FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________
Commission File No. 0-11682
S & K FAMOUS BRANDS, INC.
.................................................................
(Exact name of registrant as specified in its charter)
Virginia 54-0845694
...................................... ....................................
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11100 West Broad Street, P. O. Box 31800, Richmond, Virginia 23294-1800
...................................................................
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 346-2500
.....................
Not Applicable
...............................................................
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of July 27, 1996.
5,066,371 shares of Common Stock, $0.50 par value
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
S & K FAMOUS BRANDS, INC.
Statements of Income
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- --------------------------------
July 27, 1996 July 29, 1995 July 27,1996 July 29,1995
------------- ------------- ------------- -------------
<S> <C>
Net income........................................ $ 29,396,524 $ 27,267,166 $ 60,845,048 $ 56,013,245
Cost of sales .................................... 15,985,291 15,121,826 33,035,037 30,976,448
------------- ------------- ------------- -------------
Gross profit ..................................... 13,411,233 12,145,340 27,810,011 25,036,797
Other costs and expenses:
Selling, general and administrative .......... 11,830,936 10,732,685 24,118,810 21,836,101
Interest...................................... 143,515 200,158 271,573 403,143
Depreciation and amortization ................ 580,019 536,545 1,144,435 1,069,914
Other, net ................................... (325,255) (27,227) (380,978) (96,806)
------------- ------------- ------------- -------------
Income before income taxes ....................... 1,182,018 703,179 2,656,171 1,824,445
Provision for income taxes ....................... 337,500 267,200 897,700 693,300
------------- ------------- ------------- -------------
Net income ....................................... $ 844,518 $ 435,979 $ 1,758,471 $ 1,131,145
============= ============= ============= =============
Net income per common share ...................... $ 0.17 $ 0.09 $ 0.35 $ 0.23
============= ============= ============= =============
Weighted average common shares ................... 5,066,371 4,999,567 5,064,670 4,920,011
============= ============= ============= =============
See Notes to Financial Statements.
</TABLE>
2
<PAGE>
<TABLE>
S & K FAMOUS BRANDS, INC.
Balance Sheets
(unaudited)
<CAPTION>
July 27, July 29, January 27,
1996 1995 1996
------------ ------------ ------------
<S> <C>
Assets
Current assets:
Cash ........................................................... $ 420,951 $ 189,795 $ 520,005
Accounts receivable................................................ 523,609 395,718 609,194
Merchandise inventories............................................ 40,142,596 40,470,045 39,701,702
Other current assets............................................... 2,344,686 2,196,701 2,299,519
------------ ------------ ------------
Total current assets............................................ 43,431,842 43,252,259 43,130,420
Property and equipment, at cost:
Land and corporate facility........................................ 5,125,041 5,125,041 5,125,041
Furniture, fixtures and equipment ................................. 11,133,470 10,547,041 10,934,539
Leasehold improvements............................................. 11,854,817 10,317,364 11,651,414
------------ ------------ ------------
28,113,328 25,989,446 27,710,994
Less: Accumulated depreciation and amortization .................. 13,779,706 12,041,811 12,619,333
------------ ------------ ------------
14,333,622 13,947,635 15,091,661
Other assets .......................................................... 2,461,351 2,170,714 2,376,115
------------ ------------ ------------
$ 60,226,815 $ 59,370,608 $ 60,598,196
============ ============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt .............................. $ 180,000 $ 180,000 $ 180,000
Accounts payable .................................................. 4,508,189 3,925,983 6,360,399
Accrued expenses:
Compensation-related items...................................... 952,076 853,276 1,273,585
Current and deferred income taxes............................... 194,211 317,062 1,010,152
Other current liabilities....................................... 1,283,631 1,093,513 1,260,258
------------ ------------ ------------
Total current liabilities.................................. 7,118,107 6,369,834 10,084,394
Industrial Development Revenue Bond.................................... 2,250,000 2,430,000 2,340,000
Long-term debt......................................................... 7,428,576 10,707,887 6,601,276
Deferred income taxes.................................................. 1,227,838 1,118,270 1,200,811
Commitments
Shareholders' equity:
Preferred stock, $1 par value; authorized shares,
500,000; issued and outstanding shares, none ..................
Common stock, $.50 par value, authorized shares,
10,000,000; issued and outstanding shares, 5,066,371,
5,058,434 and 5,058,434, respectively .......................... 2,533,185 2,529,217 2,529,217
Capital in excess of par value..................................... 7,836,571 7,795,215 7,795,215
Notes receivable--Stock Purchase Loan Plan ........................ (1,431,680) (1,485,248) (1,458,464)
Retained earnings.................................................. 33,264,218 29,905,433 31,505,747
------------ ------------ ------------
42,202,294 38,744,617 40,371,715
------------ ------------ ------------
$ 60,226,815 $ 59,370,608 $ 60,598,196
============ ============ ============
See Notes to Financial Statements.
</TABLE>
3
<TABLE>
S & K FAMOUS BRANDS, INC.
Statements of Cash Flows
Increase (Decrease) in Cash
(unaudited)
<CAPTION>
Six Months Ended
-----------------------------------
July 27, 1996 July 29, 1995
------------- -------------
<S> <C>
Cash flows from operating activities:
Net income...................................................... $ 1,758,471 $ 1,131,145
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization................................ 1,346,696 1,266,269
Loss on property dispositions, (net) ........................ 226,259 45,548
Other........................................................ 66,300 61,389
Changes in assets and liabilities:
Accounts receivable...................................... 85,585 (75,519)
Inventories.............................................. (440,894) (72,609)
Other current assets..................................... (45,167) 67,104
Other assets............................................. (85,236) (195,401)
Accounts payable and accrued expenses ................... (2,078,238) (1,694,211)
Income taxes and deferred income taxes .................. (788,914) (761,500)
------------ ------------
Net cash provided by (used for) operating activities ........... 44,862 (227,785)
------------ ------------
Cash flows from investing activities:
Capital expenditures............................................ (814,916) (464,357)
Proceeds from property dispositions............................. 0 4,050
------------ ------------
Net cash used for investing activities ......................... (814,916) (460,307)
------------ ------------
Cash flows from financing activities:
Net borrowings under revolving bank lines of credit ............ 761,000 383,000
Reduction of long-term debt..................................... (90,000) (90,000)
------------ ------------
Net cash provided by financing activities ...................... 671,000 293,000
------------ ------------
Net decrease in cash................................................ (99,054) (395,092)
Cash at beginning of period......................................... 520,005 584,887
------------ ------------
Cash at end of period............................................... $ 420,951 $ 189,795
============ ============
Supplemental cash flow information:
Cash paid during the period for:
Interest..................................................... $ 274,000 $ 401,700
Income taxes................................................. 1,690,000 1,458,100
See Notes to Financial Statements.
</TABLE>
4
S & K FAMOUS BRANDS, INC.
Notes to Financial Statements
A. Accounting Policies
The accompanying unaudited interim financial statements have been
prepared by the Company in accordance with the regulations of the Securities and
Exchange Commission in regard to quarterly reporting. In the opinion of the
Company, the statements include all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair representation of the
financial position and results of operations for interim periods.
B. Interim Results of Operations
The Company's business is highly seasonal, with peak sales periods
occurring during its fourth fiscal quarter which includes the Christmas season.
The net earnings of any interim quarter are seasonally disproportionate to net
sales since administrative and certain operating expenses remain relatively
constant during the year. Consequently, interim results should not be considered
necessarily indicative of the results for the entire fiscal year.
C. Expansion
During the second quarter, the Company opened one new 4,400 square foot
S&K store in Harrisburg, Pennsylvania. Since the end of the second quarter, the
Company has closed two S&K stores (Kissimmee, Florida-- 3,940 square feet and
Fort Pierce, Florida--3,425 square feet) and one of its Washington, DC, Menswear
Mega Center stores (17,840 square feet) because they had not met the Company's
sales and earnings expectations.
As of August 31, 1996, the Company closed its two other Menswear Mega
Center stores (42,120 square feet) in the Washington, DC market. The Menswear
Mega Center concept was developed as a test in 1992 for major markets, but
financial expectations had not been met. These locations' leases were assumed by
K&G Men's Centers, Inc., which purchased certain leasehold improvements and
other fixed assets. The closings of these two stores will not have a material
effect on earnings for the current fiscal year.
5
Item 2. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
Three Months and Six Months Ended July 27, 1996, Compared to Three Months and
Six Months Ended July 29, 1995
RESULTS OF OPERATIONS
The following table sets forth certain items in the Statements of Income
as a percentage of net sales for the three months and six months ended July 27,
1996 and July 29, 1995.
<TABLE>
<CAPTION>
Percentage of Net Sales
---------------------------------------------------
Three Months Ended Six Months Ended
---------------------- -----------------------
7/27/96 7/29/95 7/27/96 7/29/95
--------- -------- -------- ---------
<S> <C>
Net sales..................................................... 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales ................................................ 54.4 55.4 54.3 55.3
--------- -------- -------- ---------
Gross profit ................................................. 45.6 44.6 45.7 44.7
Other costs and expenses:
Selling, general and administrative ...................... 40.2 39.4 39.6 39.0
Interest ................................................. .5 .7 .4 .7
Depreciation and amortization ............................ 2.0 2.0 1.9 1.9
Other, net ............................................... (1.1) (.1) (.6) (.1)
--------- -------- -------- ---------
Income before incomes taxes .................................. 4.0 2.6 4.4 3.2
Provision for income taxes ................................... 1.1 1.0 1.5 1.2
Net income ................................................... 2.9 % 1.6 % 2.9 % 2.0 %
========= ======== ======== =========
</TABLE>
Net sales in the second quarter increased by 7.8%, or $2.1 million, over
the same period last year, and reflects the net addition of 17 new stores since
July 29, 1995. Comparable store sales were up 3%. For the six-month period, net
sales increased by 8.6% or $4.8 million over the same period last year with
comparable stores sales up 3%. These sales increases were attributable to strong
performance in suits and to an aggressive marketing campaign. During the quarter
ended July 27, 1996, the Company opened one new store and converted one existing
store to its larger superstore format. There were 188 stores in operation as of
July 27, 1996, compared to 171 stores at July 29, 1995.
Cost of sales in the second quarter of fiscal 1997 was 54.4% of net sales
compared to 55.4% of net sales for the same period last year. For the six-month
period, cost of sales was 54.3% of net sales compared to 55.3% last year. These
decreases were equally the result of reduced markdowns associated with the
clearance of seasonal merchandise and improved initial markup on new inventory
purchases, both partially offset by expensing of previously capitalized buying
and occupancy costs due to lower inventory levels.
Selling, general and administrative expenses in the second quarter of
fiscal 1997 were 40.2% of net sales compared to 39.4% of net sales for the
second quarter of fiscal 1996. This increase was due to incurring planned store
salary and rent costs while sales were unexpectedly lower in July due to
weakened customer response during the Olympic Games and Hurricane Bertha. For
the six-month period, selling, general and administrative expenses were 39.6% of
net sales compared to 39.0% of net sales last year. This increase was primarily
attributable to higher medical claims during the first quarter and incurring
planned store salary and rent costs while sales fell short of expectations in
July 1996.
6
Interest expense in the second quarter of fiscal 1997 was .5% of net
sales compared to .7% of net sales for the second quarter of fiscal 1996. For
the six-month period, interest expense was .4% of net sales compared to .7% of
net sales last year. These decreases are primarily attributable to reductions in
the last six months in average borrowing levels from $9.6 million in fiscal 1996
to $6.6 million this year.
Other, net in the second quarter of fiscal 1997 was income of (1.1)% of
net sales compared to (.1)% of net sales for the same period last year. For the
six-month period, other, net was income of (.6)% of sales compared to (.1)% last
year. These increases in other, net income are primarily attributable to receipt
of nonrecurring, nontaxable proceeds from a life insurance policy on a former
officer.
Provision for income taxes in the second quarter of fiscal 1997 was 28.6%
of income before income taxes compared to 38.0% for the same quarter last year.
On a year-to-date basis, provision for income taxes was 33.8% of income before
income taxes compared to 38.0% last year. These decreases were solely
attributable to the nontaxable, nonrecurring insurance proceeds disclosed in
other, net above. The Company anticipates that its effective tax rate will be
38.0% for the remainder of fiscal 1997, compared to 38.0% in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operating activities, including capital
expenditures for the opening of new stores, from internally generated funds and
from bank borrowings. Through the first six months of fiscal 1997, the Company
opened four new S&K stores and converted two existing stores to its superstore
format. By Thanksgiving 1997, the Company plans to open a number of new stores
and remodel several others. The Company believes that its sources of liquidity
and capital resources will continue to be sufficient to fund its operations.
Operating activities provided net cash of $45,000 and used net cash of
$228,000 during the first six months of fiscal 1997 and 1996, respectively.
Excluding the effects of changes in working capital, net cash provided by
operating activities in the first six months was $3.4 million this year compared
to $2.5 million last year.
Net cash used in investing activities in fiscal 1997 and fiscal 1996 was
primarily for the purpose of store expansion and remodelings. Capital
expenditures for the first six months of fiscal 1997 and 1996 approximated $.8
million and $.5 million, respectively. In the first six months of fiscal 1997,
the Company opened four new stores and converted two others to its superstore
format. For the same period last year, the Company opened two new stores and
remodeled two other stores.
Financing activities provided net cash of approximately $.7 million in
the first six months of fiscal 1997 compared with $.3 million in the same period
in fiscal 1996. Financing activities primarily relate to fluctuations in the
borrowing levels under the Company's revolving credit agreements. During the
second quarter, the Company amended those agreements to extend the date of its
option to convert to term loans from May 31, 1997 to May 31, 1998. The Company's
revolving credit agreements with two banks aggregate $24.0 million. As of July
27, 1996, the Company had net unused commitments of approximately $12.0 million
under the agreements.
7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4) a. Extension letter dated July 30, 1996, to the
Credit Agreement dated as of March 10, 1994,
between the registrant and Crestar Bank.
(4) b. Second Amendment to Credit Agreement dated July
15, 1996, between registrant and Signet Bank.
(27) Financial Data Schedule
(b) There were no reports filed on Form 8-K during the three
months ended July 27, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
S & K FAMOUS BRANDS, INC.
(Registrant)
Date: September 6, 1996 /s/ Robert E. Knowles
---------------------
Robert E. Knowles
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: September 6, 1996 /s/ Janet L. Jorgensen
----------------------
Janet L. Jorgensen
Vice President and Controller
(Principal Accounting Officer)
8
Crestar Bank
P.O. Box 26665
Richmond, VA 23261-6665
(804) 782-5000
CRESTAR LOGO
July 30, 1996
Mr. Robert E, Knowles
Executive Vice President
S&K Famous Brands, Inc.
P. 0. Box 31800
11100 West Broad Street
Richmond, VA 23294-1800
Dear Bob:
It is my pleasure to confirm that Crestar Bank (the "Bank") has approved your
request to extend the maturity of the existing Credit Agreement (the
"Agreement") dated March 10, 1994, by and between the Bank and S&K Famous
Brands, Inc. (the "Company").
The Agreement is hereby amended as follows:
Section 2.4 is amended to change the maturity date of the revolving note
from May 31, 1997 to May 31, 1998.
Section III is amended to change the date May 31, 1997 to May 31, 1998,
the date June 30, 1997 to June 30, 1998 and the date May 31, 2001 to May
31, 2002.
In addition, the Bank and the Company agree that is our mutual intent to execute
a new Credit Agreement prior to May 31, 1997. Please indicate your acceptance to
the terms and conditions of this letter by signing below and returning the
original to me in the enclosed envelope. A copy is enclosed for your records. If
you have any questions, please contact me at 782-5564.
Sincerely,
David P. Butler
Vice President
Agreed accepted by S&K Famous Brands, Inc. this 30th day of July, 1996:
By: /s/ Robert E. Knowles
Title: Executive Vice President
SECOND AMENDMENT
TO
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment"), dated as of July
15, 1996, is among S & K FAMOUS BRANDS, INC, a Virginia corporation (the
"Borrower"); and SIGNET BANK (formerly known as Signet Bank/Virginia), a
Virginia corporation (the "Bank") .
The Bank and the Borrower are parties to a Credit Agreement (as the same
may from time to time be amended, the "Credit Agreement") dated as of August 31,
1990, as amended by a First Amendment thereto dated as of March 10, 1994. The
Borrower has requested that the Bank extend the Availability Period and make
other changes to the Credit Agreement, as hereinafter provided.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Definitions. Unless otherwise specifically defined herein, each
term used herein which is defined in the Credit Agreement has the meaning
assigned to such term in the Credit Agreement. Except as amended and
supplemented hereby, all of the terms of the Credit Agreement shall remain and
continue in full force and effect and are hereby confirmed in all respects.
SECTION 2. Amendments to the Credit Agreement. The Credit Agreement is
amended as follows:
2.01. Section 1.2 of the Credit Agreement is amended by substituting "May
31, 1998", for "May 31, 1997" in the definition of "Availability Period".
2.02. Section 3.1 of the Credit Agreement is amended by substituting "May
31, 1998" for "May 31, 1997" in the second line thereof.
2.03. Section 3.3 of the Credit Agreement is amended to read in full as
follows:
Section 3.3. Term Note. On May 31, 1998, the Company shall deliver to
the Bank a note in the form of Exhibit B attached hereto (the "Term
1
Note") dated such date and in a principal amount equal to the principal
amount of the Term Loan to be made by the Bank. The principal of the
Term Note shall be payable in thirty-five consecutive equal monthly
installments on the first day of each month commencing July 1, 1998, and
in a final installment due on May 11, 2001, when the unpaid principal
amount and all accrued and unpaid interest on the Term Note shall be
payable in full.
2.04. Section 2.1 of the Credit Agreement is amended by adding the
following as a second paragraph at the and thereof:
Letters of Credit. At the Borrower's request, the Bank may, in its
discretion, issue letters of credit on the Borrower's behalf so long as
all conditions pursuant to Article IV have been satisfied. The undrawn
amounts of such letters of credit shall be treated as Loans hereunder
for so long as the letters of credit remain outstanding, except that
interest shall not accrue on such amounts until advances are made
thereon and shall thereafter accrue only on the unreimbursed amount of
such advances. Amounts advanced pursuant to such letters of credit shall
in all respects be treated as Loans hereunder. Each such letter of
credit shall be issued subject to additional terms and conditions
contained in the Bank's standard letter of credit application and
reimbursement agreement (which includes a letter of credit fee in
addition to amounts otherwise payable hereunder), and such letters of
credit shall he in form and substance satisfactory to the Bank.
2.05. Exhibits A and B attached to the Credit Agreement are both hereby
deleted in their entirety and Exhibits A and B attached hereto are substituted
therefor. All references in the Credit Agreement to Exhibits A and B shall be
deemed to refer to the exhibits attached hereto, respectively.
SECTION 3. Consent of the Bank. The Bank executes this Amendment to
evidence its consent to the modifications effected hereby; provided, however,
that ouch consent shall neither be, nor be deemed to be, a consent to, or a
waiver of, the necessity of obtaining the consent of the Bank to any further
modification.
2
SECTION 4. Further Assurances. The Borrower hereby covenants and agrees to
execute and deliver, cause to be executed and delivered, and to do or make, or
cause to be done or made, upon the reasonable request of the Bank, any and all
instruments, paper, deeds, acts or things, supplemental, confirmatory or
otherwise, as may be reasonably required by the Bank for the purpose of
effecting the modifications described herein.
SECTION 5. Waiver of Claims. As part of the consideration to the Bank
herein, the Borrower waives any claims and all other defenses of every nature
whatsoever they may have with respect to the Loan Agreement or the Notes.
SECTION 6. Completeness and Modification. This Amendment constitutes the
entire agreement between the parties hereto as to the transactions contemplated
hereby and supersedes all prior discussions, understandings or agreements
between the parties hereto.
SECTION 7. Effectiveness. This Amendment shall become effective as of July
15, 1996, on the date (the "Effective Date") when the following conditions shall
have been satisfied:
(a) this Amendment shall have been executed by each of the parties hereto,
and the Borrower shall have delivered executed counterparts hereof to the Bank;
(b) the representations and warranties of the Borrower contained in the
Credit Agreement shall be true on and as of the Effective Date;
(c) on the Effective Date, no Event of Default shall have occurred and be
continuing under the Credit Agreement;
(d) all legal matters incident to this Amendment and the transactions
contemplated hereby shall he satisfactory to counsel for the Bank;
(e) the Bank shall have received all documents they may reasonably request
relating to the existence of the Borrower and its authority to execute, deliver
and perform this Amendment and any other matters relevant hereto or thereto, all
in form and substance satisfactory to the Bank and their Counsel; and
3
(f) the Borrower shall have executed and delivered to the Bank the
Revolving Note in the form of Exhibit A attached hereto.
At the request of the Bank, the Borrower agrees to execute and deliver such
documents and instruments, and perform all other acts as the Bank deems
reasonably necessary or desirable to effectuate the provisions of this Amendment
and shall pay, upon demand, all expenses (including reasonable attorneys' fees,
filing fees and taxes) incurred by the Bank in connection therewith,
On the Effective Date, the Credit Agreement will be automatically amended
as set forth in this Amendment. On and after the Effective Date, the rights and
obligations of the parties hereto shall be governed by the Credit Agreement, as
amended by this Amendment; provided that any rights of the parties hereto with
respect to the period prior to the Effective Date shall continue to be governed
by the terms of the Credit Agreement.
SECTION 8. Integration. Each reference in the Credit Agreement to "this
Loan Agreement", "herein", "hereunder" or words of similar import, and each
reference in any note or other document delivered in connection with the Credit
Agreement shall be deemed to be a reference to the Credit Agreement as amended
by this Amendment, and the Credit Agreement as so amended shall be read as a
single integrated document.
SECTION 9. Successors and Assigns. This Amendment shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
SECTION 10. Governing Law. This Amendment and all other instruments
referred to herein shall be governed by, and shall be construed according to,
the laws of the Commonwealth of Virginia, without regard to the choice of law
rules thereof.
WITNESS the following duly authorized signatures and seals, all as of the
date first written above.
4
S & K FAMOUS BRANDS, INC.
By: /s/ Robert E. Knowles [SEAL]
Title: Executive Vice President
SIGNET BANK
By: /s/ William D. Garrison [SEAL]
Title: Senior Vice President
5
EXHIBIT A
REVOLVING NOTE
$14,000,000.00 Richmond, Virginia
July 15, 1996
FOR VALUE RECEIVED, on May 31, 1998, S&K FAMOUS BRANDS, INC., a Virginia
corporation (the "Borrower"), hereby promises to pay to the order of SIGNET BANK
(the "Bank") at its main office, in Richmond, Virginia, in lawful money of the
United States, the principal sum of Fourteen Million and No/100 Dollars
($14,000,000.00) or the aggregate unpaid principal amount of all Revolving Loans
made by the Bank to the Borrower pursuant to the Credit Agreement hereinafter
referred to, which ever is less (the "Principal"). The Borrower further promises
to pay interest on the first day of each month from the date hereof, commencing
August 1, 1996, and on May 31, 1998 on the amount of the Principal from time to
time outstanding during the period beginning on the date hereof and continuing
until this Note is paid in full, at the rate or rates provided for in the Credit
Agreement. Interest payable hereunder shall be calculated on the basis of a
365-day year and paid for the actual number of days for which due.
This Note is the Revolving Note issued pursuant to the provisions of a
certain Credit Agreement dated as of August 31, 1990, as amended from time to
time, among the Borrower and the Bank (herein, as the same may from time to time
be amended, referred to as the "Credit Agreement"), and is issued in
substitution of a certain Note dated March 10, 1994, made by the Borrower and
payable to the order of the Bank.
This Note is subject to prepayment, in whole or in part, as specified in
the Credit Agreement. In case a Default, as defined in the Credit Agreement,
shall occur and be continuing, this Note may become or may be declared to be due
and payable in the manner and with the effect provided in the Credit Agreement,
and the Borrower hereby agrees to pay all costs and expenses in connection
therewith, including reasonable attorney's fees, as provided in the Credit
Agreement.
6
The Borrower and all guarantors, endorsers and pledgors hereof hereby waive
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with the delivery, acceptance and performance of this
Note.
The Bank is hereby authorized to maintain records of the date and amount of
each Revolving Loan, the date and amount of any payment of principal or interest
and the principal balance then remaining unpaid hereon. The Borrower hereby
agrees that the amount so evidenced shall, for all purposes, constitute prima
facie evidence thereof.
This Note shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the Borrower has caused its corporate name to be signed
by its duly authorized officer under seal as of the day and year first above
written.
S & K FAMOUS BRANDS, INC.
By: /s/ Robert E. Knowles [SEAL}
Title: Executive Vice President
7
EXHIBIT B
TERM NOTE
$____________________ Richmond, Virginia
May 31, 1998
FOR VALUE RECEIVED, S&K FAMOUS BRANDS, INC., a Virginia corporation (the
"Borrower"), hereby promises to pay to the order of SIGNET BANK (the "Bank") at
its main office, in Richmond, Virginia in lawful money of the United States, the
principal sum of ________________________________________Dollars
($____________________) (the "Principal"), in thirty-five consecutive equal
monthly installments of principal of
___________________________________________Dollars ($________________________)
each, commencing on July 1, 1998 and continuing on the first day of each month
thereafter (each of such dates being hereinafter referred to as a "Monthly
Payment Date") and one final payment of principal of
________________________________________ Dollars ($_____________________) on May
31, 2001 (the "Final Payment Date") when the entire unpaid Principal and accrued
interest thereon shall be paid in full. The Borrower hereby further promises to
pay interest from the date hereof on the amount of Principal from time to time
outstanding at a rate per annum which at all times shall be equal to the Payee's
announced prime rate in effect from time to time (the "Prime Rate"), such
interest to be payable monthly on each Monthly Payment Date commencing July 1,
1998, and on the Final Payment Date. interest shall continue to accrue on this
Note after maturity at the rate set forth above and shall then be payable on
demand of the holder of this Note. Any change in the Prime Rate shall result in
a change on the same day in the rate of interest to accrue thereafter on the
unpaid Principal of this Note at the time outstanding. Interest payable
hereunder shall be calculated on the basis of a 365-day year and paid for the
actual number of days for which due.
This Note is issued pursuant to the provisions of a certain Credit
Agreement dated as of August 31, 1990, as amended from time to time, among the
Borrower and the Bank (herein, as the same may from time to time be amended,
8
referred to as the "Credit Agreement"); but neither this reference to the Credit
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of the Borrower to pay the Principal of and the
interest on this Note as herein provided.
This Note is subject to prepayment, in whole or in part, as specified in
the Credit Agreement. In case a Default, as defined in the Credit Agreement,
shall occur and be continuing, this Note may become or may be declared to be due
and payable in the manner and with the effect provided in the Credit Agreement,
and the Borrower hereby agrees to pay all costs and expenses in connection
therewith, including reasonable attorney's fees, as provided in the Credit
Agreement.
The Borrower and all guarantors, endorsers and pledgors hereof hereby waive
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with the delivery, acceptance, performance and enforcement
of this Note.
This Note shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the Borrower has caused its corporate name to be signed
by its duly authorized officer under seal as of the day and year first above
written.
S & K FAMOUS BRANDS INC.
By: [SEAL)
Title:
9
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<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-START> JAN-28-1996
<PERIOD-END> JUL-27-1996
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