SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
S&K Famous Brands, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
S & K Famous Brands, Inc.
[logo] P.O. Box 31800
Richmond, Virginia 23294-1800
Notice of Annual Meeting of Shareholders
to be held May 28, 1998
To the Shareholders of
S & K Famous Brands, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of S & K Famous
Brands, Inc. (the "Company") will be held in the Company's store located
adjacent to its Corporate Headquarters located at 11100 West Broad Street,
Richmond, Virginia, at 3:30 p.m., E.D.T., on Thursday, May 28, 1998, for the
following purposes:
1. To elect eight (8) directors to serve for the ensuing year.
2. To ratify the selection of Price Waterhouse LLP as independent accountants
for the Company for the current year.
3. To transact such other business as may come before the meeting or any
adjournments thereof.
The Board of Directors has fixed the close of business on April 8, 1998, as the
record date for the determination of Shareholders entitled to notice and to
vote at the meeting and any adjournments thereof.
By Order of the Board of Directors,
/s/ Robert E. Knowles
-----------------------
Robert E. Knowles
Secretary
April 10, 1998
PLEASE FILL IN, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE>
S & K FAMOUS BRANDS, INC.
P.O. BOX 31800
RICHMOND, VIRGINIA 23294-1800
PROXY STATEMENT
Annual Meeting of Shareholders
to be held May 28, 1998
The enclosed proxy is solicited on behalf of the Board of Directors of S &
K Famous Brands, Inc. (the "Company") for use at the Annual Meeting of
Shareholders of the Company, to be held May 28, 1998, or any adjournments
thereof, for the purposes set forth in this Proxy Statement and the attached
Notice of Annual Meeting of Shareholders. This Proxy Statement and related form
of proxy are first being mailed to the Shareholders of the Company on or about
April 8, 1998.
The close of business on April 8, 1998, has been fixed by the Board of
Directors as the record date for determination of Shareholders entitled to
notice of and to vote at the meeting. As of the close of business on that date,
there were 5,050,728 shares of Common Stock, par value $.50 per share, of the
Company ("Common Stock") outstanding and entitled to vote. Each such share of
Common Stock entitles the holder thereof to one vote.
Proxies may be revoked at any time before exercise by written notice to
the Company, by submitting a substitute proxy, or by attending the meeting and
voting in person. Shares represented by proxies in the form enclosed, if
properly executed and returned, will be voted as specified, but when no
specification is made, the shares will be voted for the election of the
nominees for director named herein and for each of the other proposals
described herein.
Except for the election of directors, action on a matter submitted to the
shareholders will be approved if the votes cast in favor of the action exceed
the votes cast opposing the action. With respect to the election of directors,
the eight nominees receiving the greatest number of votes cast for the election
of directors will be elected. Presence in person or by proxy of the holders of
a majority of the outstanding shares of Common Stock entitled to vote at the
meeting will constitute a quorum. Shares for which the holder has elected to
abstain or to withhold the proxies' authority to vote (including broker
non-votes) on a matter will count toward a quorum but will have no effect on
the action taken with respect to such matter.
The cost of the solicitation of proxies will be borne by the Company.
Solicitation will be primarily by mail. However, directors and officers of the
Company may also solicit proxies by telephone, telegraph or personal interview
but will receive no compensation therefor other than their regular salaries.
The Company will reimburse banks, brokerage firms and other custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in sending proxy material to the beneficial owners of such shares.
The principal executive offices of the Company are located at 11100 West
Broad Street, P. O. Box 31800, Richmond, Virginia 23294-1800.
Security Ownership of Certain Beneficial Owners
The table below presents certain information as to the only persons known
to the Company to be the beneficial owners of more than 5% of the Common Stock
of the Company as of March 20, 1998. Except as otherwise noted, each of the
beneficial owners listed below has sole voting and investment power with
respect to the shares listed.
Amount and
Name and Address of Nature of Percent
Beneficial Owner Ownership of Class
- ---------------------------------- ------------------ ---------
Stuart C. Siegel 1,501,369(1) 29.9
P. O. Box 31800
Richmond, VA 23294-1800
FMR Corp. and related persons 506,600(2) 10.1
Fidelity Low-Priced Stock Fund
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc. 460,000(3) 9.2
T. Rowe Price Small
Cap Value Fund Inc.
100 E. Pratt Street
Baltimore, MD 21202
Kennedy Capital Management, Inc. 343,050(4) 6.8
10829 Olive Boulevard
St. Louis, MO 63141
Dimensional Fund Advisors, Inc. 273,700(5) 5.5
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
(1) Includes 172,192 shares held in trust for the benefit of Sara E. Rose,
David A. Rose and Howard L. Rose, the children of Mr. Siegel's sister, Judith
R. Becker.
1
<PAGE>
Stuart C. Siegel is trustee and exercises voting and investment power with
respect to these shares.
(2) FMR Corp., through its wholly-owned subsidiary, Fidelity Management &
Research Company ("Fidelity"), has sole investment power with respect to all of
these shares. Fidelity's beneficial ownership of these shares results from its
acting as investment advisor to Fidelity Low-Priced Stock Fund, an investment
company and the owner of the shares. Edward C. Johnson 3d, Chairman of FMR
Corp., and Abigail P. Johnson, a director of FMR Corp., and other members of
the Johnson family may be deemed, under the Investment Company Act of 1940, to
form a controlling group with respect to FMR Corp. The information provided is
as of December 31, 1997.
(3) These shares are owned by various individual and institutional
investors, including T. Rowe Price Small Cap Value Fund, Inc. (which has sole
voting power with respect to 425,000 of these shares), which T. Rowe Price
Associates, Inc. ("Price Associates"), serves as investment advisor. Price
Associates has sole investment power with respect to all of these shares and
sole voting power with respect to 35,000 of these shares. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price Associates
is deemed to be a beneficial owner of these shares; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of these shares.
The information provided is as of December 31, 1997.
(4) Kennedy Capital Management, Inc., a registered investment advisor, has
sole investment power with respect to all these shares and sole voting power
with respect to 240,950 shares. The information provided is as of December 31,
1997.
(5) Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of these shares
which are held in portfolios of certain investment companies, trusts and
investment vehicles for qualified employee benefit plans, all of which
Dimensional serves as investment manager. Dimensional has sole investment power
with respect to all of these shares and sole voting power with respect to
181,400 of these shares. Dimensional disclaims beneficial ownership of all such
shares. The information provided is as of December 31, 1997.
Security Ownership of Management
The table below presents certain information as to the beneficial
ownership of the Company's Common Stock by (i) each director and nominee, (ii)
each executive officer named in the Summary Compensation Table, and (iii) all
executive officers, directors and nominees as a group, as of March 20, 1998.
Except as otherwise noted, each of the persons named below has sole voting and
investment power with respect to the shares listed.
Amount and Nature
Name of of Beneficial Percent
Beneficial Owner Ownership of Class
- ------------------------- ------------------ ---------
Stuart C. Siegel 1,501,369(1) 29.9
Robert L. Burrus, Jr. 1,000 *
Donald W. Colbert 255,242(2) 4.9
Selwyn S. Herson 600 *
Andrew M. Lewis 2,000 *
Steven A. Markel 2,000 *
Troy A. Peery, Jr. 1,000 *
Marshall B. Wishnack 1,000 *
Robert J. Taphorn 55,524(3) 1.1
Robert E. Knowles 133,613(4) 2.6
Harry S. Shendow 31,333(5) *
All directors and
executive officers as
a group (12 persons) 2,047,796(6) 38.5
*Less than 1% of class
(1) See Note 1 under Security Ownership of Certain Beneficial Owners.
(2) Includes 138,200 shares subject to options exercisable within 60 days.
(3) Includes 32,167 shares subject to options exercisable within 60 days.
(4) Includes 3,500 shares owned jointly by Mr. Knowles and his wife as to
which Mr. Knowles may be deemed to share voting and investment power. Also
includes 82,167 shares subject to options exercisable within 60 days.
(5) Includes 31,333 shares subject to options exercisable within 60 days.
(6) Includes 3,500 shares owned jointly by an executive officer and his
spouse as to which such officer may be deemed to share voting and investment
power. Also includes 324,834 shares subject to options exercisable within 60
days.
2
<PAGE>
PROPOSAL NO. 1
Election of Directors
General
Eight directors are to be elected to hold office until the next Annual
Meeting of Shareholders is held and their successors are elected. All of the
eight nominees for election to the Board of Directors are presently serving as
directors. Under the Company's Bylaws each of the present directors will hold
office until his successor has been elected at the Annual Meeting of
Shareholders.
The persons named as proxies in the accompanying proxy intend to vote for
the election of only the eight persons named below unless the proxy specifies
otherwise. It is expected that each of these nominees will be able to serve,
but in the event that any such nominee is unable to serve for any reason (which
event is not now anticipated) the proxies will vote the proxy for the remaining
nominees and such other person as the Board of Directors may designate.
Information Regarding Nominees
The following table sets forth certain information regarding each nominee.
<TABLE>
<CAPTION>
Principal Occupation Present Positions
Director During the and Offices
Nominee Age Since Last Five Years with the Company
- ------------------------ ----- ---------- --------------------------------- ---------------------------
<S> <C>
Stuart C. Siegel 55 1970 Chairman of the Board of Chairman of the Board of
Directors and Chief Executive Directors; Chief Executive
Officer of the Company Officer; Director
Robert L. Burrus, Jr. 63 1979 Partner in law firm of McGuire, Director; Chairman,
Woods, Battle & Boothe LLP, Compensation Committee
Richmond, Virginia
Donald W. Colbert 48 1985 President and Chief Operating President; Chief Operating
Officer of the Company Officer; Director
Selwyn S. Herson 45 1992 President of consulting firm Director; Member,
The Windsor Park Group, Compensation Committee
Woodland Hills, California
Andrew M. Lewis, Ph.D. 52 1983 Assistant Professor, Virginia Director; Member,
Commonwealth University, Compensation Committee
since December 1993; Doctoral
Degree Candidate, University of
California, Berkeley, prior to
December 1993
Steven A. Markel 49 1996 Vice Chairman of Markel Director; Member, Audit
Corporation, a specialty Committee
property and casualty insurer
Troy A. Peery, Jr. 51 1996 President and Chief Operating Director; Member, Audit
Officer of Heilig-Meyers Committee
Company, a specialty retailer of
home furnishings
Marshall B. Wishnack 51 1992 Chairman and Chief Executive Director; Chairman, Audit
Officer of Wheat First Union Committee
("Wheat"), an investment
banking firm, since April 1996;
President and Chief Executive
Officer of Wheat to April 1996
</TABLE>
3
<PAGE>
Stuart C. Siegel is also a director of ExecuStay Corporation.
Robert L. Burrus, Jr. is also a director of CSX Corporation, Heilig-Meyers
Company, Concepts Direct, Inc., O'Sullivan Corporation, and Smithfield Foods,
Inc.
Steven A. Markel is also a director of Markel Corporation, Fairfax
Financial Holdings Limited, and Lindsey & Morden Ltd.
Troy A. Peery, Jr., is also a director of Heilig-Meyers Company, Open Plan
Systems, Inc., and Mentor Mutual Funds.
Marshall B. Wishnack is also a director of Lawyers Title Insurance
Corporation.
Certain Relationships and Related Transactions
The Company leases certain premises at 6005 North Crestwood Avenue and the
adjacent store at 5918 West Broad Street, Richmond, Virginia, totaling
approximately 22,000 square feet, from Yetta Siegel-Flax pursuant to a lease
which expires in 2002. The fiscal 1998 rent was $135,000. Yetta Siegel-Flax is
the mother of Stuart C. Siegel. The Company operates the store at 5918 West
Broad Street and has sublet the 6005 North Crestwood Avenue premises with
fiscal 1998 income of $72,000.
The Company leases its store at the Gayton Crossing Shopping Center,
Richmond, Virginia, totaling approximately 4,500 square feet, from Stuart C.
Siegel pursuant to a lease which expires in 2006. The fiscal 1998 rent paid to
Mr. Siegel was $47,000.
The Company believes that the rent and other terms provided in the above
two leases are fair and reasonable to the Company as a tenant, are comparable
to the rental terms for similar properties in the same general locations and
are as favorable to the Company as if entered into with an unaffiliated party.
Committees of the Board of Directors
The committees of the Board of Directors of the Company include an Audit
Committee and a Compensation Committee.
Messrs. Wishnack, Markel and Peery are the members of the Audit Committee.
The Audit Committee's principal responsibilities include recommending to the
Board of Directors the firm of independent accountants to be retained by the
Company; reviewing with the Company's independent accountants the scope and
results of their audits; reviewing with the independent accountants and
management the Company's accounting and reporting principles, policies and
practices; and reviewing the adequacy of the Company's accounting and financial
controls. This Committee met twice during the fiscal year ended January 31,
1998.
Messrs. Burrus, Lewis and Herson are the members of the Compensation
Committee. The Compensation Committee has responsibility for recommending to
the Board of Directors the compensation levels and benefits for directors and
officers; administering the Company's stock option plan and stock purchase loan
plan; reviewing the administration of the Company's savings/profit sharing
plan; and advising the Board of Directors and management regarding general
personnel policies. This Committee met two times during the fiscal year ended
January 31, 1998.
Attendance
The Board of Directors held five meetings during the fiscal year ended
January 31, 1998. All directors attended 85 percent or more of the aggregate
number of meetings of the Board and committees of the Board on which they
served.
Directors' Compensation
Each director who is not an employee of the Company is paid a yearly
retainer of $3,600 and a fee of $300 for each Board meeting and for each Board
committee meeting attended.
Each non-employee director also participates in the Company's Stock
Deferral Plan for Outside Directors. Under this plan, at the end of every
three-month period, each director receives shares of Company Stock with a
market value of $1,000. Payment of the shares is deferred for income tax
purposes into a trust until the director's retirement from the Board of
Directors.
4
<PAGE>
EXECUTIVE COMPENSATION
The table below summarizes certain information relating to compensation
during the three fiscal years ended January 31, 1998, of the five most highly
compensated executive officers of the Company.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------
Annual Compensation Awards Payouts
--------------------- ----------------------------- ---------
Fiscal Restricted Securities
Name and Year Stock Underlying LTIP All Other
Principal Ended Salary Bonus Award(s) Options/SARs Payouts Compensation(1)
Position January ($) ($) ($) (#) ($) ($)
- ----------------------- --------- --------- --------- ------------ -------------- --------- ----------------
<S> <C>
Stuart C. Siegel 1998 498,400 352,500 0 0 0 204,300
Chairman of the Board 1997 477,800 325,200 0 0 0 164,600
and CEO 1996 461,500 0 0 0 0 127,300
Donald W. Colbert 1998 349,300 182,200 0 24,000 0 60,900
President and COO 1997 331,800 166,900 0 0 0 43,200
1996 315,800 0 0 24,200 0 26,300
Robert J. Taphorn 1998 220,100 108,200 0 11,000 0 15,000
Executive VP 1997 208,700 100,400 0 0 0 6,900
1996 198,100 0 0 10,500 0 1,500
Robert E. Knowles 1998 205,700 87,000 0 11,000 0 30,700
Executive VP and 1997 195,500 79,600 0 0 0 22,400
CFO, Secretary and 1996 185,000 0 0 10,500 0 14,400
Treasurer
Harry S. Shendow 1998 145,500 59,900 0 2,500 0 28,000
Senior VP 1997 139,200 44,400 0 0 0 25,800
1996 143,200 0 0 2,500 0 23,900
</TABLE>
(1) Includes Company contributions under the Employees' Savings/Profit
Sharing Plan, amounts accrued under deferred compensation agreements, the net
value of the benefit to the named executives of the portion of the premiums
paid by the Company under the Split Dollar Life Insurance Plan and amounts of
interest forgiven under the Stock Purchase Loan Plan. During the fiscal year
ended January 31, 1998, (i) Company contributions allocated under the
Employees' Savings/Profit Sharing Plan to Messrs. Siegel, Colbert, Taphorn,
Knowles and Shendow were $1,900 each; (ii) amounts accrued under deferred
compensation agreements with Messrs. Siegel, Colbert, Knowles and Shendow were
$91,400, $11,200, $5,800 and $26,100, respectively; (iii) the dollar value of
the benefit of premiums paid by the Company (using an eight percent interest
rate) under the Split Dollar Life Insurance Plan for Messrs. Siegel, Colbert,
Taphorn and Knowles were $86,600, $23,500, $2,600 and $12,400, respectively;
and (iv) amounts of interest forgiven under the Stock Purchase Loan Plan for
Messrs. Siegel, Colbert, Taphorn and Knowles were $24,400, $24,300, $10,500 and
$10,600, respectively.
5
<PAGE>
The following table sets forth information with respect to options granted
during the fiscal year ended January 31, 1998, for each of the executive
officers for whom information is given in the Summary Compensation Table.
Options/SAR Grants in Last Fiscal Year(1)
<TABLE>
<CAPTION>
Potential Realizable
Value
at Assumed Annual
Rates
of Stock Price
Appreciation
Individual Grants for Option Term(4)
- -------------------------------------------------------------------------------------------------- --------------------
% of Total Exercise
Number of Securities Options/SARs or Base
Underlying Options/ Granted to Employees Price Expiration
Name SARs Granted (#)(2) in FiscalYear ($/Sh)(3) Date 5% ($) 10% ($)
- ------------------- ---------------------- ---------------------- ------------ ----------- --------- --------
<S> <C>
Stuart C. Siegel 0 N/A N/A N/A N/A N/A
Donald W. Colbert 24,000 30.8% $ 9.63 3/17/2005 110,300 264,200
Robert J. Taphorn 11,000 14.1% $ 9.63 3/17/2005 50,600 121,100
Robert E. Knowles 11,000 14.1% $ 9.63 3/17/2005 50,600 121,100
Harry S. Shendow 2,500 3.2% $ 9.63 3/17/2005 11,500 27,500
</TABLE>
(1) No stock appreciation rights ("SARs") have been granted to any
employee.
(2) These options become exercisable in one-third increments over a
three-year period beginning from the date of grant. The Compensation Committee
may accelerate the exercisability of the options.
(3) The exercise price of each option is equal to the fair market value
per share of the Company's Common Stock on the date of grant.
(4) The potential realizable values in the table assume that the market
price of the Company's Common Stock appreciates in value from the date of grant
to the end of the option term at the annualized rates prescribed by the
Securities and Exchange Commission. The actual value, if any, an executive may
realize will depend on the excess, if any, of the stock price over the exercise
price on the date the option is exercised. There is no assurance that the value
actually realized by an executive will be at or near the values indicated in
the table.
The following table sets forth information with respect to options
exercised during the fiscal year ended January 31, 1998, and the number and
value of options held at the end of such fiscal year for each of the executive
officers for whom information is given in the Summary Compensation Table.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values(1)
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-End FY-End(2)
Shares (#) ($)
Acquired Value --------------------- ---------------------
on Exercise Realized Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
------------- --------- --------------------- ---------------------
<S> <C>
Stuart C. Siegel 0 $ -- 0/0 -/-
Donald W. Colbert 5,891 $81,000 122,133/32,067 528,900/106,500
Robert J. Taphorn 0 $ -- 25,000/14,500 83,800/48,000
Robert E. Knowles 4,419 $60,750 75,000/14,500 331,000/48,000
Harry S. Shendow 0 $ -- 29,667/3,333 95,300/11,100
</TABLE>
(1) No SARs have been granted to or exercised by any employee.
(2) Difference between fair market value and exercise price at fiscal year
end.
6
<PAGE>
Stock Purchase Loan Program
In 1995, the Company adopted, with shareholder approval, the Stock
Purchase Loan Plan under which the Compensation Committee may approve loans to
officers and other key management employees of the Company for the purpose of
acquiring shares of the Company's Common Stock. The plan is intended to attract
and retain key employees and to provide incentives for management to achieve
the Company's current and long-term strategic goals. Pursuant to the plan, the
Compensation Committee authorized and the Company made an aggregate of $1.5
million in loans in 1995 to a total of 17 officers (the "1995 Loan Program").
An aggregate of 214,275 shares of Common Stock were purchased pursuant to the
1995 Loan Program.
Each outstanding loan has a term of seven years but becomes due and
payable up to one year following a termination of the participant's employment.
A loan may be prepaid without penalty at any time and is subject to mandatory
repayments equal to a specified percentage of any net annual cash bonus paid to
the participant. The loans bear interest, compounded annually, at a rate equal
to the Applicable Federal Rate rounded upward to the nearest 0.25%. The
interest rate, which is currently 6 1/2%, will be adjusted annually for changes
in the Applicable Federal Rate. Each loan is secured by a pledge to the Company
of the shares of Common Stock acquired with the loan proceeds. The shares are
subject to additional restrictions on transfer which lapse as to one-third of
the shares on each of the second, third and fifth anniversaries of the date of
the loan. These restrictions do not apply to certain transfers such as those to
family members for tax or estate planning purposes.
The 1995 Loan Program allows participants to achieve forgiveness of all or
a portion of the interest accruing on a loan during a fiscal year (a
"Performance Period") based on the Company's achievement of the performance
goals established by the Compensation Committee for such Performance Period. If
a participant's employment is terminated due to death or disability or a
termination by the Company without cause within two years following a change of
control, all interest accrued during the then current Performance Period as
well as all future interest will be forgiven. A participant who retires at or
after normal retirement age will be entitled to a prorated amount of any
interest forgiveness otherwise achieved for such Performance Period. Otherwise,
a participant must still be employed by the Company at the end of a Performance
Period to be eligible for forgiveness of any interest accrued during such
Performance Period.
The 1995 Loan Program also permits up to 25% of the principal amount of a
participant's loan to be forgiven dependent upon the participant's continued
employment with the Company and retention of the shares acquired with the loan
proceeds. If the participant remains continuously employed by the Company
through the seventh anniversary of the date of the loan, a portion of the loan
principal will be forgiven equal to 25% of the original principal amount
multiplied by the ratio which the number of shares retained on the seventh
anniversary bears to the number of shares originally acquired. Certain types of
transfers, such as those to family members for tax or estate planning purposes,
will not cause a reduction in the amount of loan principal forgiven. If the
participant's employment is terminated prior to the seventh anniversary of the
loan due to death or disability or a termination by the Company without cause
within two years following a change of control, the participant will be
entitled to principal forgiveness on the terms described above. A participant
who retires at or after normal retirement age will be entitled to a prorated
amount of such principal forgiveness based on the portion of the seven year
period during which the participant was employed. Otherwise, a participant must
still be employed on the seventh anniversary of the loan to be eligible for any
forgiveness of loan principal. The following table shows, for each
participating executive officer, the number of shares of Common Stock acquired
with the proceeds of loans under the plan and the aggregate amount of all loan
principal and accrued interest outstanding as of March 20, 1998.
<TABLE>
<CAPTION>
Number
of Shares Amount
Name Purchased Outstanding ($)
- ----------------------- ----------- ----------------
<S> <C>
Stuart C. Siegel 55,857 $410,000
Donald W. Colbert 53,142 $408,300
Robert J. Taphorn 23,357 $175,400
Robert E. Knowles 23,357 $178,900
Weldon J. Wirick, III 10,714 $ 85,100
</TABLE>
7
<PAGE>
Deferred Compensation Agreements
The Company has deferred compensation agreements with each of Messrs.
Siegel, Colbert, Knowles and Shendow. These agreements provide for specified
payments if the executive has been employed by the Company for at least 10
years. Full benefits commence on the executive's normal retirement date
(generally, age 65). If the executive terminates employment after his early
retirement date (generally, age 55) but before his normal retirement date, the
benefits are reduced by 5% per year for each year by which payment starts
before his normal retirement date. The benefits are payable on a monthly basis
for life and are guaranteed for 10 years if the executive dies. The guaranteed
payments after death are payable to the executive's beneficiary. The annual
amount of the normal retirement benefits payable under the agreements for
Messrs. Colbert, Knowles and Shendow is $81,257, $41,953 and $27,601,
respectively. Mr. Siegel's agreement provides for an annual benefit of $66,495
on the terms described above based on a normal retirement date of age 55. Mr.
Siegel is also entitled to a supplemental annual benefit of $64,723, payable
for 20 years commencing upon his termination of employment at or after reaching
age 65. If Mr. Siegel terminates employment after age 60 but before age 65, the
supplemental benefit is reduced by 5% per year for each year by which payment
commences before age 65. No supplemental benefit is payable if Mr. Siegel
terminates employment before age 60. In certain cases, the present value of the
benefits under the foregoing agreements (calculated using an 8% discount rate)
may be paid to the executive, or following the executive's death to his
beneficiary, in a lump sum or other manner.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee, which is composed of three non-management
directors of the Company, sets executive compensation levels and establishes
and administers short-term and long-term incentive programs. The Committee
believes that the most effective executive compensation program provides
incentives to achieve both current and longer-term strategic goals of the
Company, with the ultimate objective of enhancing shareholder value. The
Company's compensation package for its executive officers consists of base
salary, annual performance based bonuses, stock option grants and the
opportunity to acquire shares of Common Stock under the Company's Stock
Purchase Loan Plan.
Each year, the Committee reviews proposals submitted by the Chief
Executive Officer with respect to senior executives' annual salary, performance
goals and bonuses for the following year as well as achievements for the prior
year, performance targets under the Stock Purchase Loan Plan, and stock option
grants. In evaluating these proposals, the Committee considers (1) the
individual executive officer's performance and level of contribution, including
evaluations by the Chief Executive Officer with respect to other executive
officers, (2) the Company's performance during the last fiscal year in relation
to its financial goals, measured primarily by earnings per share, and (3)
whether the proposals are consistent with the Committee's policies on executive
compensation. The Committee considered the information previously provided by
an outside compensation consultant in establishing compensation levels and
programs for the Company's executives in fiscal 1998.
The Committee believes that a significant portion of an executive's total
compensation should be subject to Company and individual performance criteria.
Base salary amounts are generally set at the levels believed by the Committee
to be necessary to attract and retain qualified individuals when considered
along with the performance based components of the Company's compensation
package. The Committee determined that executive officers' base salaries should
be increased from one percent to five percent in fiscal 1998 with a view to
keeping total compensation competitive.
The Company's annual bonus plan provides incentives to achieve current
strategic goals of the Company and to maximize individual performance. At the
beginning of each year, the Committee sets threshold, target and maximum bonus
amounts for each executive officer. Consistent with the Company's compensation
philosophy, these potential bonus amounts are set at a significant percentage
of the executive officer's salary for such year, typically between 10% and 70%.
The determination of the amount of the bonus, if any, to be paid is made after
the end of the year by the Committee based on the degree to which the Company
has achieved the performance goals established by the Committee, measured by
earnings per share for executive officers. For other officers, the officer's
individual performance and level of contribution during the previous
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year are also considered. If the minimum, target or maximum goals are met, the
executive officer may receive the threshold, target or maximum bonus amount,
respectively, depending on the Committee's evaluation of the executive's
individual performance. Similarly, if the Company's actual performance for a
year falls between any of these goals, the executive officer may receive a
prorated portion of the next highest bonus amount. In some cases, the Committee
may adjust the bonus percentages and performance targets during the fiscal year
on a prospective basis. The Company's earnings per share for fiscal 1998 were
in excess of the maximum goals resulting in bonus payouts at the maximum
percentage based on corporate performance.
Grants of stock options to the Company's executive officers under the 1991
Stock Option Plan provide incentives to achieve the Company's long-term
performance objectives. Because the value of stock options is entirely a
function of the value of the Company's stock, the Committee believes that this
component of the Company's compensation package aligns the interests of
executive officers with those of the Company's shareholders. The Committee
determines whether a grant will be made to an executive officer, and if so in
what amount, based on the Committee's subjective evaluation of the executive
officer's potential contribution to the Company's future success, the level of
incentive already provided by the number and terms of the executive officer's
existing stock option holdings and the market price of the Company's Common
Stock. Grants to named executive officers for fiscal 1998 are shown on the
Option/SAR Grants in Last Fiscal Year table that precedes this report.
Under the Stock Purchase Loan Plan, an aggregate of $1.5 million in loans
were made by the Company in 1995 to the executive officers and other key
management employees to acquire an aggregate of 214,275 shares (the "1995 loan
program"). The 1995 loan program allows participants to achieve forgiveness of
all or a portion of the interest on the loans based upon the Company's
achievement of performance goals established by the Committee. Minimum, target
and maximum goals were established which could result in forgiveness of 25%,
50% or 100%, respectively, of the loan interest accruing during fiscal 1998,
with the amount being forgiven prorated for performance that fell between any
of the goals. The performance criterion and the targets for fiscal 1998 were
the same as those established for purposes of the Company's annual bonus plan.
The Company's performance was in excess of the maximum goals and 100% of the
loan interest accruing in fiscal 1998 was forgiven. The 1995 loan program also
permits up to 25% of the principal amount of a participant's loan to be
forgiven dependent upon the participant's continued employment with the Company
and based on the amount of stock acquired under the program which the
participant has retained. A more detailed description of the 1995 loan program
appears elsewhere in the Proxy Statement. The Committee believes that the plan,
by encouraging management's acquisition and retention of the Company's Common
Stock and by tying interest forgiveness to Company performance, provides
incentives for management to achieve both the Company's long-term performance
objectives and its current strategic goals.
The Committee determined the compensation for Mr. Siegel, the Company's
Chairman and Chief Executive Officer, for the past fiscal year in a manner
consistent with its policies and procedures. The Committee considered that Mr.
Siegel continued to provide strong leadership and motivation to the Company and
its management. The Committee evaluated the Company's performance in the
context of a difficult industry situation. The Committee determined that Mr.
Siegel's base salary for fiscal 1998 should be increased by two percent. The
Committee historically has not granted stock options to Mr. Siegel because of
his existing stock ownership in the Company. Therefore, the Committee generally
sets Mr. Siegel's bonus amounts at a greater percentage of base salary than
those set for other executives. The threshold, target and maximum potential
bonus amounts for Mr. Siegel were set at 24%, 48% and 72%, respectively, for
fiscal 1998.
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The Company exceeded its target goal for fiscal 1998 so that the maximum
bonus was paid to Mr. Siegel under the annual bonus program. To provide
additional incentives for Mr. Siegel to achieve the Company's current strategic
goals and long-term performance objectives, Mr. Siegel was provided an
opportunity to purchase shares under the 1995 loan program on a basis generally
comparable to the other senior executive officers. The amount borrowed by Mr.
Siegel and used to purchase shares under the program represented approximately
85% of his annual base salary for the year of the purchase. The performance
targets and potential forgiveness percentages for Mr. Siegel under the 1995
loan program for fiscal 1998 were the same as for other executive officers. The
fiscal 1998 interest on Mr. Siegel's loan was forgiven under the 1995 loan
program.
Based on recommendations of the outside compensation consultant, the
Committee determined that the total Company-provided retirement benefits for
Mr. Siegel were below a competitive level based on survey data from a broad
range of companies. To address this issue, the Committee approved a supplement
to Mr. Siegel's deferred compensation program. Mr. Siegel must continue working
for the Company until age 60 to receive the supplemental benefit. With the
supplemental benefit, the total Company-provided retirement benefits for Mr.
Siegel are projected to be at the median level for chief executive officers. A
more detailed description of these retirement benefits appears elsewhere in the
Proxy Statement.
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a
$1,000,000 limit on the amount of compensation that will be deductible by the
Company with respect to the Chief Executive Officer and the four other most
highly compensated executive officers. Performance based compensation that
meets certain requirements will not be subject to the deduction limit. The
Committee, with the assistance of the Company's legal counsel, has reviewed the
impact of Section 162(m) on the Company and believed it was unlikely that the
compensation paid to any executive officer during fiscal 1998 would exceed the
limit. The Committee will continue to monitor the impact of the Section 162(m)
limit and to assess alternatives for avoiding loss of tax deductions in future
years to the extent that the alternatives would be consistent with the
Committee's compensation philosophy and in the best interests of the Company.
Compensation Committee
Robert L. Burrus, Jr., Chairman
Selwyn S. Herson
Andrew M. Lewis
Compensation Committee Interlocks and Insider Participation
Mr. Burrus, a member of the Compensation Committee, is a partner in the
law firm of McGuire, Woods, Battle & Boothe LLP, which has served as counsel to
the Company on a regular basis since 1979.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total return on the Company's Common Stock with the cumulative
total return of companies in the Nasdaq Market Value Index for U.S. companies
and the Nasdaq Retail Trade Index for the period of five years commenced on
January 30, 1993, and ended on January 31, 1998.
[graph]
Year Ended 1/30/93 1/29/94 1/28/95 1/27/96 1/25/97 1/31/98
S&K 100.0 108.3 60.4 47.9 83.3 106.1
Nasdaq Market 100.0 126.0 199.0 166.7 219.4 258.4
Nasdaq Retail 100.0 107.3 94.6 106.9 131.5 153.7
Media General Financial Services supplied the data for the Company and the
Nasdaq Market Value Index. Center for Research in Security Prices (CRSP)
supplied the data for the Nasdaq Retail Trade Index.
11
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PROPOSAL NO. 2
Ratification of Selection of Accountants
Price Waterhouse LLP, Norfolk, Virginia, has been selected by the Board of
Directors as independent accountants of the Company for the current year,
subject to ratification by the Shareholders. If the Shareholders do not ratify
the selection of Price Waterhouse LLP, the Board of Directors will reconsider
its selection of independent accountants for the current year. Representatives
of Price Waterhouse LLP are expected to be present at the Annual Meeting of
Shareholders and will be given the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions from
Shareholders.
The Board of Directors recommends that you vote FOR ratification of the
selection of Price Waterhouse LLP as independent accountants for the Company
for the current year.
OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the meeting; however, if any other matters are properly brought
before the meeting, the persons named in the enclosed proxy or their
substitutes will vote in accordance with their best judgments on such matters.
SHAREHOLDER PROPOSALS FOR
1999 MEETING
Proposals of Shareholders intended to be included in the Proxy Statement
for the 1999 annual meeting must be received by the Company at its principal
executive offices no later than December 11, 1998. Any such proposal must meet
the applicable requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder.
By Order of the Board of Directors,
/s/ Robert E. Knowles
- ---------------------
Robert E. Knowles
Secretary
April 10, 1998
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[logo]
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S & K FAMOUS BRANDS, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints Robert E.
Knowles and Robert J. Taphorn, and each of them with full power of substitution
to each, proxies (and if the undersigned is a proxy, substitute proxies) and
attorneys to represent the undersigned at the Annual Meeting of Shareholders of
S & K Famous Brands, Inc., to be held at the Company's store adjacent to its
Corporate Headquarters, located at 11100 West Broad Street, Richmond, Virginia,
at 3:30 p.m., E.D.T., on May 28, 1998, and at any and all adjournments thereof,
and to vote as designated below, all of the Common Shares of S & K Famous
Brands, Inc., par value $.50 per share, held of record by the undersigned on
April 8, 1998, as fully as the undersigned could do if personally present.
(continued on other side)
<PAGE>
Please mark your votes as indicted in this example [X]
1. ELECTION OF DIRECTORS
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(except as marked to the contrary) (to vote for all nominees
listed below)
[ ] [ ]
(Instruction: To withhold authority to vote for any individual, strike a line
through the nominee's name in the list provided below.)
S. Siegel, R. Burrus, D. Colbert, S. Herson,
A. Lewis, S. Markel, T. Peery, M. Wishnack
2. PROPOSAL TO RATIFY THE SELECTION OF PRICE WATERHOUSE LLP as the
independent accountants of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
Receipt of the Secretary's Notice of and the related Proxy Statement for the
Annual Meeting of Shareholders to be held on May 28, 1998, is hereby
acknowledged.
Please sign exactly as name appears below. When shares are held by two or more
persons as joint tenants, any of such persons may sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated ___________________________, 1998
- ---------------------------------------
Shareholder's Signature
- ---------------------------------------
Shareholder's Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
