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>
[LOGO]
S & K FAMOUS BRANDS, INC.
P.O. BOX 31800
RICHMOND, VIRGINIA 23294-1800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1999
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 at the Hyatt Richmond Hotel located
at 6624 West Broad Street, Richmond, Virginia, at 10:00 a.m., E.D.T., on
Wednesday, May 19, 1999, for the following purposes:
1. To elect eight (8) directors to serve for the ensuing year.
2. To approve the Company's 1999 Stock Incentive Plan (the "1999 Plan").
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for the Company for the current year.
4. 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 7, 1999, 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 9, 1999
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 19, 1999
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 19, 1999, 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 9, 1999.
The close of business on April 7, 1999, 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 4,798,845 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 19, 1999. Except as otherwise noted, each of the
beneficial owners listed below has sole voting and investment power with
respect to the shares listed.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
- --------------------------------- ------------------ ---------
<S> <C> <C>
Stuart C. Siegel 1,501,369(1) 31.2
P. O. Box 31800
Richmond, VA 23294-1800
FMR Corp. and related persons 475,000(2) 9.9
Fidelity Low-Priced Stock Fund
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc. 460,000(3) 9.6
T. Rowe Price Small
Cap Value Fund Inc.
100 E. Pratt Street
Baltimore, MD 21202
Dimensional Fund Advisors, Inc. 390,700(4) 8.1
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
</TABLE>
(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. STUART C. SIEGEL IS TRUSTEE AND EXERCISES VOTING AND INVESTMENT
POWER WITH RESPECT TO THESE SHARES.
1
<PAGE>
(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 FEBRUARY 28, 1999.
(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, 1998.
(4) DIMENSIONAL FUND ADVISORS INC. ("DIMENSIONAL"), A REGISTERED
INVESTMENT ADVISOR, IS DEEMED TO HAVE BENEFICIAL OWNERSHIP OF THESE SHARES
WHICH ARE HELD BY CERTAIN INVESTMENT COMPANIES, TRUSTS AND OTHER INVESTMENT
VEHICLES FOR WHICH DIMENSIONAL SERVES AS INVESTMENT ADVISOR OR MANAGER.
DIMENSIONAL HAS SOLE INVESTMENT AND VOTING POWER WITH RESPECT TO ALL OF THESE
SHARES. DIMENSIONAL DISCLAIMS BENEFICIAL OWNERSHIP OF ALL SUCH SHARES. THE
INFORMATION PROVIDED IS AS OF DECEMBER 31, 1998.
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 19, 1999.
Except as otherwise noted, each of the persons named below has sole voting and
investment power with respect to the shares listed.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------- ------------------ ---------
<S> <C> <C>
Stuart C. Siegel 1,501,369(1) 31.2
Robert L. Burrus, Jr. 1,000 *
Donald W. Colbert 277,300(2) 5.6
Selwyn S. Herson 600 *
Andrew M. Lewis 2,000 *
Steven A. Markel 2,000 *
Troy A. Peery 1,000 *
Marshall B. Wishnack 1,000 *
Robert J. Taphorn 83,219(3) 1.7
Robert E. Knowles 151,308(4) 3.1
Weldon J. Wirick, III 34,337(5) *
All directors and
executive officers as
a group (11 persons) 2,055,133(6) 40.7
</TABLE>
*LESS THAN 1% OF CLASS
(1) SEE NOTE 1 UNDER SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
(2) INCLUDES 112,200 SHARES SUBJECT TO OPTIONS EXERCISABLE WITHIN 60 DAYS.
(3) INCLUDES 35,833 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 75,833 SHARES SUBJECT TO OPTIONS EXERCISABLE WITHIN 60 DAYS.
(5) INCLUDES 5,667 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 229,533 SHARES SUBJECT TO OPTIONS EXERCISABLE WITHIN 60
DAYS.
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.
2
<PAGE>
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> <C> <C> <C>
Stuart C. Siegel 56 1970 Chairman of the Board of Directors Chairman of the Board of
and Chief Executive Officer of Directors; Chief Executive
the Company Officer; Director
Robert L. Burrus, Jr. 64 1979 Partner in law firm of McGuire, Director; Chairman,
Woods, Battle & Boothe LLP, Compensation Committee
Richmond, Virginia
Donald W. Colbert 49 1985 President and Chief Operating President; Chief Operating
Officer of the Company Officer; Director
Selwyn S. Herson 46 1992 President of consulting firm, The Director; Member,
Windsor Park Group, Woodland Compensation Committee
Hills, California
Andrew M. Lewis, Ph.D. 53 1983 Assistant Professor, Virginia Director; Member,
Commonwealth University, since Compensation Committee
December 1993
Steven A. Markel 50 1996 Vice Chairman of Markel Director; Member, Audit
Corporation, a specialty property Committee
and casualty insurer
Troy A. Peery, Jr. 52 1996 President and Chief Operating Director; Member, Audit
Officer of Heilig-Meyers Committee
Company, a specialty retailer of
home furnishings, prior to
February 1999
Marshall B. Wishnack 52 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 prior to April 1996
</TABLE>
Robert L. Burrus, Jr. is also a director of CSX Corporation, Heilig-Meyers
Company, Concepts Direct, Inc., O'Sullivan Corporation, and Smithfield Foods,
Inc.
Selwyn S. Herson is also a director of Safelite Glass Corp.
Steven A. Markel is also a director of Markel Corporation.
Troy A. Peery, Jr., is also a director of Open Plan Systems, Inc., and
Mentor Mutual Funds.
Marshall B. Wishnack is also a director of Land America Financial Group.
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
3
<PAGE>
to a lease which expires in 2002. The fiscal 1999 rent was $138,000. 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 1999 income of $48,000.
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 1999 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 consist of 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 30,
1999.
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 four times during the fiscal year ended
January 30, 1999.
ATTENDANCE
The Board of Directors held five meetings during the fiscal year ended
January 30, 1999. 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, except Mr. Wishnack who attended 71 percent of such meetings.
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 is awarded shares of Company Stock with a
market value of $1,000. Payment of the shares is deferred for income tax
purposes into a trust until the director's retirement from the Board of
Directors.
4
<PAGE>
EXECUTIVE COMPENSATION
The table below summarizes certain information relating to compensation
during the three fiscal years ended January 30, 1999, of the five most highly
compensated executive officers (currently Senior Vice President and above) of
the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------- ----------------------------- ---------
FISCAL RESTRICTED SECURITIES
NAME AND YEAR STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL ENDED SALARY BONUS AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION(1)
POSITION JANUARY ($) ($) ($) (#) ($) ($)
- ----------------------- --------- --------- --------- ------------ -------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stuart C. Siegel 1999 499,000 195,200 0 0 0 120,200
Chairman of the Board 1998 498,400 352,500 0 0 0 112,900
and CEO 1997 477,800 325,200 0 0 0 80,000
Donald W. Colbert 1999 356,000 103,500 0 23,000 0 38,000
President and COO 1998 349,300 182,200 0 24,000 0 49,800
1997 331,800 166,900 0 0 0 32,800
Robert J. Taphorn 1999 224,400 63,500 0 10,500 0 12,800
Executive VP 1998 220,100 108,200 0 11,000 0 15,000
1997 208,700 100,400 0 0 0 6,900
Robert E. Knowles 1999 209,300 49,200 0 10,500 0 20,200
Executive VP and 1998 205,700 87,000 0 11,000 0 25,000
CFO, Secretary and 1997 195,500 79,600 0 0 0 17,000
Treasurer
Weldon J. Wirick, III 1999 123,600 6,900 0 4,000 0 3,700
Senior VP 1998 124,100 14,200 0 5,000 0 6,800
1997 121,000 19,700 0 0 0 3,700
</TABLE>
(1) INCLUDES COMPANY CONTRIBUTIONS UNDER THE EMPLOYEES' SAVINGS/PROFIT
SHARING PLAN, 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 30, 1999, (I) COMPANY CONTRIBUTIONS
ALLOCATED UNDER THE EMPLOYEES' SAVINGS/PROFIT SHARING PLAN TO MESSRS. SIEGEL,
COLBERT, TAPHORN, KNOWLES AND WIRICK WERE $1,900 EACH; (II) 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 $110,300, $27,700, $7,400 AND $14,600, RESPECTIVELY;
AND (III) AMOUNTS OF INTEREST FORGIVEN UNDER THE STOCK PURCHASE LOAN PLAN FOR
MESSRS. SIEGEL, COLBERT, TAPHORN, KNOWLES AND WIRICK WERE $8,000, $8,400,
$3,500, $3,700 AND $1,800, RESPECTIVELY.
5
<PAGE>
The following table sets forth information with respect to options granted
during the fiscal year ended January 30, 1999, for each of the executive
officers for whom information is given in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
- ------------------------------------------------------------------------------------------------------ --------------------
% OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS EXERCISE OR
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME SARS GRANTED(#)(2) IN FISCAL YEAR ($/SH)(3) DATE 5%($) 10%($)
- ----------------------- ---------------------- ---------------------- ------------ ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Stuart C. Siegel 0 N/A N/A N/A N/A N/A
Donald W. Colbert 23,000 32.9% $ 11.94 9/4/2006 131,100 314,000
Robert J. Taphorn 10,500 15.0% $ 11.94 9/4/2006 59,800 143,300
Robert E. Knowles 10,500 15.0% $ 11.94 9/4/2006 59,800 143,300
Weldon J. Wirick, III 4,000 5.7% $ 11.94 9/4/2006 22,800 54,600
</TABLE>
(1) NO STOCK APPRECIATION RIGHTS ("SARS") HAVE BEEN GRANTED TO ANY EMPLOYEE.
(2) THESE OPTIONS BECOME EXERCISABLE IN ONE-FIFTH INCREMENTS OVER A FIVE-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 30, 1999, 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 VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END(2)
SHARES (#) ($)
ACQUIRED VALUE ------------------------ ---------------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
(#) ($) UNEXERCISABLE UNEXERCISABLE
------------- --------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
Stuart C. Siegel 0 0 0/0 0/0
Donald W. Colbert 34,000 337,936 104,200/39,000 136,700/6,500
Robert J. Taphorn 0 0 32,166/17,834 38,100/3,000
Robert E. Knowles 10,000 106,250 72,166/17,834 132,000/3,000
Weldon J. Wirick, III 10,000 96,448 30,966/7,334 48,900/1,400
</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. Pursuant to the plan, the Compensation Committee authorized
and the Company made an aggregate of $1.5 million in loans in 1999 to a total
of 16 officers (the "1999 Loan Program"). An aggregate of 175,812 shares of
Common Stock were purchased pursuant to the 1999 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 5 3/4% for the 1995 Loan Program and 4 3/4%
for the 1999 Loan Program, 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 and 1999 Loan Programs allow 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 and 1999 Loan Programs also permit 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 aggregate 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 19, 1999.
7
<PAGE>
<TABLE>
<CAPTION>
Number
Of Shares Amount
Name Purchased Outstanding($)
- ----------------------- ----------- ---------------
<S> <C> <C>
Stuart C. Siegel 55,857 355,300
Donald W. Colbert 101,200 786,100
Robert J. Taphorn 47,386 362,200
Robert E. Knowles 47,386 369,200
Weldon J. Wirick, III 17,746 142,700
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
The Company has deferred compensation agreements with each of Messrs.
Siegel, Colbert, Knowles and Wirick. 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 Wirick is $81,257, $41,953 and $24,289,
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, 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 for the Company's
executives in fiscal 1999. During fiscal 1999 as part of the Committee's
continuing review process, the Committee engaged another nationally recognized
compensation consultant to evaluate the Company's executive compensation
practices. The Committee considered the consultant's recommendations about the
Company's stock incentive program and some of those recommendations are
reflected in the proposed 1999 Stock Incentive Plan submitted for shareholder
approval. The Committee will consider other recommendations of the consultant
in establishing compensation levels and programs for fiscal 2000 and later
years.
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 two percent to approximately six percent in fiscal
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<PAGE>
1999 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 and return on equity for executive officers for fiscal 1999.
For other officers, the officer's individual performance and level of
contribution during the previous 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 return on equity did not reach the threshold level and earnings per
share for fiscal 1999 were between the minimum and target goals resulting in
bonus payouts at the appropriate percentage.
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. For fiscal 1999,
the Committee determined whether a grant would 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. The grants to named executive officers for fiscal 1999 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"). During 1999, the Committee approved an additional $1.5 million in
loans that executive officers and other key management employees used to
acquire an aggregate of 175,812 shares (the "1999 loan program"). The 1995 and
1999 loan programs allow 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. For the 1995 loan program,
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 1999, with the amount being forgiven prorated for performance
that fell between any of the goals. The performance criterion and the targets
for fiscal 1999 were the same as those established for purposes of the
Company's annual bonus plan. The Company's performance was between the minimum
and target goals and the appropriate amount of the loan interest accruing in
fiscal 1999 was forgiven. The 1995 loan program and the 1999 loan program also
permit 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 and the 1999
loan program appear 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 fiscal 1999 in a manner consistent
with its policies and procedures. The Committee considered that Mr. Siegel had
set a strategic direction for the Company that emphasizes shareholder value.
The Committee reviewed the Company's improved performance compared to the prior
year. The Committee determined that Mr. Siegel's base salary for fiscal 1999
9
<PAGE>
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 1999. The Company performed
between its minimum and target goals for fiscal 1999 so that a proportionate
bonus was paid to Mr. Siegel under the annual bonus program.
Under the 1995 loan program, Mr. Siegel borrowed an amount that he used to
purchase shares representing approximately 85% of his annual base salary for
the year of the purchase. Due to the level of Mr. Siegel's existing stock
ownership in the Company and to allow additional amounts to be available for
other officers, Mr. Siegel did not borrow under the 1999 loan program. The
performance targets and potential forgiveness percentages for Mr. Siegel under
the 1995 loan program for fiscal 1999 were the same as for other executive
officers. The proportionate amount of the fiscal 1999 interest on Mr. Siegel's
loan was forgiven under the 1995 loan program.
Mr. Siegel also participates in the Company's deferred compensation
program. The Committee has determined that the total Company-provided
retirement benefits for Mr. Siegel are projected to be at the median level for
chief executive officers based on earlier survey data from a broad range of
companies. 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 individual limit on the amount of compensation that will be
deductible by the Company with respect to each of 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 1999 would exceed the limit. The proposed 1999 Stock Incentive Plan, as
described elsewhere in the Proxy Statement, is designed to comply with Section
162(m). 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.
10
<PAGE>
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 29, 1994, and ended on January 30, 1999.
[GRAPH]
Year Ended 1/29/94 1/28/95 1/27/96 1/25/97 1/31/98 1/30/99
- ---------- ------- ------- ------- ------- ------- -------
S&K 100.0 55.8 44.2 76.9 98.0 76.9
Nasdaq Market 100.0 94.5 132.2 174.1 205.1 320.1
Nasdaq Retail 100.0 88.2 99.7 122.6 143.0 174.8
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
<PAGE>
PROPOSAL NO. 2
APPROVAL OF 1999 STOCK INCENTIVE PLAN
INTRODUCTION
The Board of Directors of the Company has adopted, and recommends that the
shareholders approve, the Company's 1999 Stock Incentive Plan (the "1999
Plan"). The 1999 Plan is intended to further the long-term stability and
financial success of the Company by attracting and retaining key employees of
the Company through the use of cash and stock incentives. Incentive awards
under the 1999 Plan may be in the form of stock options, performance awards,
performance stock or restricted stock.
The 1999 Plan will become effective May 1, 1999, subject to shareholder
approval. Unless sooner terminated by the Board of Directors, the 1999 Plan
will terminate on April 30, 2009. No incentive awards may be made under the
1999 Plan after its termination. Upon shareholder approval of the 1999 Plan, no
further options will be awarded under the Company's 1991 Stock Option Plan (the
"1991 Plan").
The principal features of the 1999 Plan are summarized below. The summary
is qualified by reference to the complete text of the 1999 Plan, which is
attached to this Proxy Statement as Exhibit A.
ADMINISTRATION OF THE PLAN; ELIGIBILITY
The 1999 Plan will be administered by a Committee comprised of at least
three non-employee directors of the Company. The Committee has the power and
complete discretion to select eligible employees to receive incentive awards
and to determine the type of award and its terms and conditions. All present
and future employees of the Company whom the Committee determines to have
contributed or who can be expected to contribute significantly to the Company
are eligible to receive incentive awards under the 1999 Plan. The Company
estimates that it has approximately 280 such employees (5 of whom are executive
officers).
AMOUNT OF STOCK AVAILABLE FOR INCENTIVE AWARDS
The 1999 Plan reserves 300,000 of the Company's Common Shares for issuance
pursuant to incentive awards made under the 1999 Plan. In addition, shares
reserved under the 1991 Plan that have not been issued and are not covered by
an outstanding award (100,598 shares) and shares subject to outstanding options
under the 1991 Plan that expire or otherwise terminate unexercised after May 1,
1999, may be subjected to an incentive award and issued under the 1999 Plan.
Shares allocable to options granted under the 1999 Plan that expire or
otherwise terminate unexercised may again be subjected to an incentive award
under the 1999 Plan. For purposes of determining the number of shares that are
available for incentive awards under the 1999 Plan, such number will include
the number of shares surrendered by an employee to the Company in payment for
shares upon exercise of an option or in payment of federal and state income tax
withholding liabilities with respect to an incentive award. No more than
100,000 Common Shares may be allocated to the incentive awards granted to any
one participant in any one year. Adjustments will be made in the number and
kind of shares issuable under the 1999 Plan in the event of a stock dividend,
stock split or combination of shares, recapitalization, merger in which the
Company is the surviving corporation or other change in the Company's capital
stock. The Common Shares are traded on the Nasdaq Stock Market. On March 22,
1999, the closing sale price was $9.00.
STOCK OPTIONS
Options to purchase Common Shares granted to employees under the 1999 Plan
may be "incentive stock options" or nonstatutory stock options. Incentive stock
options qualify for favorable income tax treatment under Section 422 of the
Internal Revenue Code (the "Code"), while nonstatutory stock options do not.
The exercise price of an option will be at least 100% of the fair market value
of the Common Shares on the date that the option is granted by the Committee.
The Committee may, in its discretion, provide in an option agreement that an
eligible employee who exercises an option by delivering already owned Common
Shares will be granted a new option equal in amount to the number of shares
delivered to exercise the option. In such cases, the new option will expire on
the same date as provided in the underlying option, will have an exercise price
equal to 100% of the fair market value of the Common Shares on the date the new
option is granted and will be subject to the same restrictions on
exercisability imposed on the underlying option unless the Committee specifies
different limitations.
Options may only be exercised at such times as may be specified by the
Committee, provided, however, that an incentive stock option may not be
exercised after the first to occur of (i) ten years from the date on which
12
<PAGE>
the incentive stock option was granted, (ii) three months following the
optionee's retirement or termination of employment with the Company for reasons
other than death or disability, or (iii) one year from the optionee's
termination of employment on account of death or disability. The value of
incentive stock options, based on the exercise price, that can be exercisable
for the first time by an individual employee in any calendar year under the
1999 Plan or any other similar plan maintained by the Company is limited to
$100,000.
If the terms of the option or the Committee so provide, an optionee
exercising an option may pay the purchase price in cash, by delivering or
causing to be withheld from the option shares, Common Shares; by delivering a
promissory note; or by delivering an exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds from the option shares to pay the exercise price.
PERFORMANCE AWARDS
Performance awards are subject to the achievement of pre-established
performance goals and will be administered to comply with the requirements of
Section 162(m). Performance goals will relate to objective and quantifiable
performance criteria consisting of one or more of the following measures of
Company performance: asset growth; net worth; debt to equity ratio; earnings
per share (before or after income taxes and other adjustments); revenues;
operating income; operations cash flow; net income, before or after taxes; and
return on total capital, equity, revenue or assets. The Committee will set
target and maximum amounts payable under each performance award. The employee
receives the appropriate payments at the end of the performance period if the
performance goals (and other terms and conditions of the award) are met.
Payments under a performance award will be made in cash, Common Shares or both.
An employee receiving a performance award payable in Common Shares will have no
rights as a shareholder until the shares are issued under the terms of the
award. The aggregate maximum cash amount payable under the 1999 Plan to any
employee in any year cannot exceed $2,000,000. The Committee must make
performance awards prior to the 90th day of the period for which the
performance award relates or the completion of 25% of such period.
PERFORMANCE STOCK AWARDS
The Committee may grant performance stock awards entitling an employee to
receive Common Shares upon achievement of performance objectives established by
the Committee. An employee receiving a performance stock award will have no
rights as a shareholder until the Committee has certified that the performance
objectives have been met and the Common Shares are issued. The Committee may at
any time, in its discretion, remove or revise any or all performance objectives
for an award of performance stock.
RESTRICTED STOCK AWARDS
Upon receipt of an award of restricted stock, the employee will have all
of the rights of a shareholder with respect to such stock, including the right
to vote and to receive dividends, except that the employee will not be able to
sell or transfer the restricted stock until the restrictions stated in the
award agreement have lapsed or been removed under the terms of the 1999 Plan.
The restricted stock is forfeited if the restrictions have not lapsed or been
removed by the time specified in or determined under the award. The Committee
will establish as to each award of restricted stock the terms and conditions
(which may include the achievement of performance goals) upon which such
restrictions will lapse. The Committee may at any time, in its discretion,
accelerate the time at which any or all of the restrictions will lapse or
remove any or all such restrictions, except with respect to performance goals
if the award is intended to comply with Section 162(m).
CHANGE OF CONTROL
The Committee may, in its discretion, provide that stock options will
become fully exercisable and the restrictions on restricted stock will lapse
upon a change of control, notwithstanding other conditions contained in the
award. For purposes of the 1999 Plan, a "change of control" occurs (i) when a
person (or group of persons acting in concert) acquires 20% or more of the
Common Shares, (ii) when there is a change in the composition of a majority of
the Board of Directors when compared with those who are currently serving and
any new members whose nomination or election is approved by a majority of the
current Board or (iii) upon consummation of a reorganization, merger or
consolidation or other transaction which results in the shareholders of the
Company prior to such transaction owning less than 50% of the corporation
13
<PAGE>
resulting from the transaction. Exceptions are made to the first change of
control definition when (i) the acquiror obtains its shares directly from the
Company, (ii) the acquiror is the Company, a Company subsidiary or a Company
employee benefit plan or (iii) the acquiror is a corporation and immediately
after such acquisition the persons who were formerly the shareholders of the
Company own more than 50% of the acquiring corporation in substantially the
same proportion as they previously held shares in the Company.
TRANSFERABILITY OF AWARDS
Incentive awards, except incentive stock options, will be transferable to
the extent specifically provided in the incentive award. Incentive stock
options will not be transferable except by will or by the laws of descent and
distribution.
MODIFICATION OF PLAN AND AWARDS
The Company's Board of Directors can amend or terminate the 1999 Plan,
except that only shareholders can approve amendments that would (i) increase
the number of shares of Company Stock that are reserved and available for
issuance under the 1999 Plan; (ii) materially change or impact which employees
are eligible to participate in the 1999 Plan; or (iii) materially change the
benefits that eligible employees may receive under the 1999 Plan. However, the
Company's Board of Directors can amend the 1999 Plan as necessary and without
shareholder approval to ensure that the 1999 Plan continues to comply with
Section 162(m) of the Code and Rule 16b-3 under the Securities Exchange Act of
1934. In addition, the Committee may amend the terms of any incentive award or
the 1999 Plan to the extent necessary to preserve "pooling of interest"
accounting if the Company is involved in any prospective merger or similar
transaction that the Company intends to treat as a "pooling of interest" for
financial reporting purposes.
The Committee has the power to amend the terms of outstanding incentive
awards so long as the terms as amended are consistent with the terms of the
1999 Plan and provided that the consent of the employee is obtained with
respect to any amendment that would be detrimental to the employee, except that
such consent is not required if the amendment is for the purpose of complying
with Rule 16b-3 or any requirement of the Code.
FEDERAL INCOME TAX CONSEQUENCES
A participant generally will not incur federal income tax when he is
granted an incentive award.
Upon receipt of performance stock, lapse of restrictions on restricted
stock, or payment under a performance award, a participant will recognize
ordinary income equal to the fair market value of the Common Shares on that
date or the amount of cash received. Upon exercise of a nonstatutory stock
option, a participant generally will recognize ordinary income equal to the
difference between the fair market value of the Common Shares on the date of
the exercise and the option price. The Committee has authority under the 1999
Plan to include provisions allowing an employee to elect to deliver already
owned Common Shares or have a portion of the Common Shares subject to the
incentive award withheld to cover his tax liabilities. When a participant
exercises an incentive stock option, he generally will not recognize income,
unless he disposes of the Common Shares within certain time periods. The
exercise of an incentive stock option may result in a preference item that is
subject to the alternative minimum tax.
The Company usually will be entitled to a business expense deduction at
the time and in the amount that the recipient of an incentive award recognizes
ordinary income in connection therewith as described above. In some cases, such
as the exercise of a nonstatutory option, the Company's deduction is contingent
upon the Company meeting withholding tax requirements. Generally no deduction
is allowed in connection with an incentive stock option, unless the employee
disposes of Common Shares received upon exercise in violation of certain
holding period requirements. Moreover, there can be circumstances where the
Company may not be entitled to a deduction for certain transfers of Common
Shares or cash payments to a participant upon the exercise of an incentive
award that has been accelerated as a result of a "change of control".
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
S&K FAMOUS BRANDS, INC. 1999 STOCK INCENTIVE PLAN.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF ACCOUNTANTS
PricewaterhouseCoopers LLP, Virginia Beach, Virginia, has been selected by
the Board of Directors as independent accountants of the Company for the
current year, subject
14
<PAGE>
to ratification by the Shareholders. If the Shareholders do not ratify the
selection of PricewaterhouseCoopers LLP, the Board of Directors will reconsider
its selection of independent accountants for the current year. Representatives
of PricewaterhouseCoopers 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 PRICEWATERHOUSECOOPERS 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
2000 MEETING
Proposals of Shareholders intended to be included in the Proxy Statement
for the 2000 annual meeting must be received by the Company at its principal
executive offices no later than December 11, 1999. Any such proposal must meet
the applicable requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder.
With respect to shareholder proposals not included in the Company's Proxy
Statement for the 2000 annual meeting, the persons named in the Board of
Directors' proxy for such meeting will be entitled to exercise the
discretionary voting power conferred by such proxy under the circumstances
specified in Rule 14a-4(c) under the Securities Exchange Act of 1934, including
with respect to proposals received by the Company after February 24, 2000.
By Order of the Board of Directors,
/s/ Robert E. Knowles
Robert E. Knowles
Secretary
April 9, 1999
15
<PAGE>
EXHIBIT A
S&K FAMOUS BRANDS, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of this S&K Famous Brands, Inc. 1999 Stock
Incentive Plan is to further the long term stability and financial success of
S&K Famous Brands, Inc. by attracting and retaining key employees through the
use of cash and stock incentives. It is believed that ownership of Company
Stock and the use of cash incentives will stimulate the efforts of those
employees upon whose judgment and interests the Employers are and will be
largely dependent for the successful conduct of its business. It is also
believed that Incentive Awards granted to such employees under this Plan will
strengthen their desire to remain employed with the Employers and will further
the identification of those employees' interests with those of the S&K Famous
Brands, Inc. shareholders. The Plan is intended to operate in compliance with
the provisions of Securities and Exchange Commission Rule 16b-3.
2. DEFINITIONS. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Affiliate" means another corporation in which the Company owns stock
possessing at least 50 percent of the combined voting power of all classes
of stock.
(c) "Applicable Withholding Taxes" means the aggregate amount of federal,
state and local income and payroll taxes that is the minimum amount that
an Employer is required to withhold in connection with any Performance
Award, any lapse of restrictions on Restricted Stock, any grant of
Performance Stock, or any exercise of a Nonstatutory Stock Option.
(d) "Board" means the Board of Directors of S&K Famous Brands, Inc.
(e) "Change of Control" means the occurrence of any of the following
events:
(i) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 20% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, but excluding
for this purpose, any such acquisition by the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) of the
Company or its subsidiaries, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by the
individuals and entities who were the beneficial owners, respectively,
of the common stock and voting securities of the Company immediately
prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the then
outstanding shares of common stock of the Company or the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, as the case
may be; or
(ii) Individuals who, as of the date hereof, constitute the Board (as of
the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to the date hereof whose
election or nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors comprising
the Incumbent Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election
of the Directors of the Company (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Act); or
A-1
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(iii) Consummation of a reorganization, merger or consolidation, in each
case, with respect to which the individuals and entities who were the
respective beneficial owners of the common stock and voting securities
of the Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of the
Company or of its sale or other disposition of all or substantially
all of the assets of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Compensation Committee of the Board, provided
that, if any member of the Compensation Committee does not qualify as both
an outside director for purposes of Code section 162(m) and a non-employee
director for purposes of Rule 16b-3, the remaining members of the
committee (but not less than two members) shall be constituted as a
subcommittee of the Compensation Committee to act as the Committee for
purposes of the Plan.
(h) "Company" means S&K Famous Brands, Inc.
(i) "Company Stock" means common stock, $0.50 par value, of the Company. In
the event of a change in the capital structure of the Company (as provided
in Section 14), the shares resulting from such a change shall be deemed to
be Company Stock within the meaning of the Plan.
(j) "Date of Grant" means the date on which an Incentive Award is granted
by the Committee.
(k) "Disability" or "Disabled" means, as to an Incentive Stock Option, a
Disability within the meaning of Code section 22(e)(3). As to all other
Incentive Awards, the Committee shall determine whether a Disability
exists and such determination shall be conclusive.
(l) "Employer" means the Company, and each Affiliate that employs one or
more Participants.
(m) "Fair Market Value" means, as of the last day preceding the Date of
Grant on which Company Stock is traded, the closing trading price of a
share of Company Stock, as reported in The Wall Street Journal.
(n) "Incentive Award" means, collectively, an award of Restricted Stock,
Performance Stock, or an Option under the Plan.
(o) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable federal income tax treatment
under, Code section 422.
(p) "Mature Shares" means shares of Company Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and
which such holder either (i) has held for at least six months or (ii) has
purchased on the open market.
(q) "Nonstatutory Stock Option" means an Option that does not meet the
requirements of Code section 422, or, even if meeting the requirements of
Code section 422, is not intended to be an Incentive Stock Option and is
so designated.
(r) "Option" means a right to purchase Company Stock granted under the
Plan, at a price determined in accordance with the Plan.
(s) "Participant" means any employee of the Company or an Affiliate who
receives an Incentive Award under the Plan.
(t) "Performance Award" means an Incentive Award made pursuant to Section
8.
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(u) "Performance Criteria" means any of the following areas of performance
of the Company, or any Affiliate: asset growth; combined net worth; debt
to equity ratio; earnings per share (before or after income taxes and
other adjustments); revenues; operating income; operating cash flow; net
income, before or after taxes; or return on total capital, equity, revenue
or assets.
(v) "Performance Goal" means an objectively determinable performance goal
established by the Committee with respect to a given Performance Award or
grant of Restricted Stock that relates to one or more Performance
Criteria.
(w) "Performance Stock" means Company Stock awarded when performance goals
are achieved pursuant to an award as provided in Section 10.
(x) "Reload Feature" means a feature of an Option described in a
Participant's stock option agreement that requires the Committee to grant
a Reload Option in accordance with the provisions described in Section
6(d).
(y) "Reload Option" means an Option granted to a Participant equal to the
number of shares of already owned Company Stock delivered by the
Participant to exercise an Option described in Section 6(d).
(z) "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in Section 8.
(aa) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Act. A reference in the Plan to Rule
16b-3 shall include a reference to any corresponding rule (or number
redesignation) of any amendments to Rule 16b-3 enacted after the
effective date of the Plan's adoption.
3. GENERAL. The following types of Incentive Awards may be granted under
the Plan: Incentive Stock Options, Nonstatutory Stock Options, Performance
Awards, Restricted Stock, or Performance Stock.
4. STOCK. Subject to Section 14 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of Three Hundred Thousand (300,000) shares
of Company Stock, which shall be authorized, but unissued shares. In addition,
One Hundred Thousand Five Hundred Ninety Eight (100,598) shares that have not
been issued and any shares allocable to options or portions thereof that expire
or otherwise terminate unexercised after the effective date of the Plan under
the S&K Famous Brands, Inc. 1991 Stock Option Plan may be subjected to an
Incentive Award under this Plan. Shares allocable to Options or portions
thereof granted under the Plan that expire or otherwise terminate unexercised
may again be subjected to an Incentive Award under the Plan. For purposes of
determining the number of shares that are available for Incentive Awards under
the Plan, such number shall include the number of shares surrendered by a
Participant to the Company in payment for shares upon exercise of an Option or
in payment of federal and state income tax withholding liabilities with respect
to an Incentive Award. No more than one hundred thousand (100,000) shares may
be allocated to the Incentive Awards, including the maximum amounts payable
under a Performance Award, that are granted to any Participant during any
single taxable year of the Company.
5. ELIGIBILITY.
(a) All present and future employees of the Company or an Affiliate
(whether now existing or hereafter created or acquired) whom the Committee
determines to have contributed or who can be expected to contribute
significantly to the Company or an Affiliate shall be eligible to receive
Incentive Awards under the Plan. The Committee shall have the power and
complete discretion, as provided in Section 15, to select eligible
employees to receive Incentive Awards and to determine for each employee
the nature of the award and the terms and conditions of each Incentive
Award.
(b) The grant of an Incentive Award shall not obligate an Employer to pay
an employee any particular amount of remuneration, to continue the
employment of the employee after the grant or to make further grants to
the employee at any time thereafter.
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6. STOCK OPTIONS.
(a) The Committee may make grants of Options to Participants. Whenever the
Committee deems it appropriate to grant Options, a stock option agreement
shall be given to the Participant stating the number of shares for which
Options are granted, the Option price per share, whether the Options are
Incentive Stock Options or Nonstatutory Stock Options, and the conditions
to which the grant and exercise of the Options are subject.
(b) The exercise price of shares of Company Stock covered by an Option
shall be not less than 100% of the Fair Market Value of such shares on the
Date of Grant.
(c) Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement;
provided that, the exercise provisions for Incentive Stock Options shall
in all events not be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first to occur
of (x) ten years from the Date of Grant, (y) three months following
the date of the Participant's retirement or termination of employment
with all Employers for reasons other than Disability or death, or (z)
one year following the date of the Participant's termination of
employment on account of Disability or death.
(ii) An Incentive Stock Option by its terms, shall be exercisable in any
calendar year only to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the Company Stock with respect to
which Incentive Stock Options are exercisable for the first time
during the calendar year does not exceed $100,000 (the "Limitation
Amount"). Incentive Stock Options granted under the Plan and all other
plans of any Employer shall be aggregated for purposes of determining
whether the Limitation Amount has been exceeded. The Committee may
impose such conditions as it deems appropriate on an Incentive Stock
Option to ensure that the foregoing requirement is met. If Incentive
Stock Options that first become exercisable in a calendar year exceed
the Limitation Amount, the excess Options will be treated as
Nonstatutory Stock Options to the extent permitted by law.
(d) If a Participant exercises an Option that has a Reload Feature by
delivering already owned shares of Company Stock in payment of the
exercise price, the Committee shall grant to the employee a Reload Option.
The Committee shall grant the Reload Option in the same manner as set
forth in paragraph 6(a). The Reload Option shall be subject to the
following restrictions: (i) the exercise price of shares of Company Stock
covered by a Reload Option shall be 100% of the Fair Market Value of such
shares on the Date of Grant of the Reload Option; (ii) the Reload Option
shall be subject to the same restrictions on exercisability imposed on the
underlying Option (possessing the Reload Feature) delivered unless the
Committee specifies different limitations; and (iii) the Reload Option
shall expire on the same date as provided in the underlying Option.
(e) The Committee may, in its discretion, grant Options that by their terms
become fully exercisable upon a Change of Control, notwithstanding other
conditions on exercisability in the stock option agreement.
7. METHOD OF EXERCISE OF OPTIONS.
(a) Options may be exercised by the Participant giving written notice of
the exercise to the Employer, stating the number of shares the Participant
has elected to purchase under the Option. The notice shall be effective
only if accompanied by the exercise price in full in cash; provided,
however, that if the terms of an Option so permit or under rules adopted
by the Committee, the Participant may (i) deliver Mature Shares (valued at
their Fair Market Value on the date of exercise) in satisfaction of all or
any part of the exercise price, (ii) deliver a properly executed exercise
notice together with irrevocable instructions to a broker to deliver
promptly to the Employer, from the sale or loan proceeds with respect to
the sale of Company Stock or a loan secured by Company Stock, the amount
necessary to pay the exercise price and, if required by the terms of the
Option, Applicable Withholding Taxes, or (iii) deliver an interest bearing
promissory note, payable to the Company, in payment of all or part of the
exercise price together with such collateral as may be required by the
Committee at the time of exercise. The interest rate under any such
promissory note
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shall be established by the Committee and shall be at least equal to the
minimum interest rate required at the time to avoid imputed interest under
the Code.
(b) The Company may place on any certificate representing Company Stock
issued upon the exercise of an Option any legend deemed desirable by the
Company's counsel to comply with federal or state securities laws, and the
Company may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a
certificate for the shares of Company Stock acquired, he or she shall
possess no shareholder rights with respect to the shares.
(c) Each Participant shall agree, as a condition of the exercise of an
Option, to pay to the Employer, or make arrangements satisfactory to the
Employer regarding the payment to the Employer of, Applicable Withholding
Taxes. Until such amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued upon the
exercise of an Option.
(d) As an alternative to making a cash payment to the Employer to satisfy
Applicable Withholding Taxes, if the Option agreement or rules adopted by
the Committee so provide, the Participant may elect to (i) deliver Mature
Shares or (ii) have the Employer retain that number of shares of Company
Stock that would satisfy all or a specified portion of the Applicable
Withholding Taxes.
8. PERFORMANCE AWARDS.
(a) Each Performance Award shall be evidenced by an agreement (an "Award
Agreement") setting forth the Performance Goals for the award, including
the Performance Criteria, the target and maximum amounts payable and such
other terms and conditions as are applicable to the Performance Award.
Each Performance Award shall be awarded and administered to comply with
the requirements of Code section 162(m). The aggregate maximum cash amount
payable under the Plan to any Participant in any Plan Year shall not
exceed Two Million Dollars ($2,000,000). In the event of any conflict
between a Award Agreement and the Plan, the terms of the Plan shall
govern.
(b) The Committee shall establish the Performance Goals for Performance
Awards to Participants. The Committee shall determine the extent to which
any Performance Criteria shall be used and weighted in determining
Performance Awards. The Committee may vary the Performance Criteria,
Performance Goals and weightings from Participant to Participant,
Performance Award to Performance Award and Plan Year to Plan Year. The
Committee may increase, but not decrease, any Performance Goal during a
Plan Year.
(c) The Committee shall establish for each Performance Award the amount of
cash or Company Stock payable at specified levels of performance, based on
the Performance Goal for each Performance Criteria. Any Performance Award
shall be made not later than 90 days after the start of the period for
which the Performance Award relates and shall be made prior to the
completion of 25% of such period. All determinations regarding the
achievement of any Performance Goals will be made by the Committee. The
Committee may not increase during a Plan Year the amount of cash or Common
Stock that would otherwise be payable upon achievement of the Performance
Goal or Goals but may reduce or eliminate the payments as provided in a
Performance Award.
(d) The actual payments to a Participant under a Performance Award will be
calculated by applying the achievement of a Performance Criteria to the
Performance Goal as established in the Award Agreement. All calculations
of actual payments shall be made by the Committee and the Committee shall
certify in writing the extent, if any, to which the Performance Goals have
been met.
(e) Performance Awards will be paid in cash, Company Stock or both, at such
time or times as are provided in the Award Agreement. The Committee may
provide in the Award Agreement that the Participant may make a prior
election to defer the payment under a Performance Award subject to such
terms and conditions as the Committee may determine.
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(f) Nothing contained in the Plan will be deemed in any way to limit or
restrict any Employer or either Committee from making any award or payment
to any person under any other plan, arrangement or understanding, whether
now existing or hereafter in effect.
(g) A Participant who receives a Performance Award payable in Company Stock
shall have no rights as a shareholder until the Company Stock is issued
pursuant to the terms of the Performance Award. The Company Stock may be
issued without cash consideration.
(h) A Participant's interest in a Performance Award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(i) Whenever payments under a Performance Award are to be made in cash, the
Employer will withhold therefrom an amount sufficient to satisfy any
Applicable Withholding Taxes. Each Participant shall agree as a condition
of receiving a Performance Award payable in the form of Company Stock, to
pay to the Employer, or make arrangements satisfactory to the Employer
regarding the payment to the Employer of, Applicable Withholding Taxes.
Until such amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued to such
Participant. As an alternative to making a cash payment to the Employer to
satisfy Applicable Withholding Taxes, if the Award Agreement or rules
adopted by the Committee so provide, the Participant may elect to (i)
deliver Mature Shares or (ii) have the Employer retain that number of
shares of Company Stock that would satisfy all or a specified portion of
the Applicable Withholding Taxes.
9. RESTRICTED STOCK AWARDS.
(a) The Committee may make grants of Restricted Stock to Participants.
Whenever the Committee deems it appropriate to grant Restricted Stock, an
award agreement shall be given to the Participant stating the number of
shares of Restricted Stock granted and the terms and conditions to which
the Restricted Stock is subject. Restricted Stock may be awarded by the
Committee in its discretion without cash consideration.
(b) No shares of Restricted Stock may be sold, assigned, transferred,
pledged, hypothecated, or otherwise encumbered or disposed of until the
restrictions on such shares as set forth in the Participant's award
agreement have lapsed or been removed pursuant to paragraph (d) or (e)
below.
(c) Upon an award of Restricted Stock, the Participant shall, subject to
the restrictions set forth in paragraph (b) above, have all the rights of
a shareholder with respect to such shares of Restricted Stock, including,
but not limited to, the right to vote such shares of Restricted Stock and
the right to receive all dividends and other distributions paid thereon.
Certificates representing Restricted Stock shall bear a legend referring
to the restrictions set forth in the Plan and the Participant's award
agreement.
(d) The Committee shall establish as to each award of Restricted Stock the
terms and conditions upon which the restrictions set forth in paragraph
(b) above shall lapse. The terms and conditions may include the
achievement of a Performance Goal that shall be governed by the provisions
of Section 8 to the extent that the award is intended to comply with the
requirements of Code section 162(m). Such terms and conditions may also
include, without limitation, the lapsing of such restrictions as a result
of the Disability, death or retirement of the Participant or the
occurrence of a Change of Control.
(e) Notwithstanding the provisions of paragraph (b) above, the Committee
may at any time, in its sole discretion, accelerate the time at which any
or all restrictions will lapse or remove any and all such restrictions,
subject to the restrictions of Section 8 as to any Performance Goal if the
award is intended to comply with the requirements of Code section 162(m).
(f) Each Participant shall agree at the time his or her Restricted Stock is
granted, and as a condition thereof, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the
Employer of, Applicable Withholding Taxes. Until such amount has been paid
or arrangements satisfactory to the Employer have been made, no stock
certificate free of a legend reflecting the restrictions set forth in
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paragraph (b) above shall be issued to such Participant. As an alternative
to making a cash payment to the Employer to satisfy Applicable Withholding
Taxes, if the grant or rules adopted by the Committee so provide, the
Participant may elect to (i) deliver Mature Shares or (ii) have the
Employer retain that number of shares of Company Stock that would satisfy
all or a specified portion of the Applicable Withholding Taxes.
10. PERFORMANCE STOCK AWARDS.
(a) The Committee may make grants of Performance Stock to Participants.
Whenever the Committee deems it appropriate to grant Performance Stock, an
award agreement shall be given to the Participant stating the number of
shares of Performance Stock granted and the terms and conditions to which
the Performance Stock is subject.
(b) Performance Stock may be issued pursuant to the Plan from time to time
by the Committee when performance criteria established by the Committee
have been achieved and certified by the Committee.
(c) Whenever the Committee deems it appropriate, the Committee may
establish a performance criteria for an award of Performance Stock and
notify Participants of their receipt of an award of Performance Stock.
More than one award of Performance Stock may be established by the
Committee for a Participant and the awards may operate concurrently or for
varied periods of time. Performance Stock will be issued only subject to
the award and the Plan and consistent with meeting the goal or goals set
by the Committee in the award. A Participant shall have no rights as a
shareholder until the Committee has certified that the performance
objectives of the Performance Stock award have been met and the
Performance Stock is issued. Performance Stock may be issued without cash
consideration.
(d) A Participant's interest in a Performance Stock award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(e) The Committee may at any time, in its sole discretion, remove or revise
any and all performance criteria for an award of Performance Stock.
(f) Each Participant shall agree at the time of receiving an award of
Performance Stock, and as a condition thereof, to pay to the Employer, or
make arrangements satisfactory to the Employer regarding the payment to
the Employer of, Applicable Withholding Taxes. Until such amount has been
paid or arrangements satisfactory to the Employer have been made, no stock
certificate shall be issued to such Participant. As an alternative to
making a cash payment to the Employer to satisfy Applicable Withholding
Taxes, if the grant or rules adopted by the Committee so provide, the
Participant may elect to (i) deliver Mature Shares or (ii) have the
Employer retain that number of shares of Company Stock that would satisfy
all or a specified portion of the Applicable Withholding Taxes.
11. NONTRANSFERABILITY OF AWARDS. Incentive Awards, except Incentive Stock
Options, shall be transferable to the extent specifically provided in the
Incentive Award. Incentive Stock Options, by their terms, shall not be
transferable except by will or by the laws of descent and distribution and
shall be exercisable, during the Participant's lifetime, only by the
Participant.
12. EFFECTIVE DATE OF THE PLAN. The effective date of the Plan is May 1,
1999. The Plan shall be submitted to the shareholders of the Company for
approval. Until (i) the Plan has been approved by the Company's shareholders,
and (ii) the requirements of any applicable Federal or State securities laws
have been met, no Restricted Stock or Performance Stock shall be awarded that
is not contingent on these events and no Option granted shall be exercisable.
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13. TERMINATION, MODIFICATION, CHANGE
(a) If not sooner terminated by the Board, this Plan shall terminate at the
close of business on April 30, 2009. No Incentive Awards shall be made
under the Plan after its termination.
(b) The Board may amend or terminate the Plan in such respects as it shall
deem advisable; provided that, no change shall be made that increases the
total number of shares of Company Stock reserved for issuance pursuant to
Incentive Awards granted under the Plan (except pursuant to Section 14),
materially modifies the requirements as to eligibility for participation
in the Plan, or materially increases the benefits accruing to Participants
under the Plan, unless such change is authorized by the shareholders of
the Company. Notwithstanding the foregoing, the Board may unilaterally
amend the Plan and Incentive Awards with respect to Participants as it
deems appropriate to ensure compliance with Rule 16b-3 and to cause
Incentive Stock Options to meet the requirements of the Code and
regulations thereunder. Except as provided in the preceding two sentences
or Section 13(c), a termination or amendment of the Plan shall not,
without the consent of the Participant, adversely affect a Participant's
rights under an Incentive Award previously granted to him or her.
(c) Notwithstanding the prior provisions of this Section 13, this section
(c) will apply if the Company is involved in any prospective merger or
similar transaction that the Company intends to treat as a "pooling of
interest" for financial reporting purposes. In this case, the Committee
may amend the terms of any Incentive Award or of the Plan to the extent
that the Committee determines, based on advice of the Company's
independent accountants, that such terms without amendment would preclude
the use of "pooling of interest" accounting.
14. CHANGE IN CAPITAL STRUCTURE.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but
not limited to, the creation or issuance to shareholders generally of
rights, options or warrants for the purchase of common stock or preferred
stock of the Company), the number and kind of shares of stock or
securities of the Company to be subject to the Plan and to Options then
outstanding or to be granted thereunder, the maximum number of shares or
securities which may be delivered under the Plan, the exercise price and
other relevant provisions shall be appropriately adjusted by the
Committee, whose determination shall be binding on all persons. If the
adjustment would produce fractional shares with respect to any unexercised
Option, the Committee may adjust appropriately the number of shares
covered by the Option so as to eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in
the acquisition of substantially all of the Company's outstanding stock by
a single person or entity, or a sale or transfer of substantially all of
the Company's assets, the Committee may take such actions with respect to
outstanding Incentive Awards as the Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the Committee may
take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons
for all purposes.
15. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. The Committee shall have general authority to impose any limitation
or condition upon an Incentive Award the Committee deem appropriate to achieve
the objectives of the Incentive Award and the Plan and, without limitation and
in addition to powers set forth elsewhere in the Plan, shall have the following
specific authority:
(a) The Committee shall have the power and complete discretion to determine
(i) which eligible employees shall receive Incentive Awards and the nature
of each Incentive Award, (ii) the terms and conditions of any Performance
Award, (iii) the number of shares of Company Stock to be covered by each
Incentive Award, (iv) whether Options shall be Incentive Stock Options or
Nonstatutory Stock Options, (v) the time or times when an Incentive Award
shall be granted, (vi) whether an Incentive Award shall become vested over
a
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period of time and when it shall be fully vested, (vii) when Options may
be exercised, (viii) whether a Disability exists, (ix) the manner in which
payment will be made upon the exercise of Options, (x) conditions relating
to the length of time before disposition of Company Stock received upon
the exercise of Options is permitted, (xi) whether to authorize a
Participant (A) to use Mature Shares to satisfy Applicable Withholding
Taxes or (B) to have the Employer withhold from the shares to be issued
upon the exercise of a Nonstatutory Stock Option the number of shares
necessary to satisfy Applicable Withholding Taxes, (xii) the terms and
conditions applicable to Restricted Stock awards, (xiii) the terms and
conditions on which restrictions upon Restricted Stock shall lapse, (xiv)
whether to accelerate the time at which any or all restrictions with
respect to Restricted Stock will lapse or be removed, (xv) the terms and
conditions applicable to Performance Stock awards, (xvi) notice provisions
relating to the sale of Company Stock acquired under the Plan, and (xvii)
any additional requirements relating to Incentive Awards that the
Committee deems appropriate. The Committee shall have the power to amend
the terms of previously granted Incentive Awards that were granted by the
Committee so long as the terms as amended are consistent with the terms of
the Plan and provided that the consent of the Participant is obtained with
respect to any amendment that would be detrimental to him or her, except
that such consent will not be required as provided in Section 13(c) or if
such amendment is for the purpose of complying with Rule 16b-3 or any
requirement of the Code applicable to the Incentive Award.
(b) The Committee may adopt rules and regulations for carrying out the Plan
with respect to Participants. The interpretation and construction of any
provision of the Plan by the Committee shall be final and conclusive as to
any Participant. The Committee may consult with counsel, who may be
counsel to the Employer, and shall not incur any liability for any action
taken in good faith in reliance upon the advice of counsel.
(c) A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the
members present. Any action may be taken by a written instrument signed by
all of the members, and any action so taken shall be fully effective as if
it had been taken at a meeting.
16. NOTICE. All notices and other communications required or permitted to
be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows (a) if to an Employer - at the principal business address of the
Company to the attention of the Treasurer; (b) if to any Participant at the
last address of the Participant known to the sender at the time the notice or
other communication is sent.
17. INTERPRETATION. The terms of this Plan are subject to all present and
future regulations and rulings of the Secretary of the Treasury or his or her
delegate relating to the qualification of Incentive Stock Options under the
Code. If any provision of the Plan conflicts with any such regulation or
ruling, then that provision of the Plan shall be void and of no effect. The
terms of this Plan shall be governed by the laws of the Commonwealth of
Virginia.
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[LOGO]
<PAGE>
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 W. David Hiner, 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 Hyatt Richmond Hotel located at
6624 West Broad Street, Richmond, Virginia, at 10:00 a.m., E.D.T., on May 19,
1999, 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 7, 1999, as fully as the undersigned
could do if personally present.
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 APPROVE THE COMPANY'S 1999 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF PricewaterhouseCoopers LLP as the
independent accountants of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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, 2 and 3.
Receipt of the Secretary's Notice of and the related Proxy Statement for
the Annual Meeting of Shareholders to be held on May 19, 1999, 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 _______________________________, 1999
- ---------------------------------------
Shareholder's Signature
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Shareholder's Signature if held jointly
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
