is settled in cash in lieu of Shares, then the unissued
Shares associated with that Award will again become available for grant under the Plan. Any Shares that are covered under the
terms of a Prior Plan award which would otherwise become available for reuse under the terms of a Prior Plan shall instead become
available for issuance under the Plan. Except for expired, forfeited or cancelled Shares, the Plan is intended to restrict the
“recycling” of Shares back into the Plan; this means (i) Shares used or withheld in settlement of a tax withholding
obligation associated with an Award, (ii) Shares tendered or held back upon the exercise of an Option in satisfaction of the exercise
price payable upon exercise of an Option, or (iii) Shares subject to a Stock Appreciation Right that are not issued or delivered
as a result of the net stock settlement of an outstanding Stock Appreciation Right, will not become available for grant under
the Plan.
(c)
Other
Adjustment
. In the event of any corporate event or transaction such as a merger, consolidation, reorganization, recapitalization,
stock split, reverse stock split, split up, spin-off, combination of shares, exchange of shares, stock dividend, dividend in kind,
or other like change in capital structure (other than ordinary cash dividends) to stockholders of the Company, or other similar
corporate event or transaction affecting the Shares, the Committee, to prevent dilution or enlargement of Participants’
rights under the Plan, shall, in such manner as it may deem equitable, substitute or adjust, in its sole discretion, the number
and kind of shares that may be issued under the Plan or under any outstanding Awards, the number and kind of shares subject to
outstanding Awards, the exercise price, grant price or purchase price applicable to outstanding Awards, and/or any other affected
terms and conditions of this Plan or outstanding Awards. The Committee shall not make any adjustment that would adversely affect
the status of any Award that is “performance-based compensation” under Section 162(m) of the Code.
(d)
Change
in Control
. Notwithstanding anything to the contrary set forth in the Plan, upon any Change in Control, the Committee may,
in its sole and absolute discretion and without the need for the consent of any Participant, take one or more of the following
actions contingent upon the occurrence of that Change in Control:
(i) cause
any or all outstanding Awards to become vested and immediately exercisable (as applicable), in whole or in part;
(ii) cancel
any unvested Award or unvested portion thereof, with or without consideration;
(iii) cancel
any Award in exchange for a substitute award;
(iv) redeem
any Restricted Stock or Restricted Stock Unit for cash and/or other substitute consideration with value equal to fair market value
of an unrestricted Share on the date of the Change in Control;
(v) cancel
any Option in exchange for cash and/or other substitute consideration with a value equal to: (A) the number of Shares subject
to that Option, multiplied by (B) the difference, if any, between the fair market value per Share on the date of the Change
in Control and the exercise price of that Option;
provided,
that if the fair market value per Share on the date of the
Change in Control does not exceed the exercise price of any such Option, the Committee may cancel that Option without any payment
of consideration therefor;
(vi) take
such other action as the Committee shall determine to be reasonable under the circumstances; and/or
(vii) notwithstanding
any provision of this
Section 3(d)
, in the case of any Award subject to Section 409A of the Code, such Award shall vest
and be distributed only in accordance with the terms of the applicable Award Agreement and the Committee shall only be permitted
to use discretion to the extent that such discretion would be permitted under Section 409A of the Code.
In
the discretion of the
Committee
,
any cash or substitute consideration payable upon cancellation of an Award may be subjected to (i) vesting terms substantially
identical to those that applied to the cancelled Award immediately prior to the Change in Control, or (ii) earn-out, escrow,
holdback or similar arrangements, to the extent such arrangements are applicable to any consideration paid to stockholders in
connection with the Change in Control.
Section
4.
Eligibility
.
Employees and Directors of the Company or its Affiliates are eligible
to be granted Awards under the Plan;
provided, however
, that only employees of the Company or a Subsidiary are eligible
to be granted Incentive Stock Options.
Section
5.
Options
.
Options granted under the Plan may be of two types: (i) Incentive
Stock Options or (ii) Non-Qualified Stock Options. The Award Agreement shall state whether such grant is an Incentive Stock
Option or a Non-Qualified Stock Option. Any Option granted under the Plan will be in such form as the Committee may at the time
of such grant approve.
The Award Agreement evidencing any
Option will incorporate the following terms and conditions and will contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Committee deems appropriate in its sole and absolute discretion:
(a)
Option
Price
. The exercise price per Share under an Option will be determined by the Committee and will not be less than 100% of
the Fair Market Value of a Share on the date of the grant. However, any Incentive Stock Option granted to any Participant who,
at the time the Option is granted, owns, either directly and/or within the meaning of the attribution rules contained in Section 424(d)
of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, will have
an exercise price per Share of not less than 110% of Fair Market Value per Share on the date of the grant except as may be required
or otherwise be deemed advisable by the Committee in connection with the Options granted through the assumption of, or substitution
for, outstanding awards previously granted by a company acquired by the Company or any Affiliate with which the Company or any
Affiliate combines.
(b)
Option
Term
. The term of each Option will be fixed by the Committee, but no Option will be exercisable more than 10 years after the
date the Option is granted. However, any Incentive Stock Option granted to any Participant who, at the time such Option is granted,
owns, either directly and/or within the meaning of the attribution rules contained in Section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of stock of the Company, may not have a term of more than 5 years.
No Option may be exercised by any Person after expiration of the term of the Option.
(c)
Exercisability
.
Options shall not vest for at least one year after the date the Option is granted, except as (i) the Committee may determine or
permit otherwise in the event of a Change in Control, or (ii) may be required or otherwise be deemed advisable by the Committee
in connection with Options granted through the assumption of, or substitution for, outstanding awards previously granted by a
company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines.
(d)
Method
of Exercise
. Subject to the terms of the applicable Award Agreement, the exercisability provisions of
Section 5(c)
and the termination provisions of
Section 6(a)
, Options may be exercised in whole or in part from time to time
during their term by the delivery of written notice to the Company specifying the number of Shares to be purchased. Such notice
will be accompanied by payment in full of the purchase price, either by certified or bank check, or such other means as the Committee
may accept. The Committee may, in its sole discretion, permit payment of the exercise price of an Option in the form of previously
acquired Shares based on the fair market value of the Shares on the date the Option is exercised or through means of a “net
settlement,” whereby the Option exercise price will not be due in cash and where the number of Shares issued upon such exercise
will be equal to: (A) the product of (i) the number of Shares as to which the Option is then being exercised, and (ii) the
excess, if any, of (a) the then current fair market value per Share over (b) the Option exercise price, divided by (B) the
then current fair market value per Share.
No Shares will be issued upon exercise
of an Option until full payment therefor has been made. A Participant will not have the right to distributions or dividends or
any other rights of a stockholder with respect to Shares subject to the Option until the Participant has given written notice
of exercise, has paid in full for such Shares, if requested, has given the representation described in
Section 18(a)
hereof and fulfills such other conditions as may be set forth in the applicable Award Agreement.
(e)
Incentive
Stock Option Limitations
. In the case of an Incentive Stock Option, the aggregate Fair Market Value (determined as of the
time of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant
during any calendar year under the Plan and/or any other plan of the Company or any Subsidiary will not exceed $100,000. For purposes
of applying the foregoing limitation, Incentive Stock Options will be taken into account in the order granted. To the extent any
Option does not meet such limitation, that Option will be treated for all purposes as a Non-Qualified Stock Option.
(f)
Termination
of Service
. Unless otherwise specified in the applicable Award Agreement or as otherwise provided by the Committee at or after
the time of grant, Options will be subject to the terms of
Section 6(a)
with respect to exercise upon or following
termination of employment or other service.
Section
6.
Termination of Service
.
(a)
Options
.
Unless otherwise specified with respect to a particular Option in the applicable Award Agreement or otherwise determined by the
Committee, any portion of an Option that is not exercisable upon termination of service will expire immediately and automatically
upon such termination and any portion of an Option that is exercisable upon termination of service will expire on the date it
ceases to be exercisable in accordance with this
Section 6(a)
.
(i)
Termination
by Reason of Death
. If a Participant’s service with the Company or any Affiliate terminates by reason of death, any
Option held by such Participant may thereafter be exercised, to the extent it was exercisable at the time of his or her death
or on such accelerated basis as the Committee may determine at or after grant, by the legal representative of the estate or by
the legatee of the Participant, for a period expiring (i) at such time as may be specified by the Committee at or after grant,
or (ii) if not specified by the Committee, then 12 months from the date of death, or (iii) if sooner than the applicable
period specified under (i) or (ii) above, upon the expiration of the stated term of such Option.
(ii)
Termination
by Reason of Disability
. If a Participant’s service with the Company or any Affiliate terminates by reason of Disability,
any Option held by such Participant may thereafter be exercised by the Participant or his personal representative, to the extent
it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine at or after grant,
for a period expiring (i) at such time as may be specified by the Committee at or after grant, or (ii) if not specified
by the Committee, then 12 months from the date of termination of service, or (iii) if sooner than the applicable period specified
under (i) or (ii) above, upon the expiration of the stated term of such Option.
(iii)
Cause
.
If a Participant’s service with the Company or any Affiliate is terminated for Cause: (i) any Option, or portion thereof,
not already exercised will be immediately and automatically forfeited as of the date of such termination, and (ii) any Shares
for which the Company has not yet delivered share certificates will be immediately and automatically forfeited and the Company
will refund to the Participant the Option exercise price paid for such Shares, if any.
(iv)
Other
Termination
. If a Participant’s service with the Company or any Affiliate terminates for any reason other than death,
Disability or Cause, any Option held by such Participant may thereafter be exercised by the Participant, to the extent it was
exercisable at the time of such termination, or on such accelerated basis as the Committee may determine at or after grant, for
a period expiring (i) at such time as may be specified by the Committee at or after grant, or (ii) if not specified
by the Committee, then 90 days from the date of termination of service, or (iii) if sooner than the applicable period specified
under (i) or (ii) above, upon the expiration of the stated term of such Option.
(b)
Other
Awards
. In the event of termination of employment by reason of death or Disability of a Participant who holds any Restricted
Stock, Restricted Stock Units, Performance Awards, or Stock Appreciation Rights, as to which such Award has not been fully vested,
the Committee may, in its sole discretion, take any action that it deems to be equitable under the circumstances or in the best
interests of the Company, including without limitation waiving or modifying any limitation, requirement, performance condition,
or Performance Goal with respect to any such Award; provided that, the amount of Shares or cash obtained by virtue of any accelerated
vesting shall not exceed the number determined by multiplying the number of Shares underlying the Award/or cash value by a fraction,
the numerator of which is the number of full months during the Restriction Period during all of which the participant was an employee
of the Company or its Subsidiaries and the denominator of which is the number of full calendar months in the Restriction Period;
and provided further that, in the case of any Award subject to Section 409A of the Code, the Committee shall not take any action
pursuant to this Section 6(b) unless such action is permissible under Section 409A of the Code.
Section
7.
Restricted Stock
.
(a)
Issuance
.
Restricted Stock may be issued either alone or in conjunction with other Awards. The Committee will determine the time or times
within which Restricted Stock may be subject to forfeiture, and all other conditions of such Awards. The purchase price for Restricted
Stock may, but need not, be zero. The prospective recipient of an Award of Restricted Stock will not have any rights with respect
to such Award, unless and until such recipient has delivered to the Company an executed Award Agreement and has otherwise complied
with the applicable terms and conditions of such Award.
(b)
Certificates
.
Upon the Award of Restricted Stock, the Committee may direct that a certificate or certificates representing the number of shares
of Common Stock subject to such Award be issued to the Participant or placed in a restricted stock account (including an electronic
account) with the transfer agent and in either case designating the Participant as the registered owner. The certificate(s) representing
such Shares shall be physically or electronically legended, as applicable, as to sale, transfer, assignment, pledge or other encumbrances
during the Restriction Period and if issued to the Participant, returned to the Company, to be held in escrow during the Restriction
Period. As a condition to any Award of Restricted Stock, the Participant may be required to deliver to the Company a share power,
endorsed in blank, relating to the Shares covered by such Award.
(c)
Restrictions
and Conditions
. The Award Agreement evidencing the grant of any Restricted Stock will incorporate the following terms and
conditions and such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee deems appropriate
in its sole and absolute discretion:
(i) During
the Restriction Period, the Participant will not be permitted to sell, transfer, pledge, assign or otherwise encumber Restricted
Stock awarded under the Plan. The Committee may condition the lapse of restrictions on Restricted Stock upon the continued employment
or service of the recipient, the attainment of specified individual or corporate performance goals, or such other factors as the
Committee may determine, in its sole and absolute discretion.
(ii) While
any Shares of Restricted Stock remain subject to restriction, at the discretion of the Committee, the Participant will have, with
respect to the Restricted Stock, the right to vote the Shares, but will not have the right to receive any cash distributions or
dividends prior to the lapse of the Restriction Period underlying such Shares. If any cash distributions or dividends are payable
with respect to the Restricted Stock, the Committee shall require the cash distributions or dividends to be subjected to the same
Restriction Period as is applicable to the Restricted Stock with respect to which such amounts are paid. A Participant shall not
be entitled to interest with respect to any dividends or distributions subjected to the Restriction Period. Any distributions
or dividends paid in the form of securities with respect to Restricted Stock will be subject to the same terms and conditions
as the Restricted Stock with respect to which they were paid, including, without limitation, the same Restriction Period.
(iii) The
Restriction Period shall be for a minimum of one year, except as (i) the Committee may determine or permit otherwise in the event
of a Change in Control, or (ii) may be required or otherwise be deemed advisable by the Committee in connection with Restricted
Stock granted through the assumption of, or substitution for, outstanding awards previously granted by a company acquired by the
Company or any Affiliate or with which the Company or any Affiliate combines.
(iv) Subject
to the provisions of
Section 6(b)
hereof, or the applicable Award Agreement, or as otherwise determined by the Committee,
if a Participant’s service with the Company and its Affiliates terminates prior to the expiration of the applicable Restriction
Period, the Participant’s Restricted Stock that then remains subject to forfeiture will then be forfeited automatically.
Section
8.
Restricted Stock Units
.
Subject to the other terms of the Plan, the Committee
may grant Restricted Stock Units to eligible individuals and may, in its sole and absolute discretion, impose conditions on such
units as it may deem appropriate, including, without limitation, continued employment or service of the recipient or the attainment
of specified individual or corporate performance goals. Each Restricted Stock Unit shall be evidenced by an Award Agreement in
the form that is approved by the Committee and that is not inconsistent with the terms and conditions of the Plan. Each Restricted
Stock Unit will represent a right to receive from the Company, upon fulfillment of any applicable conditions, one Share for each
unit or, at the sole discretion of the Committee, an amount in cash equal to the fair market value, at the time of distribution,
of one Share for each unit. Distributions may be made in Shares. All other terms governing Restricted Stock Units, such as vesting,
time and form of payment and termination of units shall be set forth in the applicable Award Agreement; provided, however, the
period commencing with the date of an Award of Restricted Stock Units and ending at such time or times as specified by the Committee
shall be for a minimum of one year, except as (i) the Committee may determine or permit otherwise in the event of a Change in
Control, or (ii) may be required or otherwise be deemed advisable by the Committee in connection with Restricted Stock Units granted
through the assumption of, or substitution for, outstanding awards previously granted by a company acquired by the Company or
any Affiliate or with which the Company or any Affiliate combines. The Participant receiving Restricted Stock Units shall not
have any voting rights, nor the right to receive cash dividends, with respect to the Shares subject to a Restricted Stock Unit
Award until, if applicable, that Award vests and the Shares are actually issued thereunder. Subject to the provisions
Section
6(b)
hereof, or the applicable Award Agreement, or as otherwise determined by the Committee, if a Participant’s service
with the Company terminates prior to the Restricted Stock Unit Award vesting, the Participant’s Restricted Stock Units that
then remain subject to forfeiture will then be forfeited automatically.
Section
9.
Performance Based Awards
.
(a)
Performance
Awards Generally
. The Committee may grant Performance Awards in accordance with this
Section 9
. Performance Awards
may be denominated as a number of Shares or specified number of other Awards, which may be earned upon achievement or satisfaction
of such Performance Goals as may be specified by the Committee. In addition, the Committee may specify that any other Award shall
constitute a Performance Award by conditioning the vesting or settlement of the Award upon the achievement or satisfaction of
such Performance Goals as may be specified by the Committee.
(b)
Adjustments
to Performance Goals
. The Committee may provide in an Award Agreement that the Performance Goals or performance conditions
for the Award be adjusted to include or exclude the impact of items such as realized investment gains and losses, extraordinary,
unusual, non-recurring or infrequently recurring items, asset write-downs, effects of accounting changes, currency fluctuations,
acquisitions, divestitures, reserve-strengthening and other non-operating items, or any other item, event or circumstance that
would not cause an Award to fail to qualify as “performance-based compensation” under Section 162(m) of the Code
to the extent such Award is intended to qualify as “performance-based compensation.”
(c)
Other
Terms of Performance Awards
. Subject to
Section 9(d)
below, the Committee may specify other terms pertinent to a Performance
Award in the applicable Award Agreement, including terms relating to the treatment of that Award in the event of a Change in Control
prior to the end of the applicable performance period. The Participant shall not have any stockholder rights with respect to the
Shares subject to a Performance Award until the Shares are actually issued thereunder. Subject to the provisions of
Section
6(b)
hereof, or the applicable Award Agreement, or as otherwise determined by the Committee, if a Participant’s service
with the Company terminates prior to the Performance Award vesting, the Participant’s Performance Award or portion thereof
that then remains subject to forfeiture will then be forfeited automatically.
(d)
Minimum
Vesting Period
. The vesting period in respect of any Performance Award shall be for a minimum of one year, except as (i) the
Committee may determine or permit otherwise in the event of a Change in Control, or (ii) may be required or otherwise be deemed
advisable by the Committee in connection with Performance Awards granted through the assumption of, or substitution for, outstanding
awards previously granted by a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines.
(e) For
the avoidance of doubt, nothing in the Plan prohibits the Committee from granting to any Participant any Award subject to performance
vesting conditions which is not intended to be “performance-based compensation” under Section 162(m) of the Code.
Section
10.
Stock Appreciation Rights
.
The Committee may also authorize grants to Participants
of Stock Appreciation Rights. A Stock Appreciation Right is the right of the Participant to receive from the Company an amount
which shall be determined by the Committee and shall be expressed as a percentage (not exceeding 100 percent) of the Spread at
the time of the exercise of such right. Any grant of Stock Appreciation Rights shall be upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a)
Payment
.
Any amount payable upon the exercise of a Stock Appreciation Right shall be paid by the Company in cash, in Shares valued at Fair
Market Value, or any combination thereof, as determined by the Committee. Any fractional Share shall be payable in cash. Any grant
may specify that the number of Shares payable upon the exercise of a Stock Appreciation Right shall not exceed a maximum number
of Shares specified by the Committee on the date of grant.
(b)
Vesting
Period
. The Committee shall determine, on the date of grant or thereafter, the time or times at which, and the circumstances
under which, a Stock Appreciation Right may vest, in whole or in part, including based on achievement of performance conditions
or Performance Goals and/or future employment or service requirements. A grant may specify that a Stock Appreciation Right may
be exercised only in the event of a Change in Control or other similar transaction or event. Notwithstanding anything in the Plan
to the contrary, no Stock Appreciation Right shall be granted with a vesting period that is shorter than one year, except as (i)
the Committee may determine or permit otherwise in the event of a Change in Control, or (ii) may be required or otherwise be deemed
advisable by the Committee in connection with Stock Appreciation Rights granted through the assumption of, or substitution for,
outstanding awards previously granted by a company acquired by the Company or any Affiliate or with which the Company or any Affiliate
combines.
(c)
Exercise
Period
. Any grant may specify a waiting period or periods before Stock Appreciation Rights shall become exercisable and permissible
dates or periods on or during which Stock Appreciation Rights shall be exercisable; provided that no Stock Appreciation Right
granted may be exercised more than ten years after the date of grant.
(d)
Base
Price
. Each grant shall specify in respect of each Stock Appreciation Right a Base Price per Share, which shall be equal to
or greater than the Fair Market Value of such Share on the Grant Date.
(e)
Deemed
Exercise
. The Committee may provide that a Stock Appreciation Right shall be deemed to be exercised at the close of business
on the scheduled expiration date of such Stock Appreciation Right if at such time the Stock Appreciation Right by its terms remains
exercisable and, if so exercised, would result in a payment pursuant to
Section 10(a)
hereof to the holder of such Stock
Appreciation Right.
Section
11.
Amendments and Termination
.
Subject to
Sections 3 and 12
, the Board
may, at any time, may, at any time, alter, amend, suspend, discontinue or terminate the Plan in whole or in part at any time;
provided, however, that no such action shall adversely affect the rights of Participants to Awards previously granted hereunder
and, provided further, however, that any stockholder approval necessary or desirable in order to comply with tax, securities,
or other Applicable Laws or regulations, including, but not limited to, the listing requirements of the Nasdaq Global Market or
such other principal securities market on which the Shares are then traded, shall be obtained in the manner required therein.
Section
12.
Prohibition on Repricing Programs
.
Neither the Committee nor the Board shall
(i) implement any cancellation/re-grant program pursuant to which outstanding Options or Stock Appreciation Rights under
the Plan are cancelled and new Options or Stock Appreciation Rights are granted in replacement with a lower exercise price or
Base Price per Share, (ii) cancel outstanding Options or Stock Appreciation Rights under the Plan with exercise prices or
Base Prices per Share in excess of the then-current Fair Market Value per Share for consideration payable in equity securities
of the Company, (iii) otherwise reduce the exercise price or Base Price in effect for outstanding Options or Stock Appreciation
Rights under the Plan, without in each such instance obtaining stockholder approval, or (iv) take any other action that would
be treated as a repricing for U.S. generally accepted accounting principles.
Section
13.
Conditions Upon Grant of Awards and Issuance of Shares
.
(a) The
implementation of the Plan, the grant of any Award and the issuance of Shares in connection with the issuance, exercise or vesting
of any Award made under the Plan shall be subject to the Company’s procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the Awards made under the Plan and the Shares issuable pursuant to those
Awards.
(b) No
Shares or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all
applicable requirements of Applicable Law, including the filing and effectiveness of the Form S-8 registration statement
for the Shares issuable under the Plan, and all applicable listing requirements of any stock exchange on which Shares are then
listed for trading.
Section
14.
Limits on Transferability; Beneficiaries
.
No Award or other right or interest
of a Participant under the Plan shall be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation,
or liability of such Participant to, any party, other than the Company, any Subsidiary or Affiliate, or assigned or transferred
by such Participant otherwise than by will or the laws of descent and distribution, and such Awards and rights shall be exercisable
during the lifetime of the Participant only by the Participant or his or her guardian or legal representative. Notwithstanding
the foregoing, the Committee may, in its discretion, provide that Awards or other rights or interests of a Participant granted
pursuant to the Plan (other than an Incentive Stock Option) be transferable, without consideration, to immediate family members
(i.e., children, grandchildren or spouse), to trusts for the benefit of such immediate family members and to partnerships in which
such family members are the only partners. The Committee may attach to such transferability feature such terms and conditions
as it deems advisable. In addition, a Participant may, in the manner established by the Committee, designate a beneficiary (which
may be a person or a trust) to exercise the rights of the Participant, and to receive any distribution, with respect to any Award
upon the death of the Participant. A beneficiary, guardian, legal representative or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable
to such Participant, except as otherwise determined by the Committee, and to any additional restrictions deemed necessary or appropriate
by the Committee.
Section
15.
Withholding
.
No later than the date as of which an amount first becomes includible
in the gross income of the Participant for federal income tax purposes with respect to any Award under the Plan, the Participant
will pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state or local
taxes of any kind required by law to be withheld with respect to such amount. The Committee may, in its sole discretion, permit
a Participant to satisfy the minimum required withholding obligations (or such higher amount that would not have an adverse accounting
effect) with Shares, including Shares that are part of the Award that gives rise to the withholding requirement. The obligations
of the Company under the Plan will be conditioned on such payment or arrangements and the Company will have the right to deduct
any such taxes from any payment of any kind otherwise due to the Participant.
Section
16.
Liability of Company
.
(a)
Inability
to Obtain Authority
. If the Company cannot, by the exercise of commercially reasonable efforts, obtain authority from any
regulatory body having jurisdiction for the sale of any Shares under this Plan, and such authority is deemed by the Company’s
counsel to be necessary to the lawful issuance of those Shares, the Company will be relieved of any liability for failing to issue
or sell those Shares.
(b)
Grants
Exceeding Allotted Shares
. If Shares subject to an Award exceed, as of the date of grant, the number of Shares which may be
issued under the Plan without additional stockholder approval, that Award will be contingent with respect to such excess Shares,
on the effectiveness under Applicable Law of a sufficient increase in the number of Shares subject to this Plan.
(c)
Rights
of Participants and Beneficiaries
. The Company will pay all amounts payable under this Plan only to the applicable Participant,
or beneficiaries entitled thereto pursuant to this Plan. The Company will not be liable for the debts, contracts, or engagements
of any Participant or his or her beneficiaries, and rights to cash payments under this Plan may not be taken in execution by attachment
or garnishment, or by any other legal or equitable proceeding while in the hands of the Company.
Section
17.
Adjustment; Repayment of Incentive Bonuses
.
All Awards made under the Plan
(whether vested or unvested) are subject to rescission, cancellation or recoupment, in whole or in part, under any current or
future “clawback” or similar policy or the Company that is applicable to the Participant.
Section
18.
General Provisions
.
(a) The
Board may require each Participant to represent to and agree with the Company in writing that the Participant is acquiring securities
of the Company for investment purposes and without a view to distribution thereof and as to such other matters as the Board believes
are appropriate.
(b) All
certificates for Shares or other securities delivered under the Plan will be subject to such share-transfer orders and other restrictions
as the Board may deem advisable under the rules, regulations and other requirements of the Securities Act of 1933, as amended,
the Exchange Act, any stock exchange upon which the Shares are then listed, and any other Applicable Law, and the Board may cause
a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
(c) Nothing
contained in the Plan will prevent the Board from adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required.
(d) Neither
the adoption of the Plan nor the execution of any document in connection with the Plan will: (i) confer upon any employee
of the Company or an Affiliate any right to continued employment with the Company or such Affiliate, or (ii) interfere in
any way with the right of the Company or such Affiliate to terminate the employment of any of its employees at any time.
Section
19.
Electronic Delivery and Signatures
.
Any reference in the Plan or an Award
Agreement to a written document includes without limitation any document delivered electronically or posted on the Company’s
intranet or other shared electronic medium controlled by the Company, a Subsidiary or any agent of the Company or a Subsidiary.
The Committee and any Participant may use facsimile and PDF signatures in signing any Award Agreement, in exercising any Option,
or in any other written document in connection with the Plan’s administration. The Committee and each Participant are bound
by facsimile and PDF signatures, and acknowledge that the other party relies on facsimile and PDF signatures.
Section
20.
Effective Date of Plan
.
The Plan was adopted by the Board on April 25, 2017
and shall be effective on ____________ (the “Effective date”), the date on which the Plan is approved by the stockholders
of the Company.
Section
21.
Term of Plan
.
Unless the Plan shall theretofore have been terminated in accordance
with
Section 11
, the Plan shall terminate on _________, the 10-year anniversary of the effective date, and no Awards under
the Plan shall thereafter be granted; provided, however, that such expiration shall not affect Awards then outstanding, and the
terms and conditions of the Plan shall continue to apply to such Awards.
Section
22.
Invalid Provisions
.
In the event that any provision of this Plan is found
to be invalid or otherwise unenforceable under any Applicable Law, such invalidity or unenforceability will not be construed as
rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions will be given full
force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.
Section
23.
Governing Law
.
The Plan and all Awards granted hereunder will be governed
by and construed in accordance with the laws of the State of Delaware, without regard to the application of the principles of
conflicts of laws.
Section
24.
Notices
.
Any notice to be given to the Company pursuant to the provisions
of this Plan must be given in writing and addressed, if to the Company, to its principal executive office to the attention of
its Chief Executive Officer (or such other Person as the Company may designate in writing from time to time), and, if to a Participant,
to the address contained in the Company’s personnel files, or at such other address as that Participant may hereafter designate
in writing to the Company. Any such notice will be deemed duly given: if delivered personally or via recognized overnight delivery
service, on the date and at the time so delivered; if sent via telecopier or email, on the date and at the time telecopied or
emailed with confirmation of delivery; or, if mailed, five (5) days after the date of mailing by registered or certified mail.
Section
25.
Indemnification of the Board
.
No Director shall be liable for any action taken
or omitted to be taken or any determination made in good faith with respect to the Plan or any Award hereunder. To the fullest
extent permitted by Applicable Law, the Company shall indemnify and hold harmless each Director made or threatened to be made
a party to any civil or criminal action or proceeding by reason of the fact that such Director is or was a Director of the Company,
to the extent such criminal or civil action or proceeding relates to the Plan or any Award.
Section
26.
No Guarantee of Tax Consequences
.
Notwithstanding any other provision of this
Plan, no Person connected with this Plan in any capacity, including, but not limited to, the Company and its directors, officers,
agents, and employees, makes any representation, commitment, or guarantee that any tax treatment, including, but not limited to,
federal, state, and local income, estate and gift tax treatment, shall be applicable with respect to the tax treatment of any
Award, any amounts deferred under this Plan, or paid to or for the benefit of a Participant under this Plan, or that such tax
treatment shall apply to or be available to a Participant on account of participation in this Plan, or that any of the foregoing
amounts shall not be subject to a penalty tax and interest under Section 409A of the Code.
Lakeland Industries (NASDAQ:LAKE)
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