Exhibit 2
LOAN AND STOCK PURCHASE AGREEMENT
THIS LOAN AND STOCK PURCHASE AGREEMENT (as amended,
supplemented or modified from time to time, the "Loan Agreement") is dated as of
April 21, 1995 and is between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Borrower") and S&K FAMOUS
BRANDS, INC., a Virginia corporation (the "Company").
This Loan Agreement is made pursuant to the S&K Famous Brands, Inc.
Stock Purchase Loan Plan (the "Plan"). All terms not otherwise defined herein
shall have the meanings given such terms in the Plan. Accordingly, the parties
hereto agree as follows:
ARTICLE I
PURCHASE AND LOAN TERMS
Section 1.1. Purchase and Loan.
(a) The Borrower agrees, on the terms and conditions set forth
in this Loan Agreement, to purchase Company Stock as provided in his Election To
Participate. The Loan is for the purpose of the Borrower acquiring shares of
Company Stock (the "Shares").
(b) The Company agrees, on the terms and conditions set forth
in this Loan Agreement, to make a loan (the "Loan") to the Borrower under the
Plan. The loan shall be evidenced by, and repayable in accordance with, a single
promissory note in the form of Exhibit A hereto and appropriately completed (the
"Note").
(c) The Borrower's purchase of the Shares and the Company's
making of the Loan shall be subject to the approval of the Plan by the Company's
shareholders at the 1995 annual meeting of shareholders. If the Plan is so
approved, the purchase of the Shares and the Loan shall be closed promptly
thereafter effective as of the date of this Loan Agreement. If the Plan is not
so approved, the transactions contemplated by this Loan Agreement shall be null
and void.
Section 1.2. Recourse Liability. The Company shall have full
recourse against the Borrower on account of the Loan, and the Borrower shall
have personal liability with respect to the obligation hereunder and with
respect to the representations and warranties contained herein.
Section 1.3 Restrictions on Resale or Transfer
(a) The Borrower may not sell or otherwise transfer any of the
Shares for two (2) years after the date of this Loan Agreement. After two (2)
years from the date of this Loan Agreement, the Borrower may sell or transfer up
to one-third of the Shares. After three (3) years from the date of this Loan
Agreement, the Borrower may sell or transfer an additional one-third of the
Shares. After five (5) years from the date of this Loan Agreement, the Borrower
may sell or transfer the remaining one-third of the Shares. The restrictions on
sale or transfer of the Shares in this Section 1.3(a) shall apply even if the
Loan is repaid in full.
(b) The restrictions on resale or transfer in Section 1.3(a)
shall terminate if the Loan becomes due and payable in full for any reason,
including on the death or termination of employment of the Borrower.
(c) The restrictions on resale or transfer in Section 1.3(a)
shall not apply and the Shares may be transferred by reason of (i) a transfer by
will or the laws of descent and distribution, (ii) a transfer to the
Participant's spouse of no more than one-half of the Shares pursuant to a
domestic relations order issued by a court, or (iii) a transfer made for tax or
estate planning purposes to members of the Borrower's immediate family or to
partnerships or trusts whose sole beneficiaries are the Borrower and/or the
Borrower's immediate family members, provided, however, that in the case of a
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transfer described in this clause (iii), any subsequent disposition, grant of an
option or creation or sufferance of a lien with respect to any of such Shares so
transferred which is not described in clause (i), or (ii) shall be prohibited
(each of the foregoing an "Exempt Transfer").
(d) Notwithstanding the other provisions of this Section 1.3,
the Borrower may not sell or transfer any of the Shares that are then subject to
the security interest provided under Article III.
Section 1.4. Repayments From Bonus. A portion of any cash
bonuses payable to the Borrower with respect to the Company's fiscal year ending
January 27, 1996 or any later fiscal year shall be applied first to the payment
of accrued interest and then to repayment of principal on the Note. The portion
so applied shall be 25% of the bonus after reduction for any withholdings
required by law.
ARTICLE II
FORGIVENESS OF INTEREST AND PRINCIPAL
Section 2.1. Performance-Based Interest Forgiveness. All or a
portion of the interest on the Loan may be forgiven by the Company upon
achievement of the performance goals as established by the Committee pursuant to
the Plan. The following procedures shall apply if the Committee determines to
offer such forgiveness:
(a) Within 90 days after the start of a Fiscal Year,
the Committee shall select the Performance Criteria to be used and the extent to
which each Performance Criteria shall be weighted. The Committee shall also
establish the Performance Goals applicable to the Loan. The Committee may
establish Performance Goals based on performance over multiple Fiscal Years.
(b) The Committee shall determine the amount of
interest that shall be forgiven depending upon whether, or the extent to which,
the Performance Goals have been achieved. The Performance Criteria, their
weighting, Performance Goals, potential interest and/or principal forgiveness
that are established for a Loan shall be issued to the Borrower on a performance
schedule.
(c) At such times as required under a performance
schedule, the Committee shall determine the achievement of the Performance Goals
and the resulting amount of interest, if any, that shall be forgiven under the
performance schedule. All determinations regarding the extent to which any
Performance Goals have been achieved will be made by the Committee.
(d) Except as specifically provided, the Borrower
must be employed on the last day of the Fiscal Year to receive interest
forgiveness for that year. If the Borrower terminates employment with the
Company at or after his Normal Retirement Date, the Company shall forgive a
percentage of the interest equal to the amount of interest to be forgiven based
on performance in that Fiscal Year times a fraction, the numerator of which is
the number of full months in the Fiscal Year before the Borrower's retirement
and the denominator of which is 12.
(e) If less than the amount of interest to be
forgiven remains due on the Note, the Company shall forgive the remaining
interest amount and pay the Borrower an amount equal to the amount of interest
to be forgiven less the interest that is forgiven.
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Section 2.2. Continuation of Employment.
(a) If the Borrower is employed by the Company on the Final
Payment Date (as defined in the Note), the Company shall forgive the payment of
the Applicable Percentage (as defined below) of the original principal amount
due under the terms of the Note. If the Borrower is employed by the Company on
the Final Payment Date but there is less than the Applicable Percentage of the
original principal amount remaining due on the Note, the Company shall forgive
the remaining principal amount and pay the Borrower an amount equal to the
Applicable Percentage of the original principal amount less the principal amount
that is forgiven.
(b) The Applicable Percentage is the percentage determined by the
following formula:
The number of Shares acquired with the Loan for which no
25% x Disposition Event has occurred as of the Final Payment Date
--------------------------------------------------------
The original number of Shares acquired with the Loan
A "Disposition Event" means any sale or other transfer of the Shares except for
Exempt Transfers.
Section 2.3. Disability. If the Borrower has a Disability and
is employed by the Company immediately before he has a Disability, the Company
shall forgive the payment of all interest accrued for the current Fiscal Year
and all future interest due on the Note. The Company shall also forgive the
Applicable Percentage of the principal due on the Note as provided in Section
2.2, calculated as if the date on which the Borrower has a Disability is the
Final Payment Date. If less than the Applicable Percentage of the original
principal amount remains due on the Note, the Company shall forgive the
remaining principal amount and pay the Borrower an amount equal to the
Applicable Percentage of the original principal amount less the principal amount
that is forgiven. The Borrower shall remain liable for payment of any remaining
principal and accrued interest due on the Note according to its terms.
Section 2.4. Death. If the Borrower dies while employed by the
Company, the Company shall forgive the payment of all interest accrued for the
current Fiscal Year and all future interest due on the Note. The Company shall
also forgive the Applicable Percentage of the principal due on the Note as
provided in Section 2.2, calculated as if the date on which the Borrower dies is
the Final Payment Date. If less than the Applicable Percentage of the original
principal amount remains due on the Note, the Company shall forgive the
remaining principal amount and pay the Borrower's successor or estate an amount
equal to the Applicable Percentage of the original principal amount less the
principal amount that is forgiven. The Borrower's successor or his estate shall
remain liable for payment of any remaining principal and accrued interest due on
the Note according to its terms.
Section 2.5. Retirement.
(a) If the Borrower terminates employment with the Company at
or after his Normal Retirement Date, the Company shall forgive a percentage of
the principal equal to the principal then outstanding times the following
percentage:
Months since Date of this Loan Agreement x Applicable Percentage
----------------------------------------
Total Months in term of the Note
The Applicable Percentage shall be calculated as provided in Section
2.2, as if the date on which the Borrower retires is the Final Payment Date. The
Borrower shall remain liable for payment of any remaining principal and accrued
interest due on the Note according to its terms.
(b) If the principal to be forgiven under subsection (a) is
more than the remaining principal amount due on the Note, the Company shall
forgive the remaining principal amount and pay the Borrower an amount equal to
the amount to be forgiven under subsection (a) less the principal amount that is
actually forgiven.
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Section 2.6. Change of Control. If the Borrower's employment
with the Company is terminated within two (2) years after a Change of Control
occurs either (i) by the Company without Cause or (ii) by the Borrower with Good
Reason, the Company shall forgive the payment of (x) all interest accrued for
the current Fiscal Year and all future interest due and (y) the Applicable
Percentage of the principal due on the Note as provided in Section 2.2,
calculated as if the date on which the Borrower terminates employment is the
Final Payment Date. If less than the Applicable Percentage of the original
principal amount remains due on the Note, the Company shall forgive the
remaining principal amount and pay the Borrower an amount equal to the
Applicable Percentage of the original principal amount less the principal amount
that is forgiven. The Borrower shall remain liable for payment of any remaining
principal and accrued interest due on the Note.
Section 2.7. Termination of Employment. If the Borrower
terminates employment with the Company other than as provided in Sections 2.2,
2.3, 2.4, 2.5, or 2.6, the Company shall not forgive any further amounts of
interest or principal on the Loan and all payments shall be due and payable as
provided in the Note.
ARTICLE III
THE SECURITY INTEREST
Section 3.1. The Security Interest. The Borrower hereby
pledges to the Company, and grants to the Company a security interest in the
Shares and all cash, instruments and other property and proceeds from time to
time received, receivable or otherwise made upon or distributed in respect of or
in exchange for any or all of the Shares.
Section 3.2. Security for Obligations. This Loan Agreement
secures the payment of all of the obligations under the Note. All certificates
evidencing the Shares shall be delivered to and held by or on behalf of the
Company pursuant hereto and shall be accompanied by duly executed instruments of
transfer or assignment in blank.
Section 3.3. Termination of Security Interests; Release of
Collateral. Upon the full, final and irrevocable payment and performance of the
Note, the security interests in the Shares shall terminate and all rights to the
Shares shall revert to the Borrower. Upon any such termination of the security
interests, the Company will execute and deliver to the Borrower such documents
as the Borrower shall reasonably request to evidence the termination of the
security interests or the release of the Shares. Any such documents shall be
without recourse to or warranty by the Company.
Section 3.4. Borrower Representations. The Borrower represents
and warrants as follows:
(a) This Loan Agreement constitutes a valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, except as (i) the enforceability hereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(b) The Borrower owns all the Shares free and clear of any
liens other than the security interests granted hereby. The Shares are subject
to no lien, option to purchase or similar rights of any person. The Borrower is
not and will not become a party to or otherwise bound by any agreement, other
than this Loan Agreement, which restricts in any manner the rights of any
present or future holder of any of the Shares with respect thereto.
(c) The Borrower's financial information provided to the
Company in connection with the Loan is true and accurate in all material
respects.
Section 3.5. Liens on Shares. The Borrower will not sell or
otherwise dispose of, or grant any option with respect to, any of the Shares or
create or suffer to exist any lien (other than security interests in favor of
the Company) on any Shares until the payment of the Note in full.
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Section 3.6. Release of Shares. Prior to the payment in full
of the Note, the entire amount of any Shares released from the security
interests shall be immediately sold by the Borrower. The entire proceeds of any
sale of the Shares shall be applied first to the payment of accrued interest and
then to principal. If the entire principal and accrued interest on the Loan is
repaid, the provisions of Section 3.3(a) shall apply.
ARTICLE IV
DISTRIBUTIONS ON COLLATERAL; VOTING
Section 4.1. Distributions on Shares; Voting. So long as no
Event of Default shall have occurred and be continuing:
(a) The Borrower shall be entitled to exercise any and all
voting rights pertaining to the Shares or any part thereof.
(b) The following items shall be treated as a prepayment of
the Loan (except as provided in paragraph (d) below):
(i) cash dividends, dividends paid or payable other than in
cash, and instruments and other property distributed in
respect of, or in exchange for, any Shares,
(ii) dividends and other distributions paid or payable in cash
in connection with a partial or total liquidation or
dissolution or with a reduction of capital, capital surplus or
paid-in-surplus, and
(iii) cash paid in redemption of, or in exchange for, any
Shares.
(c) The Company shall execute and deliver (or cause to be
executed and delivered) to the Borrower all such proxies, powers of attorney,
consents, ratifications, waivers and other instruments, if any, as the Borrower
may reasonably request to enable the Borrower to exercise the voting and other
rights which he is entitled to exercise pursuant to paragraph (i) above.
(d) Any stock that is received by the Borrower as a stock
dividend, redemption or otherwise in respect to or exchange for the Shares shall
be deemed to be Shares subject to Article III of this Loan Agreement.
Section 4.2. Events of Default.
(a) For purposes of this Loan Agreement, each of the following
events shall constitute an Event of Default:
(i) any violation of Section 1.3 of this Loan Agreement;
(ii) the creation or sufferance of a lien on the Shares,
provided that the creation of an involuntary lien shall
not be an Event of Default if the lien is released
within ninety (90) days following the date the Borrower
becomes aware of such lien,
(iii) the Borrower shall be in default under the terms of the
Note,
(iv) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Loan Agreement
for ten (10) days after written notice thereof has been
given to the Borrower by the Company, or
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(v) any representation, warranty, certification or
statement made by the Borrower in this Loan Agreement
shall prove to have been incorrect in any material
respect when made.
(b) Upon the occurrence of an Event of Default, the Company
shall have the rights and remedies set forth in the Note. The rights and
remedies provided herein and in the Note shall be cumulative and not exclusive
of any rights or remedies provided by law.
ARTICLE V
MISCELLANEOUS
Section 5.1 Miscellaneous
(a) No failure or delay by the Company in exercising any
right, power or privilege under this Loan Agreement shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
(b) This Loan Agreement may be amended only in a writing
signed by the Borrower and the Company. Any waiver must be in a writing signed
by the waiving party.
(c) The provisions of this Loan Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Loan Agreement is for the benefit of the Company
and its successors and assigns. This Loan Agreement shall not be transferable by
the Borrower except by will or by the laws of descent and distribution.
(d) If any provision hereof is invalid and unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Company in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
Section 5.2 Governing Law. This Loan Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia, without application of Virginia conflict of law rules.
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed as of the day and year first above written.
BORROWER
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
(Signature)
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
S&K FAMOUS BRANDS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Title: Chairman
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