<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K
---------------------
(Mark one)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE FISCAL YEAR ENDED MARCH 2, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER 1-8564
SYMS CORP
(Exact name of registrant as specified in its charter)
NEW JERSEY NO. 22-2465228
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
SYMS WAY, SECAUCUS, NEW JERSEY 07094
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 902-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, $.05 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held
by non-affiliates on May 2, 1996 was $49,949,536 based upon the closing price
of such stock on that date.
As of May 2, 1996, 17,694,015 shares of Common Stock were outstanding.
Portions of the registrant's Proxy Statement for the 1996 annual
meeting be to be filed pursuant to Regulation 14A, are incorporated in Part
III hereof by reference.
===============================================================================
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Syms Corp operates a chain of thirty-eight "off-price" retail stores
located throughout the Northeastern and middle Atlantic regions and in the
Midwest, Southeast and Southwest. Each Syms store offers a broad range of first
quality, in-season merchandise bearing nationally recognized designer or
brand-name labels at prices substantially lower than those generally found in
department and specialty stores. Syms directs its merchandising efforts at
predominantly middle-income, fashion-minded and price conscious customers.
Since the first Syms store opened in New York City in 1959, the Company
has expanded to thirty-eight stores and the aggregate amount of selling space
in the Syms stores increased from approximately 2,000 square feet to
approximately 1,451,000 square feet. In March 1987, the Company relocated to an
approximately 275,000 square foot distribution center and executive
headquarters. Syms Corp was incorporated in New Jersey on July 11, 1983. On
July 25, 1983, a reorganization was effected pursuant to which Syms Inc. and a
newly formed corporation, Syms Advertising, Inc., became wholly owned
subsidiaries of Syms Corp. Syms Advertising Agency, a sole proprietorship owned
by Sy Syms, was transferred to Syms Advertising Inc. On December 31, 1985, Syms
Inc. was merged into Syms Corp. Syms Inc. was the principal retailing
subsidiary of Syms Corp and the operations previously conducted by Syms Inc.
are now being conducted by Syms Corp.
The Company maintains its executive offices at Syms Way, Secaucus, New
Jersey 07094, telephone (201) 902-9600. Unless otherwise noted, references to
the "Company" or to "Syms" relate to Syms Corp, its subsidiaries and their
predecessors.
As reported on March 17, 1995, the Company has changed its fiscal year
end to the Saturday nearest to the end of February. Prior to this change the
Company maintained its records on the basis of a 52-53 week fiscal year ending
the Saturday closest to December 31.
DESCRIPTION OF BUSINESS
The Syms chain of thirty-eight apparel stores offers a broad range of
"off-price" first quality, in-season merchandise consisting primarily of men's
tailored clothing and haberdashery, women's dresses, suits and separates,
children's apparel and men's, women's and children's shoes. Syms stores
emphasize better quality, nationally recognized designer and brand name
merchandise at prices substantially below those generally charged by department
and specialty stores. Syms carries a wide selection of sizes and styles of
men's, women's and children's wear.
Syms operates in a single industry segment and has no foreign
operations. No material part of the Company's consolidated revenues is received
from a single customer or group of customers.
MERCHANDISE
For the year ended March 2, 1996 net sales were generated by the
following categories:
<TABLE>
<S> <C>
Men's tailored clothes and haberdashery.................. 54%
Women's dresses, suits, separates and accessories........ 31
Shoes.................................................... 7
Children's wear.......................................... 6
Luggage, domestics and fragrances........................ 2
---
100%
===
</TABLE>
Most of the items sold by the Company consist of nationally recognized
fashion name merchandise. Merchandise is displayed by type and size on
conveniently arranged racks or counters. No emphasis is placed on any
particular "label". The stores generally offer minor alterations for an
additional charge.
PURCHASING
The Company purchases first-quality, in-season, brand-name merchandise
directly from manufacturers on terms more favorable than those generally
obtained by department and specialty stores. Syms estimates that approximately
200 brand-name manufacturers of apparel are represented in its stores. The
Company does not maintain large out-of-season inventories. However, Syms
occasionally buys certain basic clothing which does not change in style from
year to year at attractive prices for storage until the following season.
Purchasing is performed by a buying staff in conjunction with the General
Merchandise Manager and several other key divisional merchandise managers.
1
<PAGE> 3
DISTRIBUTION
The Company owns a distribution center, located at Syms Way, Secaucus,
New Jersey. The facility contains approximately 237,000 square feet of
warehouse and distribution space, 38,000 square feet of office space and 25,000
square feet of store space. The facility is located on an 18.6 acre parcel of
land for which the Company holds a ground lease for a remaining term of 280
years. Most merchandise is received from manufacturers at the distribution
center where it is inspected, ticketed and allocated to particular stores.
MARKETING
The Company's pricing policy is to affix a ticket to each item
displaying Syms selling price as well as the price the Company regards as the
traditional full retail price of that item at department or specialty stores.
All garments are sold with the brand-name as affixed by the manufacturer.
Because women's dresses are vulnerable to considerable style fluctuation, Syms
has long utilized a ten-day automatic markdown pricing policy to promote
movement of merchandise. The date of placement on the selling floor of each
women's dress is stamped on the back of the price ticket. The front of each
ticket contains what the Company believes to be the nationally advertising
price, the initial Syms price and three reduced prices. Each reduced price
becomes effective after the passage of ten selling days. Women's dresses
represent approximately 5.0% of net sales. The Company also offers "dividend"
prices consisting of additional price reductions on various types of
merchandise.
The Company historically has advertised principally on television and
radio. In the Fall of 1994, the Company revised its strategy and began to
enhance its advertising by including print media in all of its markets as well
as direct mail to its Syms credit card customer base. Syms has as its tag line
"An Educated Consumer is Our Best Customer." The Company sells its merchandise
for cash, checks, national credit cards, and its own Syms credit card. Syms
sells its own credit card receivables on a non-recourse basis to a third party
for a fee.
Merchandise purchased from the Company may be returned within a
reasonable amount of time, within season. The Company does not offer cash
refunds for purchases, but issues credits toward the Syms charge card or store
merchandise credits which may be used toward the purchase of other merchandise.
TRADEMARKS
"Syms", An Educated Consumer is Our Best Customer" and "The More You
Know About Clothing the Better it is for Syms" have been registered with the
United States Patent and Trademark Office.
COMPETITION
The retail apparel business is highly competitive, and the Company
accounts for only a small fraction of the total market for men's, women's and
children's apparel. The Company's stores compete with discount stores, apparel
specialty stores, department stores, manufacturer-owned factory outlet stores
and others. Many of the stores with which the Company competes are units of
large national or regional chains that have substantially greater resources
than the Company. Retailers having substantially greater resources than the
Company have indicated their intention to enter the "off-price" apparel
business, and the "off-price" apparel business itself has become increasingly
competitive especially with respect to the increased use by manufacturers of
their own factory outlets. At various times of the year, department store
chains and specialty shops offer brand-name merchandise at substantial
markdowns.
OPERATIONS AND CONTROL SYSTEMS
The Company has implemented a merchandise control system which tracks
product from its purchase to its ultimate sale in the Company's stores. The
system tracks the product by store in approximately 750 categories. All the
information regarding the product is transmitted daily through telephone lines
to the Company's database at its executive headquarters. Each week the
Company's executives receive detail reports regarding sales and inventory
levels in units and retail dollars on a store by store basis.
Management of the Company visit stores on a regular basis to coordinate
with the store managers, among other things, in the training of employees in
loss prevention methods. Each store has on premises security personnel during
normal hours and a security system after hours.
2
<PAGE> 4
EMPLOYEES
At March 2, 1996, the Company had 2,161 employees of whom approximately
617 work part time. The Company has collective bargaining agreements with the
Retail, Wholesale and Department Store Union and the United Food and Commercial
Workers Union which expire at various dates in 1997 and 1999 and cover 1,586
sales and tailor employees. The Company believes its relationships with the
Unions are good. Approximately 30 to 100 persons, consisting mostly of sales
personnel, are employed at each Syms store.
ITEM 2. PROPERTIES
THE STORES
Location
At March 2, 1996 the Company had thirty-eight stores, seventeen of
which are located in leased facilities. The following table indicates the
locations of the stores and the approximate selling space of each location. In
addition to the selling space indicated, each store contains between
approximately 2,000 to 12,000 square feet for inspection and ticketing of
merchandise and administrative functions.
<TABLE>
<CAPTION>
APPROXIMATE SELLING APPROXIMATE SELLING
OWNED STORES SPACE AT MARCH 2, LEASED STORES SPACE AT MARCH 2,
LOCATION 1996 (SQ. FT.) LOCATION 1996 (SQ. FT.)
- -------- -------------- -------- --------------
<S> <C> <C> <C>
New York City, New York 40,000 Elmsford, New York 50,000
Westbury, Long Island 72,000 Woodbridge, New Jersey 32,000
Commack, Long Island 36,000 Berlin, Connecticut 31,000
Buffalo, New York 39,000 N. Cranston, Rhode Island 27,000
Rochester, New York 32,000 Norwood, Massachusetts 36,000
Paramus, New Jersey 56,000 Peabody, Massachusetts 39,000
Secaucus, New Jersey 25,000 Franklin Mills Mall, Pennsylvania 22,000
Cherry Hill, New Jersey 40,000 Falls Church, Virginia 28,000
Fairfield, Connecticut 22,000 Potomac Mills Mall, Virginia 33,000
King of Prussia, Pennsylvania 41,000 Rockville, Maryland 56,000
Monroeville, Pennsylvania 31,000 Baltimore, Maryland 43,000
Fort Lauderdale, Florida 44,000 West Palm Beach, Florida 36,000
Miami, Florida 45,000 Gurnee Mills Mall, Illinois 33,000
Tampa, Florida 38,000 Niles, Illinois 32,000
Addison, Illinois 47,000 St. Louis, Missouri 33,000
Norcross, Georgia 51,000 Charlotte, North Carolina 30,000
Southfield, Michigan 46,000 Sharonville, Ohio 31,000
Dallas, Texas 42,000 -------
Hurst, Texas 38,000 Total Leased Space 592,000
Houston, Texas 34,000 =======
North Randall, Ohio 40,000
------
Total Owned Space 859,000
=======
</TABLE>
Syms stores are either "free standing", or located in shopping centers
or indoor malls and all are surrounded by adequate parking areas, except for
the New York City store. Syms stores are usually located near a major highway
or thoroughfare in suburban areas populated by at least one million people and
are readily accessible to customers by automobile. In certain areas where there
is a population in excess of two million people, Syms has opened more than one
store in the same general vicinity.
3
<PAGE> 5
Lease Terms
Sixteen of the Company's thirty-eight stores are currently leased from
unrelated parties, and the Elmsford, New York store is leased from Mr. Sy Syms,
the Chairman of Syms Corp. The following table summarizes lease expirations and
any renewal options:
<TABLE>
<CAPTION>
Range
Number of Number of in Years of
Calendar Leases Leases with Renewal Option
Periods Expiring Options Periods (1)
- -------- --------- ------- -----------
<S> <C> <C> <C>
1996 1 1 5
1997 2 1 5
1998 4 4 4-5
1999 3 1 5
2000 1 1 5
2001 and thereafter 6 5 5
--- ---
17 13
=== ===
</TABLE>
(1) Depending on the applicable option, the minimum rent due during the
renewal option periods may be based upon a formula contained in the
existing lease or negotiations between the parties.
Store leases provide for a base rental of between approximately $2.50
and $10.75 per square foot. In addition, under the "net, net, net" terms of all
of the leases, the Company must also pay maintenance expenses, real estate
taxes and other charges. Four of the Company's stores have a percentage of
sales rental as well as a fixed minimum rent. Rental payments for Syms' leased
stores aggregated $4,320,000 for the year ended March 2, 1996, of which
$600,000 was paid to Mr. Sy Syms as fixed rent.
Store Openings/Closings
On February 15, 1996, the Company opened a new store (approximately
31,000 square feet of selling space) in Sharonville, Ohio and on March 14, 1996
moved it North Randall, Ohio store (approximately 40,000 square feet of selling
space) to Highland Heights, Ohio (approximately 36,000 square feet of selling
space). During fiscal 1996 the Company closed its Hoffman Estates, Illinois
store (approximately 31,000 square feet of selling space) on March 11, 1995 and
its Sterling Heights, Michigan store (approximately 35,000 square feet of
selling space) on July 30, 1995. On May 2, 1996, the Company opened a new store
in Pittsburgh, Pennsylvania (approximately 40,000 square feet of selling space)
and plans to open a second store (approximately 39,000 square feet of selling
space) in New York City in the Fall of 1996.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business.
Management of the Company believes, based upon its assessment of the actions
and claims outstanding against the Company, and after discussion with counsel,
that there are no legal proceedings that will have a material adverse effect
on the financial condition and results of operations of the Company. Some of
the lawsuits to which the Company is a party are covered by insurance and are
being defended by the Company's insurance carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
4
<PAGE> 6
PART II
- -------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
The following table sets forth for the period indicated the high and
low sales prices for the Company's common stock as reported by the New York
Stock Exchange using the trading symbol SYM.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C>
1997 First Quarter (through May 3, 1996) $8 3/8 $7 3/4
1996 Quarter ended March 2, 1996 $8 1/4 $7 1/8
Quarter ended November 25, 1995 9 1/2 7 1/8
Quarter ended August 26, 1995 8 3/8 6 3/4
Quarter ended May 27, 1995 7 7/8 6 7/8
1995 Two months ended February 25, 1995 $7 $6 5/8
1994 Quarter ended December 31, 1994 $8 7/8 $6 3/8
Quarter ended October 1, 1994 8 3/8 7 1/2
Quarter ended July 2, 1994 8 3/4 7 1/2
Quarter ended April 2, 1994 10 1/4 8 1/4
</TABLE>
HOLDERS
As of May 3, 1996 there were 236 record holders of the Company's Common
Stock. The Company believes that there were in excess of 1,650 beneficial owners
of the Company's Common Stock as of that date.
DIVIDENDS
The Company paid dividends of five cents per share on January 3, 1994,
May 2, 1994 and August 1, 1994 to shareholders of record on December 3, 1994,
April 4, 1994 and July 1, 1994, respectively. The Board elected not to declare
dividends in the third and fourth quarters of 1994, in the fiscal year ended
March 2, 1996 and through May 3, 1996. Prior to the above mentioned dividends,
the Company had not paid cash dividends on its Common Stock since its 1983
initial public offering. Payment of dividends is within the discretion of the
Company's Board of Directors and will depend upon various factors including the
earnings, capital requirements and financial condition of the Company (see
Note 5 to notes to consolidated financial statements regarding covenants in
the Company's revolving credit agreement).
5
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information presented below has been derived from
the Company's audited Consolidated Financial Statements for the fiscal years
ended March 2, 1996, December 31, 1994, January 1, 1994, January 2, 1993 and
December 28, 1991 and the two months ended February 25, 1995, except that the
balance sheets at February 25, 1995 and February 26, 1994 are unaudited. The
selected financial information presented below should be read in conjunction
with such financial statements and notes thereto. The two months ended
February 26, 1994 is unaudited and presented only for comparative purposes.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
----------------------------------------------------------- ----------------
MARCH 2, DECEMBER 31, JANUARY 1, JANUARY 2, DECEMBER 28, FEBRUARY 25, FEBRUARY 26,
1996 1994 1994 1993 1991 1995 1994
-------- ------------ ---------- ---------- ------------ ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement data:
Net sales .................... $334,750 $326,651 $318,939 $319,623 $317,500 $46,632 $41,642
======== ======== ======== ======== ======= ======= =======
Net income (loss) ............ $ 10,411 $ 8,491 $ 10,847 $ 15,148 $ 14,261 $ (383) $ 50
======== ======== ======== ======== ======= ======= =======
Net income (loss) per share .. $ 0.59 $ 0.48 $ 0.61 $ 0.86 $ 0.81 $ (0.02) $ --
======== ======== ======== ======== ======= ======= =======
Weighted Average Shares
Outstanding .................. 17,694 17,694 17,690 17,690 17,682 17,694 17,692
======== ======== ======== ======== ======= ======= =======
Cash Dividends Per Share ..... $ -- $ 0.10 $ 0.05 $ -- $ -- $ -- $ --
======== ======== ======== ======== ======= ======= =======
Balance sheet data:
Working Capital .............. $ 75,521 $ 59,918 $ 59,871 $ 61,338 $ 51,972 $60,703 $52,539
Total Assets ................ 260,144 245,385 221,152 204,071 199,211 255,612 238,203
Long term debt and
capitalized leases(A) ........ 1,304 1,696 1,974 2,209 7,010 1,645 1,931
Shareholders' equity ......... 207,369 197,341 190,605 180,625 165,477 196,958 190,655
</TABLE>
- ----------------------
(A) Excludes current maturities.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has changed its fiscal year end to the Saturday nearest to
the end of February. This change was reported on March 17, 1995. Prior to this
change the Company maintained its records on the basis of a 52-53 week fiscal
year ending the Saturday closest to December 31. The following discussion
compares the fiscal years ended March 2, 1996, December 31, 1994, January 1,
1994 and the two months ended February 25, 1995 and February 26, 1994. The
fiscal year ended March 2, 1996 was comprised of 53 weeks. Fiscal years 1994
and 1993 were comprised of 52 weeks.
RESULTS OF OPERATIONS
Fiscal Year Ended March 2, 1996 Compared to December 31, 1994
Net sales of $334,750,000 for the fiscal year ended March 2, 1996
increased $8,099,000 (2.5%) as compared to net sales of $326,651,000 for the
fiscal year ended December 31, 1994. The increase was, for the most part, the
result of fiscal 1996 being comprised of 53 weeks as compared to 52 weeks in
the year ended December 31, 1994. The Company estimates that the extra week
added approximately $5,100,000 in net sales to the 1996 fiscal year.
Gross profit for the fiscal year ended March 2, 1996 was $117,189,000,
an increase of $8,450,000 (7.8%) as compared to $108,739,000 for the fiscal
year ended December 31, 1994. This increase resulted mainly from increased net
sales of $8,099,000 and the Company's gross margin increasing to 35.0% from
33.3%. The 1.7% improvement in gross margin resulted primarily from increased
levels of opportunistic and in-season purchases which created better values for
the Company's customers, especially in the second half of the 1996 fiscal year.
Selling, general and administrative expense was $70,579,000 (21.1% as a
percentage of net sales) for the period ended March 2, 1996 as compared to
$68,370,000 (20.9% as a percentage of net sales) for the fiscal year ended
December 31, 1994. The increase of $2,209,000 was caused mainly by the extra
week (53 weeks versus 52 weeks) of payroll and payroll related expenses and
higher legal and professional fees as a result of the change in fiscal year and
the proposed, but subsequently abandoned, "Going Private" transaction.
6
<PAGE> 8
Advertising expense for fiscal 1996 increased to $5,905,000, as
compared to $5,069,000 in the year ending December 31, 1994 resulting from a
return to TV and a commitment to expand the Company's advertising effort.
Occupancy costs were $12,330,000 (3.68% as a percentage of net sales)
for the period ended March 2, 1996, substantially unchanged from $12,017,000
(3.68% as a percentage of net sales) for the year ended December 31, 1994.
Depreciation amounted to $7,751,000, a decrease of $1,103,000, as
compared to $8,854,000 for the fiscal year ended December 31, 1994 primarily
to certain assets becoming fully depreciated during this period, and the
elimination of depreciable assets resulting from the closing of the Hoffman
Estates and Sterling Heights stores.
The provision for contractor advance and special charges for the fiscal
year ended March 2, 1996 includes a $2,200,000 provision made in the fourth
quarter in recognition of current information that a contractor advance may not
be fully recoverable, a charge in the first quarter of $1,200,000 for costs
associated with closing the store in Sterling Heights, Michigan, offset by a
$714,000 adjustment to the $2,935,000 special charges for costs associated with
the close down of the Hoffman, Illinois store, write-off of costs associated
with a lease in Cincinnati in which the Company had initially decided to not
open a store and write-off of pre-development costs associated with property
located in Roseland, New Jersey taken in the two month period ended February 25,
1995. The $714,000 adjustment to the $2,935,000 special charges arose when the
Company, based on subsequent experience with the real estate market in
Cincinnati, Ohio, concluded in November 1995 that the property would not be
subleased in a reasonable time frame and at an acceptable rate. The Company then
decided to open the store in February, 1996, operating with a reduced expense
structure.
Income before income taxes of $17,645,000 increased $3,275,000 (22.8%),
as compared to $14,370,000 for the fiscal year ended December 31, 1994. This
increase for the most part reflects higher gross profit, offset by increased
selling, general and administrative expense, advertising and special charges as
discussed above.
For the fiscal year ended March 2, 1996 the effective income tax rate
was 41.0% as compared to 40.9% last year.
Fiscal Year Ended December 31, 1994 Compared to January 1, 1994
In 1994, net sales were $326,651,000, an increase of $7,712,000 or 2.4%
from 1993. The increase was a result of an increase in net sales in the amount
of $31,803,000 for stores opened in 1993 and 1994, offset by a decrease of
$24,091,000 or 7.8% for comparable store net sales.
In 1994, the Company's gross margin increased to 33.3% from 32.4% in
1993. The increase was the result of a higher initial markup partially offset
by additional markdowns. As discussed in Note 1d. to notes to consolidated
financial statements, the Company changed its method of valuing the inventory
at December 31, 1994. The change in valuation resulted in a $780,000 increase
to the gross margin.
The Company estimates interim gross margin based principally upon
historical experience. The determination of cost of sales for the fiscal year
is based on a physical inventory at the end of December 31, 1994 and January 1,
1994. Using estimated gross margins for the first three quarters has resulted
in upward adjustments to gross margin in the fourth quarter for the last
several years. In 1994 the adjustment was due primarily to a higher initial
markup. These adjustments resulted in an increase to gross profit of
approximately $1,787,000 for the fourth quarter ended December 31, 1994.
Beginning in January 1995, Syms is utilizing the retail inventory method for
quarterly inventory valuation.
As a percentage of net sales, selling, general and administrative
expenses and advertising (excluding occupancy, depreciation and amortization)
were 22.5% in 1994 and 21.2% in 1993. The increase in the 1994 fiscal year
selling, general and administrative expenses and advertising (excluding
occupancy, depreciation and amortization) was principally due to a full year of
expenses related to the opening of five new stores in 1993, five new stores in
1994 and the decrease in comparable store sales. Generally, the percent to sales
of selling, general and administrative expenses are higher for recently opened
stores.
Comparable store selling, general and administrative expenses decreased
by $2,720,000 or 4.2% primarily due to a reduction in payroll and advertising
costs. Overall selling, general and administrative expenses and advertising
increased by $5,927,000 or 8.8% from the 1993 fiscal period to the 1994 fiscal
period due to the opening of new stores.
As a percentage of net sales, occupancy expenses were 3.7% in 1994 and
3.0% in 1993. In the 1994 fiscal period, occupancy expense increased as a
percentage to net sales principally due to a full year of expenses attributable
to the opening of five new stores in 1993, five new stores in 1994 and a
decrease in comparable store net sales. The new stores primarily have been
under leasing arrangements.
Income before the provision for income taxes was 4.4% in 1994 and 6.0%
in 1993. The decrease in income before the provision for income taxes in 1994
was due to a decrease in comparable store net sales and an overall increase in
selling, general and administrative expenses as well as occupancy expenses and
depreciation and amortization. These increases are primarily due to the costs
associated with opening five new stores in 1993 and five new stores in 1994.
7
<PAGE> 9
In 1994 the effective income tax rate decreased to 40.9% from 43.2% in
1993. The decrease in the effective rate was attributable to a decrease in
certain nondeductible expenses as well as state income taxes.
Two Months Ended February 25, 1995 Compared to Two Months Ended
February 26, 1994
Net sales for the eight weeks ended February 25, 1995 were $46,632,000,
an increase of $4,990,000 or 12.0% when compared with $41,642,000 for the eight
weeks ended February 26, 1994. Comparable store net sales increased by
$2,098,000 or 5.5%. This was augmented by an increase of $2,892,000 for stores
opened less than one year.
The gross margin for the eight weeks ended February 25, 1995 was 36.1%
compared with 32.5% for the prior period. The prior period's gross margin was
estimated by management. Commencing January 1, 1995, the Company implemented a
retail stock ledger to determine its interim inventory and gross margin.
As a percentage to net sales, selling, general and administrative
expenses and advertising (excluding occupancy, depreciation and amortization)
were 24.1% for the eight weeks ended February 25, 1995 and 25.2% for the eight
weeks ended February 26, 1994. The decrease in selling, general and
administrative expenses and advertising as a percentage to sales is
attributable to an increase in net sales.
As a percentage of net sales, occupancy expenses were 4.0% for the
eight weeks ended February 25, 1995 and 4.1% for the eight weeks ended February
26, 1994.
The special charges in the 1995 two month period of $2,935,000 include
costs associated with the close down of the Hoffman, Illinois store, write-off
of costs associated with a lease in Cincinnati, Ohio in which the Company had
initially decided not to open a store and write-off of pre-development costs
associated with property located in Roseland, New Jersey.
Loss before the benefit from income taxes was $567,000 or 1.0% of net
sales for the eight weeks ended February 25, 1995, compared with income before
income taxes of $84,000 for the eight weeks ended February 26, 1994. The
decrease in net income was attributable to the special charges, offset by the
increase in net sales and a higher gross margin.
Provision (benefit) for income taxes, as a percentage of income before
income taxes, reflected a benefit of 32.4% for the transition period ended
February 25, 1995, and an expense of 40.5% for the prior period ended February
26, 1994. The period ended February 25, 1995 includes a benefit of federal and
state income taxes offset by certain other state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 2, 1996 was $75,521,000, an increase of
$15,603,000 from December 31, 1994, and the ratio of current assets to current
liabilities improved to 2.5 to 1 as compared to 2.3 to 1 at December 31, 1994.
Working capital at December 31, 1994 was $59,918,000, an increase of
$47,000 from January 1, 1994. The ratio of current assets to current
liabilities fell to 2.3 to 1 at December 31, 1994 as compared to 3.2 to 1 at
January 1, 1994.
Net cash provided by operating activities totaled $11,136,000 for the
fiscal year ended March 2, 1996 and decreased by $1,800,000 compared to
$12,936,000 for the fiscal year ended December 31, 1994. Net income for 1996
amounted to $10,411,000 compared to $8,491,000 in 1994, an increase of
$1,920,000. In the period ended March 2, 1996, cash provided from operating
activities was mainly used to reduce accounts payable by $4,721,000 and to
increase inventory by $2,694,000.
Net cash provided by operating activities totaled $12,936,000 in 1994
compared to $12,297,000 in 1993. Net income for 1994 amounted to $8,491,000
compared to $10,847,000 in 1993, a decrease of $2,356,000. In 1994 merchandise
inventories increased by $17,389,000 and accounts payable increased $8,535,000
primarily due to the addition of five new stores opened during 1994.
Net cash used in investing activities was $4,452,000 for the fiscal
year ended March 2, 1996. Net cash used in investing activities was $14,488,000
in 1994 compared to $12,178,000 in 1993. Expenditures for property and
equipment totaled $4,777,000, $14,591,000 and $17,508,000 for the fiscal years
ended March 2, 1996, December 31, 1994 and January 1, 1994, respectively.
Net cash used in financing activities was $2,337,000 for the fiscal
year ended March 2, 1996 resulting for the most part from the $2,050,000
repayment of short term borrowings. Net cash provided by financing activities
was $911,000 in 1994. Net cash used in financing activities was $1,065,000 in
1993. The Company paid cash dividends of $0.10 per share in 1994, which totaled
$1,769,000. The Company had net borrowings of $2,900,000 in 1994. In 1993, the
Company paid cash dividends of $0.05 per share, which totaled $885,000.
8
<PAGE> 10
The Company has a revolving credit agreement with a bank for a line of
credit not to exceed $40,000,000 through December 1, 1997. At December 1, 1997
the Company has the option to reduce this commitment to zero or convert the
revolving credit agreement to a term loan with a maturity date of December 1,
2000. Except for funds provided from this credit agreement, the Company has
satisfied its operating and capital expenditure requirements, including those
for the opening and expansion of stores, from internally generated funds. For
the fiscal year ended March 2, 1996, under the revolving credit agreement, the
borrowings peaked at $16,100,000 and the average amount of borrowings was
$3,500,000 with a weighted average interest rate of 7.3%. For the fiscal year
ended December 31, 1994, under the revolving credit agreement, the average
amount of borrowings was $6,800,000 with a weighted average interest rate of
5.2%. For the fiscal year ended January 1, 1994, under the revolving credit
agreement, the average amount of borrowings was $7,300,000 with a weighted
average interest rate of 4.0%.
The Company has planned capital expenditures of approximately
$16,500,000 for the fiscal year ending March 2, 1997, which includes plans to
open two new stores, to expand the Secaucus distribution center and to relocate
one store from a leased location to a Company built store.
Management believes that existing cash, internally generated funds,
trade credit and funds available from the revolving credit agreement will be
sufficient for working capital and capital expenditure requirements for the
fiscal year ending March 2, 1997.
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe inflation has had a material
effect on sales or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are filed together with
this report. See index to Consolidated Financial Statements in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
9
<PAGE> 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Sy Syms(1)(2)(3)................. 70 Chairman of the Board, Chief
Executive Officer and
Director of the Company
Marcy Syms(1)(2)................. 45 President, Chief Operating
Officer and Director of the
Company
John K. Kabay.................... 54 Vice President,
Chief Financial Officer,
Treasurer and Director of the Company
Wilbur L. Ross, Jr.(3)(4)(5)..... 58 Director of the Company
Harvey Weinberg(3)(4)(5)......... 57 Director of the Company
</TABLE>
- -----------------
(1) Member of the Executive Committee of the Company.
(2) Sy Syms is the father of Marcy Syms and Stephen A. Merns.
(3) Member of the Compensation Committee of the Company.
(4) Member of the Audit Committee of the Company.
(5) Member of the Stock Option Committee of the Company.
The following officers are significant employees of the Company:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Stephen A. Merns(2).............. 43 Vice President, Secretary and Merchandise
Manager Men's Tailored Clothing
Ronald Zindman................... 44 Vice President - General Merchandise
Manager Ladies, Mens and Haberdashery
Allen Brailsford................. 51 Vice President - Operations
Douglas C. Meyer................. 43 Vice President - Marketing, Advertising and Sales
Promotion
</TABLE>
The officers and directors of Syms Advertising, Inc. are: Sy Syms -
Chairman of the Board, Chief Executive Officer and Director; Marcy Syms -
President, Chief Operating Officer and Director and Stephen A. Merns, Secretary.
The members of the Company's Board of Directors hold office until the
next annual meeting of shareholders and until their successors are duly elected
and qualified. Executive officers are elected annually by the Board of
Directors of the Company and serve at the pleasure of the Board. Marcy Syms and
Stephen A. Merns are the children of Sy Syms. There are no other family
relationships between any directors or executive officers of the Company. None
of the organizations with which these persons were previously associated
is a parent, subsidiary or other affiliate of the Company except as otherwise
set forth.
SY SYMS has been Chairman of the Board, Chief Executive Officer and a
Director of the Company and/or its predecessors since 1959 and of Syms Inc.
from 1959 through 1985. Mr. Sy Syms was Chief Operating Officer of the Company
from 1983 to 1984. Mr. Syms has been a Director of Israel Discount Bank of New
York since December 1991.
MARCY SYMS has been President and a Director of the Company since 1983
and Chief Operating Officer of the Company since 1984. Ms. Marcy Syms was
President and a Director of Syms Inc. from 1983 through 1985 and an officer and
Director of Syms Inc. from 1978 through 1985.
10
<PAGE> 12
JOHN K. KABAY has been Vice President, Chief Financial Officer,
Treasurer and a Director of the Company since February 12, 1996. Mr. Kabay was
Senior Vice President of AmeriData Technologies, Inc. from 1994 to 1996 and
Senior Vice President, Chief Financial Officer and Treasurer of Calvin Klein,
Inc. from 1985 to 1994.
WILBUR L. ROSS, JR. has been a Managing Director of Rothschild Inc.
since 1976. He is a member of the Board of Directors of Mego Corp. He has been
a director of the Company since 1983.
HARVEY WEINBERG has been a consultant since April 1994. From April 1992
to April 1994 he was President and Chief Executive Officer of HSSI, Inc., a
retailer of men's and women's apparel. From 1987 to September, 1990 he was
Chief Executive Officer and Vice Chairman of the Board of Directors of Hartmarx
Corporation and from 1990 to September 1992 served as Chairman of the Board of
Hartmarx Corporation. He has been a Director of the Company since December 1992.
STEPHEN A. MERNS has been Vice President, Secretary and Merchandise
Manager Men's Tailored Clothing of the Company since January 1, 1986. Mr.
Stephen A. Merns was Vice President and a buyer of men's haberdashery of Syms
Inc. from 1980 through 1985 and Secretary of Syms Inc. from 1983 through 1985.
RONALD ZINDMAN has been Vice President - General Merchandise Manager
Ladies, Men's and Haberdashery since July 10, 1994. Previously, Mr. Zindman was
Vice President - General Merchandise Manager Ladies from March 1993 to July
1994 and a buyer of men's and women's merchandise from March 1, 1990 to
March 1993.
ALLEN BRAILSFORD has been Vice President - Operations since January
1993. Previously Mr. Brailsford was Director of Operations from March 1992 to
January 1993 and Director of Distribution from March 1985 to March 1992.
DOUGLAS C. MEYER has been Vice President - Marketing, Advertising and
Sales Promotion since July 1994. Mr. Meyer was Vice President, Marketing and
Creative Services for Loehmann's from 1987 to 1994.
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) of the General Instructions
to Form 10-K, the information called for by Item 11 is omitted from this Report
and is incorporated by reference to the definitive Proxy Statement to be filed
by the Company pursuant to Regulation 14A of the General Rules and Regulations
under the Securities Exchange Act of 1934, which the Company will file not
later than 120 days after March 2, 1996, the end of the fiscal year covered by
this Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3) of the General
Instructions to Form 10-K, the information called for by Item 12 is omitted
from this Report and is incorporated by reference to the definitive Proxy
Statement to be filed by the Company pursuant to Regulation 14A of the General
Rules and Regulations under the Securities Exchange Act of 1934, which the
Company will file not later than 120 days after March 2, 1996, the end of the
fiscal year covered by this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3) of the General
Instructions to Form 10-K, the information called for by Item 13 is omitted
from this Report and is incorporated by reference to the definitive Proxy
Statement to be filed by the Company pursuant to Regulation 14A of the General
Rules and Regulations under the Securities Exchange Act of 1934, which the
Company will file not later than 120 days after March 2, 1996, the end of the
fiscal year covered by this Report.
11
<PAGE> 13
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C> <C>
(a)(1) Financial Statements:
Independent Auditors' Report............................. F-1
Consolidated Balance Sheets.............................. F-2
Consolidated Statements of Income........................ F-3
Consolidated Statements of Shareholders' Equity.......... F-4
Consolidated Statements of Cash Flow..................... F-5
Notes to Consolidated Financial Statements............... F-6 - F-15
</TABLE>
All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto:
(a)(3) List of Exhibits:
The following exhibits which are marked with an asterisk are filed as
part of this Report and the other exhibits set forth below are incorporated by
reference (utilizing the same exhibit numbers, except as stated otherwise
below) from (i) the Company's Registration Statement on Form S-1 under the
Securities Act of 1933 (Registration No. 2-85554) filed August 2, 1983 and
declared effective September 23, 1983 or (ii) where indicated, the Company's
reports on Form 8-K or Form-10K or the Company's Proxy Statement (Commission
File No. 1-8564). Management contracts or compensatory plans or arrangements
required to be filed as exhibits are identified by a (+).
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of Syms Corp, as amended
3.2 By-laws of Syms Corp
4.1 Specimen Certificate of Common stock
4.3 $5,600,000 New Jersey Economic Development Authority Revenue Bond
Agreement dated December 1, 1981
4.4 Amendments to the New Jersey Economic Development Authority Revenue
Bond Agreement
4.4a First Amendment dated April 14, 1982
4.4b Second Amendment dated May 17, 1982
4.4c Third Amendment dated June 27, 1983
4.4d Fourth Amendment dated July 14, 1983
4.5 Mortgage & Note dated December 11, 1981 between Syms Inc. and New
Jersey Economic Development Authority
9.1 Voting Trust Agreement, dated July 25, 1983
9.2 Supplemental Agreement and Amendment to Voting Trust Agreement, dated
as of December 15, 1994 (Exhibit 9.1 to Form 8-K dated December 15,
1994)
10.3 Elmsford (White Plains), New York Leased Premises
10.3a Lease, June 21, 1977
10.3b Lease Modification, December 28, 1978
10.3c Lease Modification, July 26, 1983
10.3d Consent, July 29, 1983
10.3e Parking Area Lease No. 1, July 29, 1969
10.3f Parking Area Sublease No. 1, November 29, 1974
10.3g Parking Area Lease No. 2, June 23, 1969
10.3h Parking Area Sublease No. 2, November 29, 1974
10.3i Assignment and Assumption, July 29, 1983
10.4 Ground Lease at One Emerson Lane, Township of Secaucus, Hudson County,
New Jersey. Assignment and Assumption of Ground Lease, dated May 8,
1986, to Registrant (exhibit 28.1 to 8-K Report dated May 1986)
</TABLE>
12
<PAGE> 14
+10.21 Syms Corp 1983 Incentive Stock Option and Appreciation Plan as Amended
and Restated (Exhibit A to Company's Proxy Statement for the 1993
Annual Meeting of Shareholders)
10.29 Credit Card Program Agreement dated as of March 12, 1987 and as amended
as of March 16, 1987 between General Electric Credit Card Corporation
and Registrant (10-K Report for fiscal year ended December 31, 1987)
10.32 Revolving Credit Agreement dated as of December 1, 1993 between Syms
Corp and United Jersey Bank (8-K Report dated December 7, 1993)
*10.33 Form of Indemnification Agreement between Registrant and Directors
and Executive Officers of the Registrant
*10.34 Credit Plan Agreement dated December 11, 1995 between Citicorp Retail
Services, Inc. and Registrant
*21 List of Subsidiaries of the Company
*23 Consent of Deloitte & Touche LLP
*27 Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended March 2, 1996 no reports on Form 8-K were filed.
13
<PAGE> 15
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SYMS CORP
By SY SYMS
-----------------------
Sy Syms
Chairman of the Board
Date: May 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
SY SYMS Chairman of the Board, May 29, 1996
- ---------------------- Chief Executive Officer
Sy Syms and Director
(principal executive officer)
MARCY SYMS President, Chief Operating May 29, 1996
- ---------------------- Officer and Director
Marcy Syms
JOHN K. KABAY Vice President, Chief May 29, 1996
- ---------------------- Financial Officer, Treasurer
John K. Kabay and Director (principal financial
and accounting officer)
WILBUR L. ROSS, JR. Director May 29, 1996
- ----------------------
Wilbur L. Ross, Jr.
HARVEY WEINBERG Director May 29, 1996
- ----------------------
Harvey Weinberg
</TABLE>
14
<PAGE> 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Syms Corp
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheets of Syms Corp and
its subsidiaries as of March 2, 1996 and December 31, 1994, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years ended March 2, 1996, December 31, 1994 and January 1,
1994 and the two month period ended February 25, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Syms Corp and subsidiaries as of
March 2, 1996 and December 31, 1994 and the results of their operations and
their cash flows for each of the three fiscal years ended March 2, 1996,
December 31, 1994 and January 1, 1994 and the two month period ended February
25, 1995 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
May 9, 1996
F-1
<PAGE> 17
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 2, DECEMBER 31,
1996 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,804 $ 706
Merchandise inventories 112,954 96,807
Deferred income taxes 5,221 2,476
Prepaid expenses and other current assets 3,521 5,275
-------- --------
Total current assets 126,500 105,264
PROPERTY AND EQUIPMENT - Net of accumulated
depreciation and amortization 129,235 135,986
OTHER ASSETS 4,409 4,135
-------- --------
TOTAL ASSETS $260,144 $245,385
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 30,900 $ 23,399
Accrued expenses 9,918 8,582
Obligations to customers 4,490 4,305
Income taxes payable 5,331 5,882
Short term borrowings -- 2,900
Current portion of obligations
under capital lease 340 278
-------- --------
Total current liabilities 50,979 45,346
-------- --------
OBLIGATIONS UNDER CAPITAL LEASE 1,304 1,696
-------- --------
DEFERRED INCOME TAXES 255 1,002
-------- --------
OTHER LONG TERM LIABILITIES 237 --
-------- --------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock, par value $0.05 per share
Authorized 30,000 shares; 17,694 shares
outstanding as of March 2, 1996 and
December 31, 1994 885 885
Preferred stock, par value $100 per share
Authorized 1,000 shares; none outstanding -- --
Additional paid-in capital 11,709 11,709
Retained earnings 194,775 184,747
-------- --------
Total shareholders' equity 207,369 197,341
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $260,144 $245,385
======== ========
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE> 18
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
-------------------------------------- --------------------------
MARCH 2, DECEMBER 31, JANUARY 1, FEBRUARY 25, FEBRUARY 26,
1996 1994 1994 1995 1994
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $334,750 $326,651 $ 318,939 $ 46,632 $41,642
Cost of goods sold 217,561 217,912 215,516 29,776 28,108
-------- -------- --------- -------- -------
Gross profit 117,189 108,739 103,423 16,856 13,534
EXPENSES
Selling, general and administrative 70,579 68,370 61,984 10,652 10,133
Advertising 5,905 5,069 5,528 576 364
Occupancy 12,330 12,017 9,626 1,841 1,702
Depreciation and amortization 7,751 8,854 7,446 1,359 1,190
Provision for contractor advance
and special charges 2,686 -- -- 2,935 --
-------- -------- --------- -------- -------
Income (loss) from operations 17,938 14,429 18,839 (507) 145
Interest expense (income) - net 293 59 (243) 60 61
-------- -------- --------- -------- -------
Income (loss) before income taxes 17,645 14,370 19,082 (567) 84
Provision (benefit) for income taxes 7,234 5,879 8,235 (184) 34
-------- -------- --------- -------- -------
NET INCOME (LOSS) $ 10,411 $ 8,491 $ 10,847 $ (383) $ 50
======== ======== ========= ======== =======
Net Income (Loss) Per Share $ 0.59 $ 0.48 $ 0.61 $ (0.02) $ --
======== ======== ========= ======== =======
Weighted Average Shares Outstanding 17,694 17,694 17,690 17,694 17,692
======== ======== ========= ======== =======
Cash Dividends Per Share $ -- $ 0.10 $ 0.05 $ -- $ --
======== ======== ========= ======== =======
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 19
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK, COMMON STOCK,
AUTHORIZED, AUTHORIZED,
1,000 SHARES; 30,000 SHARES:
$100 PAR VALUE $0.05 PAR VALUE ADDITIONAL
------------------ ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
------ ------ ------ ------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - JANUARY 2, 1993 -- $-- 17,690 $885 $11,677 $ 168,063
Exercise of stock options -- -- 2 -- 18 --
Cash dividend -- -- -- -- -- (885)
Net income - 1993 -- -- -- -- -- 10,847
--- --- ------ ---- ------- ---------
BALANCE - JANUARY 1, 1994 -- -- 17,692 885 11,695 178,025
Exercise of stock options -- -- 2 -- 14 --
Cash dividend -- -- -- -- -- (1,769)
Net income - 1994 -- -- -- -- -- 8,491
--- --- ------ ---- ------- ---------
BALANCE - DECEMBER 31, 1994 -- -- 17,694 885 11,709 184,747
Net loss for the two months
ended-February 25, 1995 -- -- -- -- -- (383)
Net income for the fiscal year
ended-March 2, 1996 -- -- -- -- -- 10,411
--- --- ------ ---- ------- ---------
BALANCE - MARCH 2, 1996 -- $-- 17,694 $885 $11,709 $ 194,775
=== === ====== ==== ======= =========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 20
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
----------------------------------- -------------------------
MARCH 2, DECEMBER 31, JANUARY 1, FEBRUARY 25, FEBRUARY 26,
1996 1994 1994 1995 1994
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,411 $ 8,491 $ 10,847 $ (383) $ 50
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 7,751 8,854 7,446 1,359 1,190
Deferred income taxes (3,539) (1,484) (684) 47 --
Loss (gain) on sale of property and equipment 10 (73) (10) (16) --
Loss on disposal of assets 1,142 -- -- 1,360 --
Changes in operating assets and liabilities:
(Increase) in merchandising inventories (2,694) (17,389) (11,686) (13,453) (9,000)
(Increase) decrease in prepaid expenses
and other current assets 2,158 (418) (681) (404) 2,403
(Increase) decrease in other assets (306) (290) (702) 4 (2)
(Decrease) increase in accounts payable (4,721) 8,535 9,259 12,222 14,573
Increase (decrease) in accrued expenses 1,203 4,164 161 133 (2,596)
(Decrease) increase in obligations to
customers (271) 805 90 456 (166)
Increase in other long term liabilities 237 -- -- -- --
(Decrease) increase in income taxes (245) 1,741 (1,743) (306) (3,036)
-------- -------- -------- -------- --------
Net cash provided by operating activities 11,136 12,936 12,297 1,019 3,416
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of marketable
securities -- -- 5,300 -- --
Expenditures for property and equipment (4,777) (14,591) (17,508) (388) (1,910)
Proceeds from sale of property and equipment 325 103 30 13 --
-------- -------- -------- -------- --------
Net cash (used in) investing activities (4,452) (14,488) (12,178) (375) (1,910)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends -- (1,769) (885) -- --
Repayments of obligations under capital lease (287) (234) (198) (43) (36)
Revolving line of credit (repayments) borrowings (2,050) 2,900 -- (850) --
Exercise of options -- 14 18 -- --
-------- -------- -------- -------- --------
Net cash (used in) provided by
financing activities (2,337) 911 (1,065) (893) (36)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH 4,347 (641) (946) (249) 1,470
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 457 1,347 2,293 706 1,347
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,804 $ 706 $ 1,347 $ 457 $ 2,817
======== ======== ======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 399 $ 253 $ 42 $ -- $ --
======== ======== ======== ======== ========
Income taxes paid (refunds received) -
net $ 11,026 $ 5,106 $ 10,646 $ (33) $ --
======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 21
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED MARCH 2, 1996, DECEMBER 31, 1994, JANUARY 1, 1994
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principal Business - Syms Corp operates a chain of thirty-eight "off-price"
retail stores (thirty-nine in 1994) located throughout the Northeastern and
middle Atlantic regions and in the Midwest, Southeast and Southwest. Each
Syms store offers a broad range of first quality, in season merchandise
bearing nationally recognized designer or brand-name labels for men, women
and children.
b. Principles of Consolidation - The consolidated financial statements include
the accounts of Syms Corp and its subsidiaries (the "Company"), all of which
are wholly owned. All significant intercompany accounts and transactions
have been eliminated.
c. Accounting Period - The Company has changed its fiscal year end to the
Saturday nearest to the end of February. This change was reported on March
17, 1995. The fiscal year ended March 2, 1996 was comprised of 53 weeks. The
fiscal years ended December 31, 1994 and January 1, 1994 were comprised of
52 weeks.
d. Merchandise Inventories - Merchandise inventories are stated at the lower of
cost (first in, first out) or market, as determined by the retail inventory
method. During the fiscal year ended December 31, 1994, the Company changed
its method of valuing inventory by computing separate cost complements for
each department within its five merchandise categories. In the past, the
Company computed a single cost complement for each of its five merchandise
categories. Management believes the change results in a more accurate
inventory valuation. This change resulted in a total increase to gross
margin of $780,000 of which approximately one half relates to prior years.
The Company considers that the effect on fiscal year end 1994 and prior
years is not material.
e. Depreciation and Amortization - Depreciation is computed principally by the
straight-line method at rates adequate to allocate the cost of applicable
assets over their expected useful lives. The cost of leaseholds and
leasehold improvements are amortized over the terms of the leases or the
useful lives of the assets, whichever is shorter.
Facilities leases (Note 7) having the substance of financing transactions
have been capitalized. The related lease obligations have been included as
obligations under capital lease. The leased assets are being amortized as
described above.
f. Income Taxes - Income taxes are accounted for under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax
basis of assets and liabilities that will result in taxable or deductible
amounts in the future. Such deferred income tax asset and liability
computations are based on enacted tax laws and rates applicable to periods
in which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to
the amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
F-6
<PAGE> 22
g. Earnings Per Share - Net income per share is computed by dividing net income
by the weighted average number of common shares and common stock equivalents
outstanding during each period. The Company's common stock equivalents
consist of outstanding stock options and for the periods ended March 2,
1996, December 31, 1994 and January 1, 1994, the effect of outstanding
common stock options was not dilutive.
h. Cash and Cash Equivalents- Syms Corp considers credit card receivables and
all short-term investments with a maturity of three months or less as cash
equivalents.
i. Estimated Fair Value of Financial Instruments - Statement of Financial
Accounting Standards ("SFAS") No. 107, "Disclosures About Fair Value Of
Financial Instruments", requires disclosure of the estimated fair value of
financial instruments. The carrying value of cash and cash equivalents,
accounts receivable and accounts payable approximates their estimated fair
value.
j. Pre-opening Costs - Store pre-opening costs are deferred until the store's
opening, at which time they are expensed over the first 12 months of store
operation.
k. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
l. New Accounting Standards
a. Long-Lived Assets - In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This statement is effective for
fiscal years beginning after December 15, 1995. The Company has not
adopted SFAS No. 121 for the period ended March 2, 1996. Based on the
Company's review, the effect on its financial statements from the
adoption of this statement is not expected to be material.
b. Stock Based Compensation - In October 1995, the Statement of Financial
Accounting Standards ("SFAS") No. 123 was issued. SFAS No. 123
encourages companies to adopt a fair value base method of accounting for
stock-based compensation plans in place of the intrinsic value based
method provided for by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Companies which
continue to apply the provisions of APB 25 must make pro forma
disclosure in the notes to their financial statements of net income and
earnings per share as if the fair value based method of accounting
defined in SFAS No. 123 had been applied. The Company plans to adopt
SFAS No. 123 in the fiscal year ending March 2, 1997 on a pro forma
disclosure basis.
m. Reclassifications - Certain reclassifications have been made to the prior
years' financial statements to conform to the current year presentation.
F-7
<PAGE> 23
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of:
<TABLE>
<CAPTION>
MARCH 2, DECEMBER 31,
1996 1994
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land $ 34,060 $ 34,060
Buildings and building improvements 102,244 100,519
Leasehold and leasehold improvements 20,365 22,782
Machinery and equipment 14,893 14,465
Furniture and fixtures 15,547 14,923
Capital lease 3,763 3,763
Construction in progress 2,774 1,674
-------- --------
193,646 192,186
Less accumulated depreciation and amortization 64,411 56,200
-------- --------
$129,235 $135,986
======== ========
</TABLE>
NOTE 3 - INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
-------------------------------------- ----------------
MARCH 2, DECEMBER 31, JANUARY 1, FEBRUARY 25,
1996 1994 1994 1995
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal $ 9,109 $ 5,956 $ 7,152 $ (223)
State 1,684 1,407 1,767 (22)
-------- ------- ------- ------
10,793 7,363 8,919 (245)
-------- ------- ------- ------
Deferred:
Federal (2,622) (1,202) (528) 43
State (937) (282) (156) 18
-------- ------- ------- ------
(3,559) (1,484) (684) 61
-------- ------- ------- ------
$ 7,234 $ 5,879 $ 8,235 $(184)
======== ======= ======= =====
</TABLE>
F-8
<PAGE> 24
The following is a reconciliation of income taxes computed at the U.S.
Federal statutory rate to the provision for income taxes:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
---------------------------------------- ----------------
MARCH 2, DECEMBER 31, JANUARY 1, FEBRUARY 25,
1996 1994 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statutory Federal income tax rate 35.0% 35.0% 35.0% (35.0)%
State taxes, net of Federal
income tax benefits 5.3 5.5 5.3 (3.2)
Officers' life insurance 0.7 0.4 1.4 5.2
Other, net -- -- 1.5 0.6
---- ---- ---- -----
Effective income tax rate 41.0% 40.9% 43.2% (32.4)%
==== ==== ==== =====
</TABLE>
The composition of the Company's deferred tax assets and liabilities is as
follows:
<TABLE>
<CAPTION>
MARCH 2, DECEMBER 31,
1996 1994
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Capitalization of inventory costs $ 3,800 $ 1,760
Capital lease 333 470
Accounts receivable 1,018 --
Other 650 816
------- -------
Total deferred tax assets 5,801 3,046
Deferred tax liability:
Depreciation method and different estimated lives (835) (1,572)
------- -------
Net $ 4,966 $ 1,474
======= =======
Classified in balance sheet as follows:
Current deferred tax asset $ 5,221 $ 2,476
Deferred tax liability (net of noncurrent deferred tax
asset) (255) (1,002)
------- -------
Net $ 4,966 $ 1,474
======= =======
</TABLE>
F-9
<PAGE> 25
NOTE 4 - OBLIGATIONS TO CUSTOMERS
Obligations to customers represent credits issued for returned merchandise as
well as gift certificates. The Company's policy is to allow customers to
exchange credits issued for other merchandise or credit to the Syms charge card.
NOTE 5 - BANK CREDIT FACILITIES
The Company has an unsecured revolving credit agreement with a bank for a line
of credit not to exceed $40,000,000 through December 1, 1997. Interest on
individual advances is payable quarterly at 1 1/2% per annum below the bank's
base rate, except that at the time of advance, the Company has the option to
select an interest rate based upon one of two other alternative calculations,
with such rate to be fixed for a period not to exceed 90 days. The average daily
unused portion is subject to a commitment fee of 1/8 of 1% per annum. As of
March 2, 1996 there were no outstanding borrowings under this agreement.
The agreement contains financial covenants, with respect to consolidated
tangible net worth, as defined, working capital and maximum capital
expenditures, including dividends, as well as other financial ratios.
Total interest charges incurred for the years ended March 2, 1996, December 31,
1994 and January 1, 1994 including amounts related to capital leases, were
$623,000, $865,000 and $474,000, respectively, of which $105,000, $612,000 and
$431,000 were capitalized in fiscals 1996, 1994 and 1993, respectively, in
connection with the purchase and construction of new facilities.
The interest rate on short term borrowings was 6.75% at March 2, 1996. At
December 31, 1994 there was $2,900,000 in outstanding borrowings and there were
no borrowings at January 1, 1994.
In addition, the Company has a separate $10,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of
merchandise. This agreement may be cancelled at any time by either party. At
March 2, 1996 and at December 31, 1994, the Company had $3,786,000 and
$4,290,000, respectively, in outstanding letters of credit.
F-10
<PAGE> 26
NOTE 6 - PENSION AND PROFIT SHARING PLANS
a. Pension Plan - The Company has a defined benefit pension plan for all
employees other than those covered under collective bargaining agreements.
The benefits are based on years of service and the employee's highest
average pay during any five consecutive years within the ten-year period
prior to retirement. Pension plan costs are funded annually. Contributions
are intended to provide not only for benefits attributed to service to date,
but also for those expected to be earned in the future.
The following table sets forth the Plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
MARCH 2, DECEMBER 31,
1996 1994
---- ----
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $2,552 at March 2, 1996 and $3,156
at December 31, 1994 $ 2,711 $ 3,355
======= =======
Projected benefit obligation $ 3,592 $ 3,393
Plan assets at fair value, primarily mutual
funds and United States Treasury bills 3,249 2,853
------- -------
Plan assets less than projected benefit obligation (343) (540)
Unrecognized net loss 186 375
Unamortized net asset at transition (152) (177)
------- -------
Accrued pension cost (included in accrued expenses) $ (309) $ (342)
======= =======
</TABLE>
F-11
<PAGE> 27
Pension expense includes the following components:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------
MARCH 2, DECEMBER 31, JANUARY 1,
1996 1994 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 330 $ 384 $ 370
Interest cost on the projected
benefit obligation 242 248 224
Actual return on plan assets
(191) (193) (249)
Net amortization and deferral (80) (82) (8)
----- ----- -----
Net periodic pension cost $ 301 $ 357 $ 337
===== ===== =====
</TABLE>
The weighted average discount rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation was 7.75% during each of the years ended March 2, 1996 and
December 31, 1994 and 4.5% for the year ended January 1, 1994. The expected
long-term rate of return on plan assets was 8.5% during each of the years
ended March 2, 1996, December 31, 1994 and January 1, 1994.
b. Profit-Sharing Plan - The Company has a profit-sharing plan for all
employees other than those covered under collective bargaining agreements.
Contributions to the profit-sharing plan are made at the discretion of the
Plan's administrators.
Profit-sharing plan contributions were $130,000 for each of the years ended
March 2, 1996, December 31, 1994 and January 1, 1994, respectively.
c. 401-K Plan - In 1995, the Company established a defined contribution savings
plan (401-K) for substantially all of its eligible employees. Employees may
contribute a percentage of their salary to the plan subject to statutory
limits. The Company has not made any contributions to this plan.
F-12
<PAGE> 28
NOTE 7 - COMMITMENTS
a. Leases - The Company has various operating leases and one capital lease for
its retail stores, with terms expiring between 1996 and 2016. The Company
also has a ground lease that expires in 2276. Under most lease agreements,
the Company pays real estate taxes, maintenance and other operating
expenses. Certain store leases also provide for additional contingent
rentals based upon a percentage of sales in excess of certain minimum
amounts.
Future minimum lease payments at March 2, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING
REAL ESTATE LEASES
----------- ------
(IN THOUSANDS)
<S> <C> <C>
1997 $ 600 $ 6,295
1998 600 6,916
1999 600 6,101
2000 450 5,384
2001 -- 5,010
2002 and thereafter -- 44,049
--------- ---------
Total minimum payments 2,250 $ 73,755
=========
Less amount representing interest 606
---------
Present value of net minimum lease payments 1,644
Less current maturities 340
---------
$ 1,304
=========
</TABLE>
Payments under the real estate capital lease, which expires in 1999, are payable
to the Company's principal shareholder. Rental payments were $600,000 during
each of the years ended March 2, 1996, December 31, 1994 and January 1, 1994.
F-13
<PAGE> 29
Rent expense for operating leases is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
----------------------------------- ----------------
MARCH 2, DECEMBER 31, JANUARY 1, FEBRUARY 25,
1996 1994 1994 1995
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Minimum rentals $ 4,308 $ 4,030 $ 2,425 $ 698
Escalation rentals 24 9 9 28
Contingent rentals 40 25 28 4
Sublease rentals (386) (192) (192) (32)
------- ------- ------- -----
$ 3,986 $ 3,872 $ 2,270 $ 698
======= ======= ======= =====
</TABLE>
NOTE 8 - STOCK OPTION PLAN
The Company's Stock Option Plan allows for the granting of incentive stock
options, as defined in Section 422A of the Internal Revenue Code of 1954 (as
amended), non-qualified stock options or stock appreciation rights. The plan
requires that incentive stock options be granted at an exercise price not less
than the fair market value of the common shares on the date the option is
granted. The exercise price of the option for holders of more than 10% of the
voting rights of the Company must be not less than 110% of the fair market value
of the common shares on the date of grant. Non-qualified options and stock
appreciation rights may be granted at any exercise price. The Company has
reserved 1,000,000 shares of common stock for issuance thereunder.
No option or stock appreciation rights may be granted under the stock option
plan after July 2003. The maximum exercise period for any option or stock
appreciation right under the plan is ten years from the date the option is
granted (five years for any optionee who holds more than 10% of the voting
rights of the Company). The options are exercisable at a rate of 20% per year.
Transactions for the fiscal years ended March 2, 1996, December 31, 1994,
January 1, 1994 and the two months ended February 25, 1995 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
------------------------------------------- ----------------
MARCH 2, DECEMBER 31, JANUARY 1, FEBRUARY 2,
1996 1994 1994 1995
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Options outstanding, beginning of period 469 547 472 529
Granted - 57 122 -
Exercised - (2) (2) -
Cancelled (38) (73) (45) (60)
------- ------- ------- -------
Options outstanding, end of period 431 529 547 469
======= ======= ======= =======
Option price range at period-end $ 7.125 $ 7.125 $ 7.125 $ 7.125
to to to to
$12.250 $12.250 $12.250 $12.250
</TABLE>
F-14
<PAGE> 30
NOTE 9 - OTHER TRANSACTIONS
Included in cost of sales for the three fiscal years ended March 2, 1996,
December 31, 1994 and January 1, 1994 are purchases of approximately $5,139,000,
$6,322,000 and $7,110,000, respectively, from a company related to the principal
shareholder, as well as a licensee of the related company. In 1991 the Company
entered into an agreement with the licensee to purchase annually approximately
$4,200,000 of suits for a five year period ending December 31, 1996. Included in
prepaid expenses and other current assets at March 2, 1996 and December 31, 1994
are advances to the licensee totalling approximately $3,438,000 and $3,519,000,
respectively. The advances at March 2, 1996 are for purchases to be received in
the Spring and Fall of 1996 and are to be received by the Company prior to
December 31, 1996. A $2,200,000 provision was made for the fiscal year and
fourth quarter ended March 2, 1996 in recognition of current information that
the licensee advance may not be fully recoverable. In addition, the Company has
guaranteed a letter of credit on behalf of the licensee totalling approximately
$150,000, which expires on July 5, 1996 and at March 2, 1996 has advanced fabric
in the approximate amount of $489,000.
NOTE 10 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTER
----------------------------------------
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
YEAR ENDED MARCH 2, 1996
Net sales $79,252 $72,814 $93,439 $ 89,245
======= ======= ======= ========
Gross profit $27,174 $24,535 $34,577 $ 30,903
======= ======= ======= ========
Net income $ 1,036 $ 741 $ 5,561 $ 3,073
======= ======= ======= ========
Net income per share $ 0.06 $ 0.04 $ 0.32 $ 0.17
======= ======= ======= ========
YEAR ENDED DECEMBER 31, 1994
Net sales $68,642 $80,015 $77,813 $100,181
======= ======= ======= ========
Gross profit $21,966 $26,348 $25,289 $ 35,136
======= ======= ======= ========
Net income $ 325 $ 1,654 $ 1,464 $ 5,048
======= ======= ======= ========
Net income per share $ 0.02 $ 0.09 $ 0.08 $ 0.29
======= ======= ======= ========
</TABLE>
Beginning January 1, 1995, the Company installed a computerized retail stock
ledger system which enabled the Company to more accurately determine its interim
inventory and gross margin based upon the retail method of accounting. Prior to
January 1, 1995, the Company estimated interim gross profit based principally
upon historical experience, which yields less precise results than the method
used for year-end valuation purposes. The fourth quarter results for the period
ended December 31, 1994 were impacted by a difference in gross profit determined
as a result of physical inventories taken at year-end. This resulted in an
increase to gross profit of approximately $1,787 for the fourth quarter ended
December 31, 1994. In addition, the fourth quarter results for the period ended
December 31, 1994 were impacted by the change in method of valuing the ending
inventory totaling approximately $780.
F-15
<PAGE> 31
SYMS CORP
INDEX TO EXHIBITS
The following exhibits which are marked with an asterisk are
filed as part of this Report and the other exhibits set forth below are
incorporated by reference (utilizing the same exhibit numbers, except as stated
otherwise below) from (i) the Company's Registration Statement on Form S-1 under
the Securities Act of 1933 (Registration No. 2-85554) filed August 2, 1983 and
declared effective September 23, 1983 or (ii) where indicated, the Company's
reports on Form 8-K or Form 10-K or the Company's Proxy Statement (Commission
File No. 1-8564). Management contracts or compensatory plans or arrangements
required to be filed as exhibits are identified by a (+).
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
3.1 Certificate of Incorporation of Syms Corp, as amended
3.2 By-laws of Syms Corp
4.1 Specimen Certificate of Common stock
4.3 $5,600,000 New Jersey Economic Development Authority Revenue Bond
Agreement dated December 1, 1981
4.4 Amendments to the New Jersey Economic Development Authority Revenue Bond
Agreement
4.4a First Amendment dated April 14, 1982
4.4b Second Amendment dated May 17, 1982
4.4c Third Amendment dated June 27, 1983
4.4d Fourth Amendment dated July 14, 1983
4.5 Mortgage & Note dated December 11, 1981 between Syms Inc. and New Jersey
Economic Development Authority
9.1 Voting Trust Agreement, dated July 25, 1983
9.2 Supplemental Agreement and Amendment to Voting Trust Agreement, dated as
of December 15, 1994 (Exhibit 9.1 to Form 8-K dated December 15, 1994)
10.3 Elmsford (White Plains), New York Leased Premises
10.3a Lease, June 21, 1977
10.3b Lease Modification, December 28, 1978
10.3c Lease Modification, July 26, 1983
10.3d Consent, July 29, 1983
10.3e Parking Area Lease No.1, July 29, 1969
10.3f Parking Area Sublease No. 1, November 29, 1974
10.3g Parking Area Lease No. 2, June 23, 1969
10.3h Parking Area Sublease No. 2, November 29, 1974
10.3i Assignment and Assumption, July 29, 1983
10.4 Ground lease at One Emerson Lane, Township of Secaucus, Hudson County,
New Jersey
Assignment and Assumption of Ground Lease, dated May 8, 1986,
to Registrant (Exhibit 28.1 to 8-K Report dated May 1986)
+10.21 Syms Corp 1983 Incentive Stock Option and Appreciation Plan as Amended
and Restated (Exhibit A to Company's Proxy Statement for the 1993 Annual
Meeting of Shareholders)
10.29 Credit Card Program Agreement dated as of March 12, 1987 and as amended
as of March 16, 1987 between General Electric Credit Card Corporation
and Registrant (10-K Report for fiscal year ended December 31, 1987)
10.32 Revolving Credit Agreement dated as of December 1, 1993 between Syms
Corp and United Jersey Bank (8-K Report dated December 7, 1993)
*10.33 Form of Indemnification Agreement between Registrant and Directors and
Executive Officers of the Registrant
*10.34 Credit Plan Agreement dated December 11, 1995 between Citicorp Retail
Services, Inc. and Registrant
*21 List of Subsidiaries of the Company
*23 Consent of Deloitte & Touche LLP
*27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.33
INDEMNIFICATION AGREEMENT
THIS AGREEMENT, made and entered into this 12th day of February,
1996 ("Agreement"), by and between SYMS CORP, a New Jersey corporation (the
"Corporation") , and ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to
serve corporations as directors or officers or in other capacities unless they
are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, such corporations;
WHEREAS, the current impracticability of obtaining adequate
insurance and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Corporation (the "Board")
has determined that the difficulty in attracting and retaining such persons is
detrimental to the best interests of the Corporation's shareholders and that the
Corporation should act to assure such persons that there will be increased
certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the
Corporation contractually to obligate itself to indemnify such persons to the
fullest extent permitted by applicable law so that they will serve or continue
to serve the Corporation free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve
and/or to undertake additional service for or on behalf of the Corporation on
the condition that he be so indemnified;
NOW, THEREFORE, in consideration of the promises and the
covenants contained herein, the Corporation and Indemnitee do hereby covenant
and agree as follows:
1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve or
continue to serve as a director and/or officer of the Corporation for so long as
Indemnitee is duly elected or appointed and qualified or until such time as
Indemnitee
<PAGE> 2
(subject to any contractual obligation or any obligation imposed by operation of
law) tenders his resignation in writing or is removed as a director and/or
officer. This Agreement shall not impose any obligation on the Indemnitee or the
Corporation to continue the Indemnitee's position with the Corporation beyond
any period otherwise applicable.
2. GENERAL. The Corporation shall indemnify, and shall advance
Expenses (as hereinafter defined) to, Indemnitee as provided in this Agreement
and to the fullest extent permitted by law in effect on the date hereof and to
such greater extent as applicable law may thereafter from time to time permit.
3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, wholly or partly by reason of his Corporate
Status (as hereinafter defined) , he is, or is threatened to be made, a party
to any threatened, pending or completed Proceeding (as hereinafter defined),
other than a Proceeding by or in the right of the Corporation. Pursuant to this
Section 3, Indemnitee shall be indemnified against Expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding or any claim, issue or matter therein,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
4. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 4 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending or completed Proceeding brought by or
in the right of the Corporation to procure a judgment in its favor. Pursuant to
this Section 4, indemnitee shall be indemnified against Expenses actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
if he acted in good faith and in a manner he believed to be in or not opposed to
the best interests of the Corporation and its shareholders. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Corporation if such indemnification is not permitted by New Jersey
or other applicable law; provided, however, that indemnification against
Expenses shall
-2-
<PAGE> 3
nevertheless be made by the Corporation in such event to the extent that the
Superior Court of the State of New Jersey, or the court in which such proceeding
shall have been brought or is pending, shall determine upon application that
despite the adjudication of liability, but in view of all circumstances of the
case, such Indemnitee is fairly and reasonably entitled to indemnity for such
Expenses as the Superior Court or such other court shall deem proper.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR
PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Corporation
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For purposes of this Section 5 and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal or
withdrawal with or without prejudice, shall be deemed to be a successful result
as to such claim, issue or matter.
6. ADVANCE OF EXPENSES. The Corporation shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within twenty (20) days after the receipt by the Corporation of a
statement or statements from Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by Indemnitee and shall include or be preceded or accompanied by an
undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
against such Expenses.
7. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee
shall submit to the Corporation a written request, including therein or
therewith such documentation and information as is reasonably available to
-3-
<PAGE> 4
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Secretary of the Corporation
shall, promptly upon receipt of such a request for indemnification, advise the
Board in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to Section 7(a) hereof, a determination, if required by applicable law,
with respect to Indemnitee's entitlement thereto shall be made in the specific
case: (i) if a Change in Control (as hereinafter defined) shall have occurred,
by Independent Counsel (as hereinafter defined) in a written opinion to the
Board, a copy of which shall be delivered to Indemnitee (unless Indemnitee shall
request that such determination be made by the Board or the shareholders, in
which case the determination shall be made in the manner provided below in
clause (ii) or (iii) of this Section 7(b)); (ii) if a Change of Control shall
not have occurred, (A) by the Board by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined), (B) if a quorum of the Board
consisting of Disinterested Directors is not obtainable or, even if obtainable,
such quorum of Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee,
or (C) by the shareholders of the Corporation if the Certificate of
Incorporation, as amended, the By-laws or a resolution of the Board or the
shareholders so directs; or (iii) as provided in Section 8(b) of this Agreement;
and, if it is so determined that Indemnitee is entitled to indemnification,
payment to Indemnitee shall be made within ten (10) days after such
determination. Indemnitee shall cooperate with the person, persons or entity
making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information that is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating shall be borne by the Corporation (irrespective of
the determination as to Indemnitee's entitlement to indemnification), and the
Corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) If the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to
-4-
<PAGE> 5
Section 7(b) of this Agreement, the Independent Counsel shall be selected as
provided in this Section 7(c). If a Change of Control shall not have occurred,
the Independent Counsel shall be selected by the Board, and the Corporation
shall give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change of Control shall have occurred, the
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board, in which event the preceding
sentence shall apply), and Indemnitee shall give written notice to the
Corporation advising it of the identity of the Independent Counsel so selected.
In either event, Indemnitee or the Corporation, as the case may be, may, within
seven (7) days after such written notice of selection shall have been given,
deliver to the Corporation or to Indemnitee, as the case may be, a written
objection to such selection. Such objection may be asserted only on the ground
that the Independent Counsel so selected does not meet the requirement of
"Independent Counsel" as defined in Section 14 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 7(a) of this Agreement, no Independent Counsel shall have been
selected or, if selected, shall have been objected to, in accordance with this
Section 7(c), either the Corporation or Indemnitee may petition the Superior
Court of the State of New Jersey or other court of competent jurisdiction for
resolution of any objection that shall have been made by the Corporation or
Indemnitee to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the Court or by such
other person as the Court shall designate, and the person with respect to whom
an objection is favorably resolved or the person so appointed shall act as
Independent Counsel under Section 7(b) of this Agreement. The Corporation shall
pay any and all reasonable fees and expenses of Independent Counsel incurred by
such Independent Counsel in connection with acting pursuant to Section 7(b) of
this Agreement, and the Corporation shall pay all reasonable fees and expenses
incident to the procedures of this Section 7 (c), regardless of the manner in
which such Independent Counsel was selected or appointed. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section 9(a)
(iii) of this Agreement, Independent Counsel shall be discharged and
-5-
<PAGE> 6
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
8. Presumptions and Effect of Certain Proceedings.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 7(a) of this
Agreement, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under
Section 7 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made such determination within sixty (60) days
after receipt by the Corporation of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made, and Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such sixty-day
period may be extended for a reasonable time, not to exceed an additional thirty
(30) days, if the person, persons or entity making the determination with
respect to entitlement to indemnification in good faith requires such additional
time for the obtaining or evaluating of documentation and/or information
relating thereto; and provided, further, that the foregoing provisions of this
Section 8(b) shall not apply (i) if the determination of entitlement to
indemnification is to be made by the shareholders pursuant to Section 7(b) of
this Agreement and if (A) within fifteen (15) days after receipt by the
Corporation of the request for such determination the Board has resolved to
submit such determination to the shareholders for their consideration at an
annual meeting thereof to be held within seventy-five (75) days after such
receipt and such determination is made thereat, or (B) a special meeting of
shareholders is called within fifteen
-6-
<PAGE> 7
(15) days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 7(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumptian that Indemnitee did not act in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Corporation or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
9. Remedies of Indemnitee.
(a) If (i) a determination is made pursuant to Section 7 of this
Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6
of this Agreement, (iii) the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 7(b) of this Agreement and
such determination shall not have been made and delivered in a written opinion
within ninety (90) days after receipt by the Corporation of the request for
indemnification, (iv) payment of indemnification is not made pursuant to Section
5 of this Agreement within ten (10) days after receipt by the Corporation of a
written request therefor or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 7 or 8 of this Agreement, Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of New Jersey, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator, pursuant to the
rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 9 (a).
-7-
<PAGE> 8
The Corporation shall not oppose Indemnitee's right to any such adjudication or
award in arbitration.
(b) In the event that a determination shall have been made
pursuant to Section 7 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 9 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 9, the
Corporation shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have
been made pursuant to Section 7 or 8 of this Agreement that Indemnitee is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant to
this Section 9, absent (i) a misstatement by Indemnitee of a material fact, or
an omission of a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for indemnification or
(ii) a prohibition of such indemnification under applicable law.
(d) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 9 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Corporation is bound by all the provisions of this Agreement.
(e) If Indemnitee, pursuant to this Section 9, seeks a judicial
adjudication of or an award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, Indemnitee shall be entitled to
recover from the Corporation, and shall be indemnified by the Corporation
against, any and all expenses (of the types described in the definition of
Expenses in Section 14 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of Expenses sought, the expenses incurred by
-8-
<PAGE> 9
Indemnitee in connection with such judicial adjudication or arbitration shall be
appropriately prorated.
10. Security. To the extent requested by the Indemnitee and approved by
the Board, the Corporation may at any time and from time to time provide
security to the Indemnitee for the Corporation's obligations hereunder through
an irrevocable bank line of credit, funded trust or other collateral. Any such
security, once provided to the Indemnitee, may not be revoked or released
without the prior written consent of Indemnitee.
11. Non-Exclusivity; Duration of Agreement; Insurance; Subrogation.
(a) The rights to be indemnified and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Corporation's Certificate of Incorporation, as amended, or By-laws, any
other agreement, a vote of shareholders or a resolution of directors, or
otherwise. This Agreement shall continue until, and terminate upon, the latter
of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve
as a director and officer of the Corporation or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise that Indemnitee served at the request of the Corporation; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of Expenses hereunder and of
any proceeding commenced by Indemnitee pursuant to Section 9 of this Agreement
relating thereto. This Agreement shall be binding upon the Corporation and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
(b) If the Corporation maintains an insurance policy or policies
providing liability insurance for directors or officers of the Corporation or
fiduciaries of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise that such person serves at the request
of the Corporation, Indemnitee shall be covered by such policy or policies in
accordance with the terms thereof to the maximum extent of the coverage
available for any such director or officer under such policy or policies.
-9-
<PAGE> 10
(c) If any payment is made under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Corporation to bring suit to enforce such rights.
(d) The Corporation shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
12. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, each portion of any section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
13. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES.
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim, issue or matter therein, brought or
made by him against the Corporation, except as may be provided in Section 9(e)
of this Agreement.
14. DEFINITIONS. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item
or any similar schedule or form) promulgated under the Securities Exchange Act
of 1934, as amended (the "Act"),
-10-
<PAGE> 11
whether or not the Corporation is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in Control shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections 13
(d) and 14 (d) of the Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board in office immediately prior to such
person attaining such percentage interest; (ii) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a majority of the Board
thereafter; or (iii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by the
Corporation's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
(b) "Corporate Status" describes the status of a person who is
or was or has agreed to become a director of the Corporation, or is or was an
officer, employee, agent or fiduciary of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise that such person is or was serving at the request of the Corporation.
(c) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts and witnesses, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
type customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend or investigating a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of
-11-
<PAGE> 12
corporation law and neither at the time of designation is, nor in the five years
immediately preceding such designation was, retained to represent: (i) the
Corporation or Indemnitee in any matter material to either such party or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Corporation or Indemnitee in an action to determine Indemnitee's
rights under this Agreement arising on or after the date of this Agreement,
regardless of when the Indemnitee's act or failure to act occurred.
(f) "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing
and any other proceeding (including any appeals from any of the foregoing)
whether civil, criminal, administrative or investigative, except one initiated
by an Indemnitee pursuant to Section 9 of this Agreement to enforce his rights
under this Agreement.
15. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
part of this Agreement or to affect the construction thereof.
16. MODIFICATION AND WAIVER. This Agreement may be amended from time to
time to reflect changes in New Jersey law or for other reasons. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
17. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Corporation in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter that may be subject to indemnification or advancement of Expenses
covered hereunder; provided, however, that the failure to give any such notice
shall not disqualify the indemnitee from indemnification hereunder.
-12-
<PAGE> 13
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i) if
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, at the time of delivery, or (ii) if
mailed by certified mail (return receipt requested) with postage prepaid, on the
third business day after the date on which it is so mailed, and addressed:
(a) if to Indemnitee, to:
Syms Corp
Syms Way
Secaucus, New Jersey 07094
(b) if to the Corporation, to:
Syms Corp
Syms Way
Secaucus, New Jersey 07094
or to such other address as may have been furnished by like notice to Indemnitee
by the Corporation or to the Corporation by Indemnitee, as the case may be.
19. GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New Jersey applicable to contracts made and to be performed in such
state without giving effect to the principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed or have caused the
execution of this Agreement on the day and year first above set forth.
SYMS CORP
By:
----------------------------------
Title:
-------------------------------
INDEMNITEE:
-------------------------------------
-13-
<PAGE> 1
EXHIBIT 10.34
CREDIT PLAN AGREEMENT
Dated as of December 11, 1995
Between
SYMS Corporation, a New Jersey corporation ("Syms") and Citicorp Retail
Services, Inc., a Delaware corporation ("CRS").
PRELIMINARY STATEMENT. Syms, through its stores, is engaged in the
business of the sale at retail of family clothing and other merchandise. CRS is
engaged primarily in the business of lending money, including but not limited to
the operation of credit card plans. General Electric Capital Corporation
("GECC") currently operates a credit program for Syms' customers (the "Credit
Plan"). Syms and CRS have agreed that pursuant to the terms of this Agreement
(i) Syms will arrange for GECC to sell and CRS shall buy the Eligible
Receivables outstanding under the Credit Plan and GECC's interest in the Credit
Agreements, and (ii) CRS will continue to operate and manage in a professional
manner the Credit Plan under which certain existing customers of Syms may
continue to utilize the Credit Plan and certain customers of Syms who meet
initial and continuing credit standards may enter into Credit Agreements with
CRS to open revolving credit accounts and thereafter obtain loans from CRS to
pay for goods and services purchased from Syms.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Account" means a credit-card-accessed open-ended consumer loan
account established in favor of a Charge Customer under a Credit
Agreement.
"Account Balance" means, with respect to any Account, the
outstanding balance (or credit balance) of such Account at the time of
determination, which shall consist of, without limitation, (i) the
aggregate Face Amount of all Receivables (other than Ineligible
Receivables) posted to such Account prior to such time, and (ii) the
aggregate amount of all fees and charges posted to such Account prior to
such time, including, without limitation, interest and finance charges,
returned check charges or late charges, minus the aggregate amount of
all credits posted to such Account prior to such time.
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim of any person or entity other than
CRS.
<PAGE> 2
"Business Day" means any day other than a Saturday, Sunday,
Federal legal holiday or legal holiday under the laws of the State of
New York.
"Charge Customer" means a person now or hereafter having a
Credit Agreement in effect under the Credit Plan.
"Charge Slip" means the printed form that Charge Customers use
in exercising their credit privileges under the Credit Plan.
"Credit Adjustment Slip" means that form of merchandise return
slip or customer balance adjustment slip used to reflect a credit or a
debit to a Charge Customer's Account.
"Credit Agreement" means a written agreement between a Charge
Customer and GECC or CRS pursuant to which such Charge Customer is
obligated to repay Loans under the Credit Plan and finance charges and
other charges related thereto.
"Credit Plan" means the revolving credit plan pursuant to which
a Charge Customer may obtain loans to finance the purchase of goods and
services at Stores of Syms and from third parties pursuant to Section
7.08, provided that any reference to the CRS Credit Plan shall include
financial services and products of CRS, all as provided herein.
"Contract Year" means the period from the Conversion Date to the
end of the calendar month on which the first anniversary of the
Conversion Date occurs and, thereafter, a period ending on each
anniversary of the first Contract Year.
"Dates": "Last Billing Date" means, for each billing cycle of
Existing Customers, the date for such cycle as of which GECC will
prepare the final monthly billing statements prior to the Conversion
Date for the Eligible Receivables for such Existing Customers, and
unless otherwise agreed will be a date during the month prior to the
Closing Date. "Conversion Date" means the day on which CRS will commence
providing the services specified in Article VII and, unless otherwise
agreed, shall be the Closing Date. "Closing Date" means the Business
Day on which GECC or Syms delivers to CRS or its affiliate the
certificate, assignment, and other documents required by Section 2.02,
and unless otherwise agreed will be no later than March 12, 1996.
"Debt" means (i) indebtedness for borrowed money or for the
deferred purchase price of property or services excluding trade debt,
(ii) obligations as lessee under leases which shall have been or should
be, in accordance with Generally Accepted Accounting Principles,
recorded as capital leases, (iii) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of the kinds
referred to in clause (i) or (ii) above, and (iv) liabilities in respect
2
<PAGE> 3
of unfunded vested benefits under plans covered by Title IV of the
Employment Retirement Income Security Act of 1974, as amended from time
to time or any successor statute ("ERISA").
"Eligible Customer" means an Existing Customer who is not
described in Schedule 2.
"Event of Default" has the meaning set forth in Article VIII.
"Existing Customer" means a Charge Customer having a Credit
Agreement in effect on the Conversion Date.
"Face Amount" means, with respect to any Receivable, an amount
equal to the total amount reflected on the Loan or Charge Slip with
respect to such Receivable.
"Final Receivables" has the meaning set forth in Section 9.02.
"Ineligible Customer" means an Existing Customer who is so
described in Schedule 2.
"Inquiries and Complaints" has the meaning set forth in Section
7.06.
"Loan" means a loan obtained by a Charge Customer from GECC or
CRS under the Credit Plan.
"Merchandise Complaint" means any inquiry, complaint, dispute or
conflict between a Charge Customer and Syms (but excluding any inquiry,
complaint, dispute or conflict of any third parties operating as
described in Section 7.08) whether communicated or addressed to Syms or
to CRS, which involves the identity, quality, condition, performance or
delivery of goods or services or any representation or warranty or any
recall or replacement program with respect thereto.
"Net Credit Sales" means, for any period of time, the total
dollar amount of all sales evidenced by Charge Slips transmitted to CRS
during such period, as increased or decreased by the total dollar amount
of all Credit Adjustment Slips transmitted to CRS during such period.
"Operating Procedures" means all of the procedures,
instructions, manuals, forms, policies and practices now or hereafter in
effect which govern the operation of the Credit Plan, including but not
limited to:
(a) the manner in which Charge Customers may apply for
and obtain an Account, and enter into Credit Agreements;
(b) the manner in which Credit limits for each Charge
Customer are established and may be revised from time to time;
3
<PAGE> 4
(c) the manner in which Charge Customers may obtain a
Loan to pay for a purchase and thereby create a Receivable;
(d) the manner in which Charge Customers are issued
Credit Adjustment Slips for returns and adjustments or in
response to Merchandise Complaints;
(e) the manner in which Receivables are billed and
collected, and related Inquiries and Complaints from Charge
Customers are answered; or
(f) any other guidelines governing point-of-sale
transactions as agreed to by the parties and as may be amended
from time to time.
"Outstanding Receivables" means for any particular day the
amount of all unpaid Receivables owned by CRS as of such day which have
not been written off.
"Receivable" means all indebtedness or other amounts owing of
each Charge Customer arising under his or her Credit Agreement,
including the obligation to repay Loans, all periodic, minimum and other
finance charges accrued thereon or added thereto, and all late charges,
returned check fees, penalties, attorneys' fees or other amounts payable
pursuant to such Credit Agreement. "Ineligible Receivables" means the
Receivables of Ineligible Customers (incurred before the Conversion
Date). "Eligible Receivables" means the Receivables of Eligible
Customers. "Authorized Receivables" means Receivables incurred on and
after the Conversion Date meeting the authorization requirements set
forth in this Agreement.
"Records" means all books, records and documents (including,
without limitation, the master file and other computer tapes and disks)
relating to the Receivables and includes, without limitation, all (a)
Charge Slips evidencing the Loans, (b) Credit Adjustment Slips, and (c)
the Credit Agreements, provided, however, that for purposes of Section
3.03 hereof Records shall be limited to the electronic
telecommunications from Syms to CRS or its affiliate of the amount of
credits and debits to be applied to the Accounts by CRS, the date of the
transaction and the identity of the Account to which such Charge and
Credit Adjustment Slips relate. Upon receipt of such transmission, CRS
shall credit or debit such amount to the appropriate Account.
"Store" means a retail store now or hereafter operated by Syms
or any of its subsidiaries.
"Termination Date" shall have the meaning set forth in Section
9.01.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
4
<PAGE> 5
"GECC Agreement" means the Agreement between Syms and GECC dated
as of March 12, 1987, as amended from time to time.
SECTION 1.02. Preparation for Conversion. Prior to the Conversion Date,
Syms will or will use its best efforts to cause GECC to (1) make available to
CRS additional information concerning the GECC Credit Plan in effect prior to
the Conversion Date and Charge Customers and supply CRS with additional details
of the Accounts to be converted, in each case in accordance with Schedule 1, and
(2) continue to operate the Credit Plan in all material respects in accordance
with the Operating Procedures for the Credit Plan now in effect (except as may
be required by law). Prior to the Conversion Date, CRS will make all necessary
preparations to commence service hereunder on the Conversion Date. Certain
details of the undertakings of the parties with respect thereto are set forth in
Schedule 1. Notwithstanding the foregoing, Syms will notify CRS on a monthly
basis of all changes, to Syms' knowledge, that GECC makes to the Operating
Procedures or credit standards, which could have an adverse impact on the value
of the Existing Receivables, the conversion of the Credit Plan or the operation
of the Credit Plan after conversion.
SECTION 1.03. Operations Prior to the Purchase of the Receivables.
(a) Prior to the Conversion Date, Syms will use its best efforts
including exercising all rights Syms has under the GECC Agreement (i) to keep
the Credit Plan available in all of the Stores in which the Credit Plan is
currently in effect and which are not closed or sold prior to the Conversion
Date, (ii) to provide authorization services to such Stores, promptly post
Loans, finance charges, credits and payments to the Accounts, render timely and
accurate monthly billing statements, receive payments and refund credit
balances, pursue diligent collection efforts, handle all complaints concerning
bills (as well as goods and services sold) and adjust them), maintain books and
records, render the reports and files to CRS as provided in Schedule 1, (iii) to
maintain the current credit standards, aging, and write-off policies and (iv) to
conduct all activities with respect to the Credit Plan in accordance with all
legal requirements and good business practices.
(b) Except as expressly provided in this Agreement, Syms will use all
commercially reasonable efforts to cause GECC not to send to its Charge
Customers generally any communication with respect to the GECC Credit Plan that
could reasonably be expected to materially adversely affect CRS's ability to
collect and administer the Receivables after the Conversion Date, including, but
not limited to, legal notices required by a change in law after the date hereof,
or any offering of the goods or services of third parties, except pursuant to
contracts now in existence, without the prior review of CRS. In the event GECC
sends such communication, CRS may adjust the Discount Rate (as defined in
Section 3.01) to compensate CRS for such materially adverse effect if CRS is not
otherwise reimbursed for such adverse effect.
5
<PAGE> 6
ARTICLE II
PURCHASE OF GECC CREDIT PLAN RECEIVABLES
AND COMMENCEMENT OF SERVICE, ETC.
SECTION 2.01. Purchase of Receivables. (a) As of the Last Billing Date
for each cycle, Syms will cause GECC to prepare and mail a statement to each
Charge Customer in whose account there were Eligible Receivables or a credit
balance during the billing period ended on such Last Billing Date which
statement shall direct the Charge Customer to make payment to GECC and unless
the parties shall agree upon an alternative arrangement Syms shall cause GECC to
process all Charge Customer payments received prior to the Closing Date and
shall use all commercially reasonable efforts to cause GECC to automatically
forward to CRS within one Business Day all such payments received after the
Closing Date without handling or processing by Syms or GECC.
(b) As of the Closing Date: (i) without recourse, except as provided
herein, CRS will purchase and Syms will cause GECC to sell and assign to CRS all
of the Eligible Receivables of all Existing Customers; (ii) Syms will cause GECC
to assign to CRS all of its interest in the Credit Agreements and Accounts of
all Existing Customers having Eligible Receivables (including Existing Customers
having credit and zero balances); and (iii) CRS will assume liability for any
credit balances as set forth in such statements and will refund credit balances
in accordance with applicable legal requirements.
SECTION 2.02. Closing. On the Closing Date:
(a) Syms will deliver to CRS or its affiliate at Melville, New York:
(i) a certificate of the controller of Syms dated the Closing
Date, setting forth his calculation in good faith of the purchase
price of all Eligible Receivables, which shall be the aggregate
Account Balance of all Eligible Receivables of Eligible Customers
as of the close of business on the Business Day immediately
preceding the Closing Date plus assessed and unbilled finance
charges on each Account since its Last Billing Date (net of a
reasonable estimate made in consultation with GECC and CRS of the
portion thereof which will not be billed because the Charge
Customer will pay his bill in full before the expiration of the
free period) determined in accordance with the books and records
of Syms, subject to adjustment as hereinafter provided.
(ii) an Assignment to CRS of all of GECC's interest in all of the
Eligible Receivables of all Existing Customers and in the Credit
Agreements and Accounts of Existing Customers (including Existing
Customers having credit and zero balances) executed by authorized
officers of GECC.
(iii) other documents required by Section 4.01.
6
<PAGE> 7
(iv) electronic information in a form and format reasonably
acceptable to CRS containing the current master file of all
Accounts and Receivables of Eligible Customers as of the Closing
Date.
(v) acknowledgment copies of proper financing statements (Form
UCC-1) naming GECC as the debtor and assignor of Receivables and
CRS as secured party and assignee, or other, similar instruments
or documents, as may reasonably be necessary under the UCC of all
appropriate jurisdictions or any comparable law to perfect the
ownership interests in all Receivables, Accounts and Credit
Agreements in which an interest may be assigned hereunder.
(b) CRS will pay to Syms (or, at the direction of Syms, to GECC) the net
amount certified pursuant to subsection (a)(i) above, by crediting such amount
to the account of Syms or GECC (as the case may be) with Citibank, N.A. or such
other bank as Syms may direct, in immediately available funds.
SECTION 2.03. Commencement of Service. On the Conversion Date, CRS will
assume the responsibility for servicing, in accordance with Article VII, the
Accounts which are assigned to CRS pursuant to this Article II. Notwithstanding
the sale of Accounts hereunder, Syms shall retain ownership of the list of its
customers' names and addresses and the goodwill existing therefrom, while
recognizing that the Charge Customers are also customers of CRS. CRS shall keep
said list confidential and not disclose same or any part thereof to any third
party, other than in accordance with Section 10.06. Without Syms' written
permission, CRS further agrees not to sell such names and addresses.
SECTION 2.04. Delivery of Records. On a Business Day which shall be no
more than 10 days after the Closing Date and selected by Syms on at least two
days' notice to CRS, Syms will deliver to CRS or its affiliate at Melville, New
York, all of the Records relating to Eligible Customers to be delivered pursuant
to Schedule 1.
SECTION 2.05. Adjustment Payments. (a) On the Business Day after such
delivery of Records, CRS will pay to Syms (or, if so directed by Syms, to GECC)
the excess (if any) of (x) the aggregate amount of the Account Balances
reflected in the Records delivered pursuant to Section 2.04 over (y) the amount
paid pursuant to Section 2.02(b) above, in the manner specified in such Section;
or Syms will pay or cause GECC to pay to CRS the excess (if any) of the amount
specified in clause (y) above over the amount specified in clause (x) above.
(b) As soon as possible after the first billing date of each Account
after the Closing Date, CRS will compare the actual finance charges assessed for
each Account to the assessed and unbilled finance charge estimate included as
part of the purchase price at the Closing Date. The actual finance charges will
be prorated to include the period up to but not including the Closing Date. Any
variance between the actual finance charges and the estimate will be settled
upon between Syms and CRS.
7
<PAGE> 8
ARTICLE III
REIMBURSEMENT FOR LOANS
SECTION 3.01. Reimbursement at Discount. CRS will remit the proceeds of
any Loan to Syms for each Loan that CRS makes hereunder to a Charge Customer to
pay for goods and services purchased from Syms or a third party seller by paying
to Syms the amount of the Loan less a discount computed as a percentage of each
Loan as provided in Section 3.02 ("Discount Rate").
SECTION 3.02. Discount. The parties agree that the Discount Rate shall
be one and fifteen one hundredths percent (1.15%) on Net Credit Sales.
However, if Syms achieves the following Net Credit Sales Thresholds during any
of the first five Contract Years, the Discount Rate shall be reduced to ninety
hundredths percent (.90%) for the applicable contract year, and CRS will
reimburse Syms an amount equal to twenty five hundredths percent (.25%) (the
"Discount Adjustment Rate") multiplied by the Net Credit Sales for such
applicable Contract Year. The result will be an effective Discount Rate of
ninety hundredths percent (.90%).
<TABLE>
<CAPTION>
Contract Year Net Credit Sales Threshold
------------- --------------------------
<S> <C>
First $57,965,000.00
Second $69,225,000.00
Third $75,625,000.00
Fourth $82,325,000.00
Fifth $89,400,000.00
</TABLE>
If Syms does not meet the above Net Credit Sales Thresholds during any Contract
Year, but does in a particular Contract Year achieve Net Credit Sales in excess
of the prior Contract Year's Net Credit Sales Threshold, the Discount Rate will
be adjusted downward according to the following example. In the fourth Contract
Year, Net Credit Sales were $80,000,000.00. Subtract $75,625,000 (the third
Contract Year's Net Credit Sales Threshold) from $80,000,000.00, which equals
$4,375,000.00. Then divide $4,375,000.00 by $6,700,000.00 (the difference
between the fourth and third Contract Years' Net Credit Sales Thresholds), which
equals 0.6529. 0.6529 is then multiplied by the Discount Adjustment Rate of
0.25%, which equals 0.16%. In this example, the Discount Rate for the fourth
Contract Year would be reduced by 0.16%, which means the Discount Rate
applicable for the fourth Contract Year would be 0.99%. In addition, the
Discount Rate for the first Contract Year may be adjusted downward according to
the above example if the Net Credit Sales for that first Contract Year are in
excess of the Net Credit Sales for the previous twelve months that GECC was
operating the Credit Plan but did not meet the Net Credit Sales Threshold of
$57,965,000.00 for the first Contract Year. This possible reduction in the
Discount Rate shall be calculated and reimbursed to Syms within sixty days of
the end of any Contract Year.
8
<PAGE> 9
SECTION 3.03. Settlement Procedures. The proceeds of each Loan less the
applicable Discount Rate will be paid to Syms by CRS on the Business Day
following the day on which the Records of such Loans (i.e., electronic data
transmissions) are received before 11:00 a.m. ET or if received later, on the
second Business Day, by crediting same day funds to an account in the name of
Syms at Citibank, N.A. or otherwise as directed by Syms. CRS will use all
commercially reasonable efforts to pay the above amount to Syms by 1:00 p.m. ET
of the next Business Day. Subject to Section 3.07, all such payments may be made
net of any other amounts due from Syms to CRS under this Agreement, including
but not limited to payments pursuant to Sections 3.03 through 3.08, provided
Syms receives a monthly accounting itemizing such deductions. In the event that
amounts due from Syms to CRS under this Agreement on any Business Day shall
exceed amounts payable by CRS to Syms, Syms shall pay such excess to CRS by
crediting funds to the account of CRS at Citibank, N.A., New York, New York on
the same time schedule as stated above in this Section 3.03. Information
regarding Loans, payments transmitted by Syms and other credits issued to be
applied to Accounts by CRS shall be provided electronically from Syms to CRS's
computers in a form prescribed by CRS and shall include all information that
could reasonably be expected to be necessary for the maintenance of Records and
the preparation of billing statements by CRS in accordance with law and good
business practice.
SECTION 3.04. Assignment of Certain Receivables. (a) CRS may, until 90
days after the Closing Date, from time to time assign to Syms without recourse
all of CRS's interest in any unpaid Receivable (including finance and other
charges) which arises out of a Loan if in the good faith judgment of CRS the
validity of such Loan, the obligation of the Charge Customer to pay such
Receivable or the ability of CRS to bill it to the Charge Customer or collect it
has been materially adversely affected by one of the following events or
conditions:
(i) at the time such Loan was made any of the representations or
warranties of Syms in Section 5.03 was not true;
(ii) the Loan was made as the result of fraud or misrepresentation in or
alteration of an application, Charge Slip or other Record of the
transaction which in the good faith judgment of CRS was caused directly
by fraud or negligence of an officer or employee of Syms or any Store;
(iii) an officer or employee of Syms or a Store failed to materially
comply with the Agreement or any Operating Procedure in connection with
such Loan;
(iv) the Loan was made to an Existing Customer who was included as an
Eligible Customer on the Conversion Date and who in response to CRS's
collection efforts has denied the existence of an enforceable Credit
Agreement, and Syms or GECC cannot provide to CRS upon request proof
that the Charge Customer has executed or otherwise accepted an
enforceable Credit Agreement;
9
<PAGE> 10
(b) CRS shall provide with each such assignment a reasonably detailed
explanation setting forth the basis for CRS's conclusion that subsection (a) is
applicable.
(c) Syms shall pay CRS for each Receivable so assigned the full amount
thereof including finance and other charges, within 10 days after such
assignment.
(d) CRS shall continue to bill and otherwise diligently attempt to
collect from Charge Customers any Receivables so assigned (to the extent that
such activity does not violate any law or good business practices), provided
that Syms pays CRS for its costs of such billing and collection attempts at a
rate to be agreed upon. All collections of such Receivables (including finance
and other charges accrued before and after the assignment) will be paid over by
CRS to Syms (net of any fees to collection agencies and/or attorneys incurred in
accordance with CRS's normal collection practices).
(e) Except for those Receivables described in this Section 3.04, CRS
shall assume Receivables on a non-recourse basis and under no circumstance shall
it have the right to assign or otherwise transfer to Syms any Receivable that
arises out of a Loan. Up to 90 days from the Closing Date, the provisions of
Section 3.04 shall apply to any loan made pursuant to such Receivables. After 90
days, the provisions of Section 7 shall apply to any Loan made pursuant to such
Receivable.
SECTION 3.05. Customer Service Adjustments. Whenever pursuant to Section
7.06, Syms determines, in response to a Merchandise Complaint or similar inquiry
from a Charge Customer, to accept a return of goods for full or partial credit
or make an adjustment in the principal amount or finance or other charges
accrued or payable with respect to the Account of a Charge Customer, Syms shall
issue a Credit Adjustment Slip to be applied to the Charge Customer's Account by
CRS. Syms shall notify CRS of such issuance promptly, via the daily transmission
provided by Syms to CRS, of the amount thereof, which CRS will apply to the
Account, thereby reducing the Account Balance.
SECTION 3.06. Postal Rates. Syms will reimburse CRS within 30 days of
billing for any additional actual out-of-pocket expenses incurred by CRS to mail
billing statements and other correspondence to Charge Customers directly due to
an increase in the postal rates charged by the postal service above those in
effect on the Conversion Date. Syms reimbursement shall be capped at $20,000 per
year.
SECTION 3.07. Billings by Parties. Except as otherwise provided in this
Agreement, any amount for which either party becomes liable to the other under
this Agreement, shall be billed monthly with payment due within thirty days of
the billing date. Any amounts owed to a party and not paid when due may be set
off against any amounts owing to the other party under this Agreement.
SECTION 3.08. Servicing Fee. CRS shall pay Syms on the Closing Date a
$200,000.00 one-time Servicing Fee for the right to service the Credit Plan for
the first five Contract Years. However, if Syms terminates this Agreement during
the first five Contract Years for any reason other than breach by CRS, Syms
shall proportionately
10
<PAGE> 11
reimburse CRS for this Servicing Fee. For example, if Syms terminates this
Agreement in the Third Contract Year, Syms shall reimburse CRS $80,000.00, which
represents the part of the Servicing Fee apportioned to the fourth and fifth
Contract Year.
SECTION 3.09. Historical Financial Information. In the event that CRS
discovers within 30 days of receiving tapes from GECC that there were
substantial discrepancies between such tapes and previous information supplied
to CRS by Syms, the parties agree to meet and discuss such discrepancies.
However, Syms shall have no obligation during such meeting to take any specific
actions.
ARTICLE IV
CONDITIONS OF PURCHASE AND LOANS
SECTION 4.01. Conditions Precedent to Purchase and Loans. (a) The
obligation of CRS to purchase the Eligible Receivables from GECC on the Closing
Date is subject to the conditions precedent that (i) Syms shall have performed
all of its obligations under Article I and Schedule I and (ii) CRS or its
affiliate shall have received on or before the Closing Date the documents listed
in Section 2.02 and the following, each (unless otherwise indicated) dated such
date, in form and substance satisfactory to CRS:
(i) Acknowledgment copies of proper Financing Statements (Form UCC-3),
if any, necessary to terminate or exclude from any previously filed
Financing Statement all security interests and other rights of any
person in the Receivables, Accounts and Credit Agreements including any
interests therein as proceeds of any inventory of Syms (except to the
extent such interests have been subordinated by an intercreditor
agreement reasonably satisfactory to CRS); and
(ii) Certified copies of Requests for Information (Form UCC-11) dated a
date reasonably near to the Conversion Date, listing all effective
financing statements which name Syms (under its present name and any
previous name) as debtor, together with copies of such financing
statements.
(iii) Such other approvals, certificates, documents and opinions as CRS
may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of Syms. Syms represents
and warrants to CRS on the date hereof, and on the date of each remittance
pursuant to Section 3.03 as follows:
11
<PAGE> 12
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of New Jersey and is duly qualified to do
business, and is in good standing, in every jurisdiction where the nature of its
business requires it to be so qualified.
(b) The execution, delivery and performance by Syms of this Agreement,
and all other instruments and documents to be delivered hereunder, and the
transactions contemplated hereby and thereby, are within Syms corporate powers,
have been duly authorized by all necessary corporate action, do not contravene
(i) Syms charter or by-laws or (ii) any law or any contractual restriction
binding on or affecting Syms.
(c) This Agreement constitutes the legal, valid and binding obligation
of Syms enforceable against Syms in accordance with its terms.
(d) The consolidated balance sheet of Syms and its subsidiaries as of
December 31, 1994, and the related statements of income and retained earnings
for the fiscal year then ended certified by Deloitte and Touche, L.L.P.,
independent public accountants, copies of which have been furnished to CRS,
fairly present the financial condition of Syms as at such dates and the results
of the operations of Syms for the periods ended on such dates.
(e) There are no actions, suits or proceedings pending, or to the
knowledge of Syms threatened against or affecting Syms or any subsidiary, or the
property of Syms or of any subsidiary, in any court, or before any arbitrator of
any kind, or before or by any governmental body, which could reasonably be
expected to have a material adverse effect on Syms.
(f) On and after the Closing Date CRS, unless it fails to file any
financing statement correctly, has a valid and perfected ownership interest in
each Receivable and each related Account and Credit Agreement and the proceeds
thereof, each such interest having first priority over any other ownership or
security interest therein or any other Adverse Claim; and no effective financing
statement or other instrument similar in effect caused or suffered to be filed
against Syms or its subsidiaries covering any Receivable, Account or Credit
Agreement or the proceeds thereof or non-cash proceeds of any inventory of Syms
is on file against Syms or any of its subsidiaries in any recording office
except such as may be filed in favor of CRS in accordance with this Agreement
and except that inventory may be covered by liens and filings other than by CRS
provided any filing on inventory is filed after CRS's financing statements have
been filed against Syms or if filed prior to CRS's filing is properly
subordinated to CRS with respect to the Receivables.
SECTION 5.02. Representations and Warranties of CRS. CRS represents and
warrants to Syms on the date hereof and on the date of each remittance pursuant
to Section 3.03 as follows:
(a) CRS is a Delaware corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and on each date on
which this representation is again made will be duly qualified or licensed to do
business and will
12
<PAGE> 13
be in good standing in each jurisdiction, if any, where the character of its
assets or business requires it to be so qualified.
(b) The execution, delivery and performance by CRS of this Agreement and
all other instruments and documents to be delivered hereunder, and the
transactions contemplated hereby and thereby, are within its corporate powers,
have been duly authorized by all necessary corporate action, do not contravene
(i) its charter or by-laws or (ii) any law or any contractual restriction
binding on or affecting CRS and do not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with respect to
any of its properties.
(c) This Agreement constitutes the legal, valid and binding obligation
of CRS enforceable against CRS in accordance with its terms.
(d) There are no actions, suits or proceedings pending or to the
knowledge of CRS threatened against or affecting CRS or any subsidiary, or the
property of CRS or of any subsidiary, in any court, or before any arbitrator of
any kind, or before or by any governmental body, which could reasonably be
expected to have a material adverse effect on CRS.
(e) Credit card applications will be approved or declined in compliance
with applicable regulations including Regulation B and the Equal Credit
Opportunity Act, which specifically address discrimination.
SECTION 5.03. Representations and Warranties as to Charge Customers and
Receivables. Syms further represents and warrants to CRS on the date hereof
that:
(a) GECC has previously issued to each Existing Customer a credit card
in full compliance with all Federal and applicable state laws and regulations
relating to the issuance of credit cards or requests therefor.
(b) GECC has entered into a valid, binding and enforceable Credit
Agreement signed or otherwise accepted by each Eligible Customer.
(c) Each periodic billing statement rendered by or on behalf of Syms
prior to and as of the Last Billing Date was in full compliance with all Federal
and applicable state laws and regulations.
(d) Each Receivable sold to CRS pursuant to Article II has been or will
have been incurred in accordance with the Operating Procedures in effect at the
time it was incurred, and, whether or not such Procedures so provided, the
following shall be true:
(i) Such Receivable was incurred by a Charge Customer solely as
consideration for a bona fide sale of goods or services by Syms
or an authorized third party provider under the GECC Agreement
and is not subject to any dispute, offset, counterclaim or
defense other than a potential Merchandise Complaint that has
not been asserted.
13
<PAGE> 14
(ii) If a credit card was used, the card appeared to be valid on
its face and showed no signs of having been altered, defaced or
tampered with and the last name of the name signed on the card
was the same as the last name of the name embossed or otherwise
placed on the card by the issuer, and the signature of the
customer signed on the Charge Slip compared favorably with the
signature on the signature panel of the credit card; if no
credit card was used, Syms warrants the identity of the customer
as the Charge Customer whose account number is given.
(iii) The Charge Customer was given or sent a Charge Slip
setting forth a description of the goods or services, the date
of the transaction, and the full price including taxes, and any
other information required by law; Syms has retained a copy and
undertakes to deliver it to CRS on demand.
(iv) Such Receivables identified by Syms as Eligible Receivables
are Eligible Receivables incurred prior to the Conversion Date.
ARTICLE VI
COVENANTS OF SYMS
SECTION 6.01. Affirmative Covenants of Syms. Until Syms or its designee
has paid to CRS the purchase price of the Final Receivables (as defined in
Section 9.02) or all the Receivables have been collected or written off by CRS,
Syms will, unless CRS shall otherwise consent in writing (which consent shall
not be unreasonably withheld):
(a) Compliance with Laws, Etc. Comply in all material respects with all
applicable material laws, rules, regulations and orders with respect to it and
its business and properties and to the extent applicable the Credit Plan.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualification would
materially adversely affect the interest of CRS hereunder or in the Receivables,
or the ability of Syms or CRS to perform their respective obligations hereunder.
(c) Performance and Compliance with Credit Agreements. At its expense
timely and fully perform and comply with all material provisions, covenants and
other promises required to be observed by it under Credit Agreements except to
the extent CRS is required to perform such obligations.
(d) Credit Plan and Operating Procedures. Comply in all material respect
with the Credit Plan and Operating Procedures in regard to each Receivable and
Loan and to
14
<PAGE> 15
the extent applicable the related Credit Agreements, provided, however, that
failure to comply with an Operating Procedure not adopted in accordance herewith
or not previously furnished in writing to Syms shall not constitute a breach of
this provision. In the event of any conflict between any Operating Procedures
and any term of this Agreement, the latter shall prevail.
(e) Payment of Taxes, Etc. Pay and discharge, before the same shall
become delinquent, all material taxes, assessments and governmental charges or
levies imposed upon it or upon its property.
(f) Notice of Store Openings and Closings. Provide a notice to CRS of
the opening, closing or acquisition of a Store as soon as possible but in no
event less than 45 days prior to such opening, closing or acquisition, unless
such opening, closing, or acquisition is confidential. In that case, Syms will
use best efforts to communicate with CRS as soon as practical thereafter. In
addition, at least once each fiscal year, Syms shall advise CRS of its future
plans with respect to Store openings, acquisitions and closings.
(g) Records. Retain and make available to CRS on request all Charge
Slips, Credit Adjustment Slips, and other Records necessary to substantiate the
existence, validity and amount of each Loan and Account.
SECTION 6.02. Reporting Requirements of Syms. Until Syms or its designee
has paid to CRS the purchase price of the Final Receivables or all the
Receivables have been collected or written off by CRS, Syms will, unless CRS
shall otherwise consent in writing, furnish to CRS or its affiliate:
(a) as soon as available and in any event within 90 days alter the end
of each fiscal year of Syms, the consolidated balance sheets of Syms and its
subsidiaries as of the end of such year and related statements of income and
retained earnings and cash flow statements for such year, certified by
nationally recognized independent public accountants;
(b) promptly after the sending or filing thereof, copies of all annual
and quarterly reports which Syms files with the Securities and Exchange
Commission; and
(c) promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the conditions or operations,
financial or otherwise, of Syms as CRS may reasonably from time to time request
in order to protect its interests under or contemplated by this Agreement.
SECTION 6.03. Negative Covenants of Syms. Until Syms or its designee has
paid to CRS the purchase price of the Final Receivables or, all the Receivables
have been collected or written off by CRS, Syms will not, without the prior
written consent of CRS (which consent shall not be unreasonably withheld):
(a) Sales, Liens, Etc. Sell, assign (by operation of law or otherwise)
or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or
with
15
<PAGE> 16
respect to, any Loan, Receivable or related Credit Agreement, or upon or with
respect to any account to which any proceeds of any Receivable are sent, or
assign any right to receive income in respect of any thereof.
(b) Change in Business or Charge Plan or Operating Procedures. Make any
change in the character of its business or in the Credit Plan or Operating
Procedures, which change would, in any case, materially impair the
collectibility of any Receivables.
(c) Other Credit Plans. Enter into or suffer to exist any other Syms
owned or operated credit plan in the Stores other than the Credit Plan, except
(i) as provided in Section 7.13, (ii) solely for use in any Stores not primarily
engaged in the sale of retail clothing, (iii) after termination of this
Agreement if Syms does not exercise the option to purchase or have a bank
purchase the Receivables and CRS must collect-out the Receivables Syms may
implement a credit program for its customers, provided (A) such program will not
unreasonably confuse Charge Customers or interfere with or jeopardize the
collectibility of the Receivables, (B) Syms will compensate CRS for any
reasonable added expense due to the implementation of a new credit program
provided a reasonably itemized accounting has been provided therefor, (C) Syms
will not send without CRS's prior written consent (which consent shall not be
unreasonably withheld) any communication to Charge Customers which refers to the
Credit Plan or the new credit program which communication might materially
adversely affect CRS's ability to collect the Receivables, and (D) Syms will not
knowingly solicit any active Charge Customers for new accounts (provided Syms
may accept unsolicited applications from such customers) or use the names,
addresses or any other information regarding such customers in any way without
the prior written consent of CRS.
(d) Introduce a Co-Branded Card. Enter into a co-branded Visa or
MasterCard arrangement without giving CRS or any of its affiliates the right to
substantially and competitively match any other offer made to Syms. In addition,
Syms must be satisfied with the performance of the Credit Plan or the right of
first refusal described in this Section does not exist.
SECTION 6.04. Merger, Etc. Before Syms shall merge or consolidate with
any other entity or sell or transfer substantially all of its assets or capital
to any entity, Syms shall provide to CRS as far in advance as reasonably
possible satisfactory financial information concerning the surviving entity
including the intentions of the parties with respect to the continued operation
of the Credit Plan and, if the other party is in the retail business, at other
stores to be operated by the surviving party, and such other information as
would be appropriate to enable CRS to plan for the continued operation of the
Credit Plan. If in the reasonable judgment of CRS, such transaction will have a
materially adverse effect on Syms financial condition or the financial condition
and operations of the business as it had been conducted by Syms, CRS may at its
option terminate this Agreement on 90 days prior written notice to Syms which
notice shall be given within 60 days after final and complete information is
provided, effective only upon a consummation of the merger, consolidation or
sale. In the event CRS does not elect to terminate, the Agreement shall survive
any such merger or consolidation and in the case of a sale of all or
substantially all of Syms assets, Syms
16
<PAGE> 17
shall require the acquiring or resulting entity to assume in writing this
Agreement and all of Syms obligations and duties hereunder and enter into a
supplementary agreement with CRS, reasonably satisfactory to CRS, which (if
mutually agreed on by CRS and the surviving party) will specify the extent to
which this Agreement will apply to any additional stores to be operated by the
surviving party in accordance with Section 7.13 and will be substantially
similar to this Agreement. Notwithstanding the foregoing, this Section 6.04
shall not apply to the sale or transfer of substantially all of Syms' assets to
an affiliate of Syms as long as such affiliate become a party to this Agreement.
ARTICLE VII
OPERATIONS BY CRS AFTER THE CONVERSION DATE
During the period from the Conversion Date until the Termination Date:
SECTION 7.01. Operation of Credit Plan. (a) During the term of this
Agreement, CRS will operate, maintain and promote the Credit Plan for all Stores
subject hereto in a professional manner in all material respects in accordance
with applicable laws and regulations and substantially in accordance with the
Operating Procedures, (including, without limitation, using the customized
letter package currently used by Syms and complying with all applicable Consumer
Credit Laws). However, the Bank may make changes therein from time to time,
effective only upon 30 days prior written notice if such change relates to
providing Records and settlement of Accounts, unless such change would have an
insignificant impact on Syms, in which case CRS shall notify Syms of such change
as soon as practical thereafter. CRS will provide to Syms the services
hereinafter described, provided that CRS will not make a change which will
impose a material additional cost or unreasonable burden on Syms or which is
contrary to any specific provision of this Agreement unless such change is
required by law. In addition, CRS shall not substantially change the billing
methods and calculations used for Charge Customers as of the Closing Date. CRS
will consider and discuss with Syms any requests by Syms to change any of the
Operating Procedures or other aspects of the Credit Plan, but will not be
obliged to put them into effect if they would adversely affect CRS's duties,
responsibilities, costs of operations or the revenue therefrom without the
written consent of CRS which consent will not be unreasonably withheld. Syms
will cooperate with CRS in the operation of the Charge Plan and in developing
and implementing procedures necessary for the operation of the Credit Plan by
CRS. CRS agrees to operate the Credit Plan without using the CRS name to Charge
Customers or potential Charge Customers. CRS shall own the Accounts and shall
bear the credit risk for such Accounts, unless otherwise provided in this
Agreement.
(b) CRS will operate the Credit Plan with respect to each Store opened
by Syms from the opening thereof subject to Sections 6.03(c) and 7.13, provided
CRS receives the minimum notice required by Section 6.01(g) otherwise from the
earliest practicable date following the opening of the Store and further
provided that CRS may decline to operate the Credit Plan with respect to a new
Store until such time as CRS receives notice of such Store opening if (i) Syms
fails to provide any notice to CRS or
17
<PAGE> 18
its affiliate of the store opening or (ii) if such Store will not be operated as
a typical Store (which means a retail store engaged primarily in the retail sale
of family clothing and accessories or other similar goods).
SECTION 7.02. Charge Customer Documents: Application Processing
Services. (a) CRS will provide Syms at CRS's expense with appropriate quantities
of Credit Plan applications, disclosure statements, temporary cards, take-one
application dispensers, Charge Slips, Records, and other documents necessary to
carry out the Credit Plan all of which shall become the property of Syms upon
delivery to Syms subject to Syms obligation to use them only in accordance with
the terms of the Agreement. CRS shall supply credit cards to all new Charge
Customers, shall re-issue credit cards to existing Charge Customers if
necessary, and shall honor all requests by existing Charge Customers for
replacement or additional cards, as well as providing all change-in-terms
notifications. CRS shall supply the carrier forms, welcome letters, Credit
Agreements and envelopes along with such credit cards. CRS shall also supply the
billing statements, the remittance envelopes included with the monthly bill, the
collection letters mailed to delinquent Accounts and the decline letters mailed
to rejected applicants. Credit Plan documents shall prominently display the Syms
trademark or trade name, and Syms shall be responsible for the distribution of
such documents to its Stores.
(b) CRS will provide at its own expense an electronic application
service to the Stores whereby a qualified person can be given a credit line if
the application criteria set out in the Operating Procedures are satisfied. Such
service will be available at the customer service desk and/or certain specified
POS registers during normal Store hours. The qualified person will be able to
purchase immediately utilizing a temporary account identification card together
with additional identification. This temporary account identification will be
good for 30 days and limited to the Store where the account was opened.
(c) CRS shall also process applications from Charge Customers for
increases in such Charge Customer's credit limit.
(d) Syms shall take and transmit to CRS, or its affiliate, Charge Plan
applications and applications for increases in credit limits in each Store at
the customer service desk and shall promptly forward them to CRS.
SECTION 7.03. Credit Standards; Account Pricing; Authorizations; and
Processing of Loans. (a) The credit standards which CRS shall apply to the
processing of Credit Plan applications, the setting of credit limits for Charge
Customers, the processing of applications for increases of credit limits, the
granting of authorizations for Loans, and the solicitation of pre-approved
customers through direct mail and telephone solicitation programs shall be
determined from time to time by CRS, according to its usual and applicable
creditworthy standards, which constitutes proprietary information of CRS. CRS
shall maximize the number of qualified applicants that are approved for credit
under the Credit Plan and shall review periodically its credit standards to
facilitate the highest number of qualified applicants being approved as
possible. In addition, CRS will endeavor to apply substantially the
18
<PAGE> 19
same credit criteria as is applied under the Credit Plan as of December 11,
1995. (Syms has indicated that this current credit criteria has resulted in a
75% credit approval rate for the month of November, 1995.) If such credit
criteria is not made available to CRS, CRS's goal will be to use credit criteria
that is substantially similar to the existing credit criteria. However, as CRS
has the sole credit loss risk, CRS reserves the right to change such credit
criteria from time to time. Charge Customer Account pricing shall be as set
forth in Schedule 4 and may not be amended except upon mutual agreement of the
parties;
(b) No Loan shall be made to a Charge Customer pursuant to the Credit
Plan except in accordance with the loan authorization procedures set forth in
the Operating Procedures. CRS will provide electronic authorization services to
POS registers in each Store and Syms shall configure all POS registers in each
Store so as to have access to such electronic authorization services for Loans
in accordance with mutually acceptable protocols. Such services will be provided
through the communications network selected by CRS. If Syms elects to use any
other means of communication, Syms will give CRS at least 3 months prior notice
of any such proposed change and will absorb all costs of such proposed change
over $.08 per electronic authorization transaction. Such services will be
provided during the hours set forth in the Operating Procedures and, on at least
1 week's notice from Syms, CRS will extend the times for such authorization
services. At the time of each sale to be paid for by a Loan, Syms will prepare a
Charge Slip, and at the time Syms gives a Charge Customer credit for the return
of merchandise, or an adjustment of the price of the merchandise or for any
other reason, with respect to a sale paid for by a Loan, Syms will issue a
Credit Adjustment Slip. All Records will be either on a form to be provided to
Syms in a format agreed upon by CRS and Syms or on a form provided by and
specified by CRS which is compatible with Syms point-of-sale equipment, in each
case subject to Section 7.02. Each day Syms will capture all of the information
on all Records on magnetic records and transmit such information by electronic
data transmission with appropriate summaries to CRS and forward such information
to CRS or its affiliate, all in accordance with the Operating Procedures. CRS
will provide authorization services to Syms via toll-free telephone lines during
Store hours.
SECTION 7.04. Processing of Loans, Refunds and Adjustments. CRS will
maintain and update on a daily basis a master file and other Records of the
Receivables based on information received from Syms with respect to Loans,
credits, adjustments and payments received by Syms.
SECTION 7.05. Billing and Collections. (a) CRS will bill Charge
Customers monthly including amounts owed on the Conversion Date under the GECC
Credit Plan, upon such lawful terms and conditions as CRS shall determine. The
bills will include provisions for payment by mail to Syms and CRS will receive,
process and promptly post such payments to the Accounts. The monthly bill will
instruct the Charge Customers to make all payments to Syms, and CRS shall have
the right to endorse the name of Syms on any and all checks made out to Syms or
other forms of payment received by CRS in the performance of this Agreement and
to deposit them in a Bank account for collection. CRS shall provide all in-house
collection efforts for the Credit Plan. In the event that CRS sues a Charge
Customer to collect a delinquent debt, Syms
19
<PAGE> 20
will cooperate reasonably with CRS in its prosecution of the suit. This Section
shall survive and remain in effect for so long as CRS owns any Receivables.
(b) The parties intend that Charge Customers shall be required to make
all payments by mail to Syms. Syms will not actively solicit or encourage any
Charge Customer to make a payment in any Store but may permit such payments as a
customer convenience consistent with past practice. In accordance with the
Operating Procedures, Syms, upon receiving any payment for an Account, will on
the date of receipt of a check or cash, notify CRS of such payment by electronic
data transmission (including payment date, amount, and account number), and CRS
shall deduct such amount from any amounts due Syms under Section 3.03.
(c) CRS assumes all obligations under the Credit Plan Agreements
relating to Receivables owned by CRS excluding obligations express or implied
with respect to the quality of the merchandise financed under such agreements.
SECTION 7.06. Customer Service. (a) CRS and Syms agree to cooperate in
rendering good customer service including, but not limited to, maintaining Syms
current practice of answering the phones, responding to written and telephone
inquiries and complaints concerning Loans, returns, adjustments, credits, bills,
payments, collections and other matters (collectively "Inquiries and
Complaints"). CRS shall provide toll free telephone numbers for use by the
Charge Customers. CRS will answer 80% of all customer service calls from Charge
Customers within 30 seconds. CRS agrees to respond quickly to all Charge
Customers Inquiries and Complaints received by it and to make all necessary
adjustments in such Charge Customer's account to correct errors and as required
by law and good business practice.
(b) Syms agrees to promptly forward to CRS or its affiliate all written
Inquiries and Complaints directed to it, and to provide CRS with any information
relating to each such Inquiry or Complaint including Merchandise Complaints as
CRS may request.
(c) CRS will promptly forward all Merchandise Complaints which CRS
receives to Syms. Syms shall respond to and resolve all Merchandise Complaints
promptly in accordance with the Operating Procedures and within the time period
required by law. Syms will notify CRS of action taken with respect to
Merchandise Complaints received by CRS and will provide a summary monthly of
action taken with respect to all Merchandise Complaints.
(d) Syms is authorized to accept returns of merchandise and credit the
Accounts of Charge Customers making such returns. Syms will pay and/or credit
CRS the amount of credits made to Accounts by reason of such returns. Syms shall
notify CRS of any such credit made to a Charge Customer Account.
(e) CRS will exercise all reasonable efforts to mail a new card to each
Charge Customer in good standing within 5 days of notice from such Charge
Customer who reports a lost or stolen card, provided the loss was not caused by
the negligence of the Charge Customer.
20
<PAGE> 21
(f) CRS will provide customer service to Charge Customers at the
following times: Monday-Saturday (other than Holidays) 8:00 A.M. - 12:00
midnight ET. The automated voice response unit is available 24 hours a day for
customer inquiries, excepting a one half-hour period during the early morning
hours.
(g) If Syms fails to reply to the Charge Customer or to advise CRS as
aforesaid, Syms will reimburse CRS for any loss of principal, interest and
penalties (if any) resulting from any failure to make a timely reply to the
Charge Customer.
(h) Subject to Syms approval, CRS shall have the right at its own
expense to mail surveys in order to determine Charge Customer satisfaction with
the Credit Plan as CRS deems appropriate.
SECTION 7.07. Mailing Labels; Syms Stuffers. CRS will, upon 30 days'
advance notice, provide Syms mailing labels addressed to all Charge Customers
for a charge of $9.00 per thousand labels or a computer tape containing the
names and addresses of all Charge Customers for no charge. CRS will include in
each regular monthly mailing to Charge Customers up to seven inserts of such
promotional materials as Syms shall deliver to CRS or its affiliate reasonably
prior (but in no case less than 10 days prior) to such mailing, provided that
such materials conform with industry standards or can be inserted into CRS's
mailing envelope by CRS's equipment and CRS has been notified of such mailing at
least 30 days in advance of such mailing (60 days if such mailing is targeted to
selected groups of Charge Customers). Such promotional materials shall be for
goods and services for which the Credit Plan may be utilized. Syms will pay to
CRS any increase in the cost of postage for such mailing. CRS will print on
billing statements such messages with respect to Syms business and/or the Credit
Plan as Syms shall reasonably request within 30 days prior to mailing, to the
extent that space is available after providing for legal notices and delinquency
and collection notices (but CRS may exclude such messages from statements for
delinquent accounts). Any reference in such mailings to CRS or any of its
affiliates or any term or condition of credit shall be subject to the prior
written approval of CRS, which shall not be unreasonably withheld. Information
concerning Charge Customer names and addresses shall not be used by Syms or CRS
or by any independent contractors of CRS or Syms nor shall Syms or CRS permit it
to be used in any way connected to any other credit plan including post
termination credit plans except as may be permitted under Section 6.03(c) or
9.02(a).
SECTION 7.08. Offerings of Third-Party Goods and Services. (a) With the
prior written consent of Syms, CRS may offer to the Charge Customers goods and
services of any party provided that such goods and services are not competitive
with the goods and services offered by the Stores and the material clearly
identifies the offeror in a way that will not lead the Charge Customer to
believe that Syms is the offeror. CRS may mail such offerings to the Charge
Customers in separate envelopes or include them with any regular monthly mailing
to Charge Customers. Syms shall receive 50% of any net revenue that CRS may
receive from these third party goods and services.
21
<PAGE> 22
(b) CRS expressly has not assumed and does not assume any obligations
with respect to agreements between either Syms or GECC and third-party vendors,
and CRS shall have no obligation to Syms or GECC to perform any obligations of
Syms or GECC under any such agreement.
SECTION 7.09. Promotion of the Charge Plan. (a) Syms will maintain the
availability of the Credit Plan at all Stores and generally promote and
publicize it at least to the same extent that it promotes and publicizes the
most favored other credit card plan such as VISA or Mastercard accepted at the
Stores. In any advertising or promotional mailing in which Syms mentions or
promotes any credit plan accepted by it (except an advertisement or occasional
promotional mailing paid for in whole or substantial part by the operator of a
credit plan), Syms will mention or promote the Credit Plan with at least
substantially equal prominence. Wherever Syms displays the acceptance decal,
take-one boxes or other promotional material of any other credit plan, Syms will
display the comparable material of the Credit Plan with at least substantially
equal prominence. Syms shall take reasonable efforts to assure that employees of
Syms shall promote the Credit Plan as the preferable charge plan. All references
to CRS or the Credit Plan which refer to the specific terms of the Credit Plan
must be approved by CRS. After the Conversion Date, Syms will not accept any new
charges under the GECC Credit Plan and will not permit any other consumer credit
plan (with or without a credit card) to utilize any trademark or trade name
commonly utilized by Syms except to the extent such plan shall be permitted by
Section 6.03(c), 7.13 or 9.02(a).
(b) CRS will develop and execute only with Syms approval marketing
programs to market the Credit Plan to consumers residing in the areas served by
the Stores. The details of each such marketing program will be presented to Syms
in advance for its review, input and approval. CRS and Syms will each contribute
$50,000 during the first Contract Year to a marketing fund in order to promote
the Credit Plan. For subsequent Contract Years, the parties shall agree upon
what amounts may be contributed to the marketing fund. Syms can develop and
execute marketing programs for the Credit Plan without obtaining CRS approval,
but will provide notification to CRS if such marketing programs will have a
material impact on CRS.
(c) CRS shall at its expense promote the Credit Plan by (i) providing
appropriate signage (including listings of different credit cards accepted) and
take-one boxes, which Syms shall strategically place in its Stores subject to
the Credit Plan all of which become the property of Syms upon delivery, and (ii)
developing easy to understand training materials on the operation of the Credit
Plan and providing training programs for sales and service personnel to
encourage support of the Credit Plan.
SECTION 7.10. Meetings. CRS and Syms agree to use their best efforts to
meet periodically to discuss the operations hereunder and to discuss and share
information, including, without limitation, (i) the location, type and volume of
total sales, Loans, and sales under any other credit card plans accepted in the
Stores, and (ii) any promotional programs or other activities designed to
increase Net Loans.
22
<PAGE> 23
SECTION 7.11. Reports. CRS shall furnish reports to Syms on a monthly
basis in the form of the Report Forms, unless a different frequency shall be
specified in the applicable Report Form.
SECTION 7.12. Acquisitions. (a) Whenever Syms proposes (whether
directly or through a subsidiary, through merger with or purchase of another
company, chain or individual Stores, or through the opening of new stores) to
operate Stores not then served by the Credit Plan, Syms will keep CRS fully
informed as to its plans for such change in order to allow CRS to make
preparations (i) to service such additional Stores, customers or business under
the existing Credit Plan, or (ii) to establish a new Credit Plan for such
additional Stores, customers or business, or (iii) to the extent permitted under
the applicable agreements, to take over and service as a Credit Plan hereunder
any existing private label credit program serving such Stores, customers or
business if such plan is acquired by Syms each to the extent provided below.
(b) If such Stores do not have a credit card program which is utilized
primarily in such Stores at the time of acquisition, and (i) if such Stores are
Stores selling merchandise generally similar to that currently sold by Syms, CRS
and Syms will as soon as reasonably practicable make the Credit Plan available
in such Stores to those customers who become Charge Customers in accordance with
the terms of this Agreement, but (ii) if such Stores are not similar Stores CRS
shall have the option, by notice to Syms within 30 days after all of the
relevant information concerning such Stores is provided to CRS, to treat such
Stores as provided in clause (i) and if CRS gives such notice both CRS and Syms
shall be obliged to do so.
(c) If such Stores have a credit card program which is utilized
primarily in such Stores at the time of acquisition [and if such Stores are
similar Stores], CRS (with Syms cooperation and assistance) will enter into
negotiations to purchase the Receivables, credit agreements, records and other
assets of such credit card program and to terminate any service or operating
contract relating to such program. If such purchase and termination can be
arranged at a price satisfactory to CRS and such program can be converted into a
part of the Credit Plan at a cost satisfactory to CRS, and without adversely
affecting Syms, CRS will notify Syms that it has elected to purchase and convert
such program, and upon completion of such purchase and conversion such Stores
shall be Stores as defined herein and eligible participants in such program will
become Charge Customers as defined herein.
(d) If CRS fails to give the notice referred to in subsection (c) above
to Syms within 30 days after the acquisition of the Stores, Syms may continue to
utilize and promote such program at the acquired Stores, subject to the
following sentence. If CRS shall notify Syms within 30 days after the
acquisition of such Stores that it was unable to arrange the purchase,
termination and conversion of such program primarily because of its inability to
negotiate the termination of a service or operating contract relating to such
program at a cost satisfactory to CRS, Syms shall keep CRS advised of its
prospective expiration or termination, and shall not renew or extend such
contract until CRS has had a reasonable opportunity, prior to such expiration or
termination to again negotiate to purchase the Receivables, credit agreements,
records and other assets of such program; if such purchase can then be arranged
at a price satisfactory to CRS
23
<PAGE> 24
and the program can then be converted into a part of the Credit Plan at a cost
satisfactory to CRS and without adversely affecting Syms, CRS shall give the
notice referred to in the last sentence of subsection (c) above with the same
effect. If such purchase cannot be arranged, then Syms may renew or extend such
servicing or operating contract.
SECTION 7.13. Store Closings. (a) As of the Closing Date, Syms financial
strength is as good as any other similar company in the retail industry. Their
operating income is strong. This is the type of high-quality company that CRS
likes to do business with.
(b) The provisions of this Section 7.13 shall only apply if more than
five Stores (excluding Store relocations) close within any six month period
("Closed Stores"). At the end of each month, CRS shall calculate the Receivables
associated with such Closed Stores as a percentage of total Receivables
associated with the Credit Plan. (The Closed Store Receivable is the total
balances on Accounts where the most recent purchase was made in a Closed Store.
If a Charge Customer that purchased in a Closed Store subsequently purchases in
an open Store, the Account will be removed from the Closed Store Receivables.)
If the above percentage is greater than 10%, then the loss rate for the Closed
Store Receivable is calculated. If this loss rate is higher than the loss rate
for the entire Credit Plan, the difference between this Closed Store loss rate
and the Credit Plan loss rate is multiplied by the Closed Store Receivable to
determine incremental losses, and Syms shall pay this amount to CRS within 30
days of written notification. If Syms is required to make any payment under this
Section 7.13(b), then the calculation of Closed Store Receivables as a
percentage of total Receivables shall occur each month until the loss rate
associated with such Closed Stores is less than 10%. At such time, the
provisions of this Section 7.13(b) shall cease to apply until the next time Syms
Closed Store Receivables as a percentage of total Receivables is greater than
10%.
(c) If Syms closes 10 or more Stores (excluding Store relocations) in
any 12 month period CRS shall have the right to terminate the Credit Plan with
120 days prior written notice.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Termination on Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Syms or CRS shall fail to make any material payment due hereunder
for a period of 10 days after notice thereof from the other;
(b) Syms or CRS shall fail to comply in any material way with any of
their respective obligations contained herein for a period of 30 days after
notice from the other;
24
<PAGE> 25
(c) Any representation or warranty made by Syms or CRS herein or in any
document delivered pursuant hereto shall have been or shall be incorrect in any
material respect and/or material amount (as the case may be) when made or deemed
made and has not been cured for a period of 30 days after notice from the other;
provided that incorrect representations and warranties by Syms with respect to
Receivables aggregating less than 5% of the Receivables then owned by CRS will
not constitute an Event of Default if Syms reimburses CRS for such Receivables
if required to do so by Section 3.04; or
(d) Syms or any of its subsidiaries or CRS or any of its parent
corporations shall generally not pay its debts as such debts become due unless
either party has a serious good faith dispute with such debts, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against Syms or any of its subsidiaries or CRS or any of its parent
corporations seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property;
then (i) if any Event of Default with respect to Syms shall occur and be
continuing CRS may, at its option, and (ii) if any Event of Default with respect
to CRS shall occur and be continuing Syms may at its option, at any time by
notice to the other cause this Agreement to be terminated on the date specified
in such notice. Upon any such termination, the terminating party shall have, in
addition to all other rights and remedies under this Agreement or otherwise, all
other rights and remedies provided under other applicable laws, which shall be
cumulative.
ARTICLE IX
TERMINATION AND PURCHASE OPTION OR COLLECT-OUT OF
RECEIVABLES
SECTION 9.01. Term; Termination. This Agreement shall remain in effect
until the effective date (the "Termination Date") on which this Agreement is
terminated by one of the parties hereto pursuant to this Section, Section 6.04,
or Section 8.01. Either party may terminate this Agreement effective on the last
day of the fifth Contract Year or thereafter at the end of each subsequent fifth
Contract Year, by giving written notice to the other party not less than ninety
(90) days prior to such Termination Date.
SECTION 9.02. Option to Purchase Receivables. (a) In the event of
termination by either party, Syms shall have the option to purchase or to cause
another bank to purchase from CRS, on the Termination Date or such other date
as the parties may agree upon (the "Purchase Date"), all of the Receivables,
other than the Receivables set forth in Schedule 3, on the day prior to the
Purchase Date (the "Final
25
<PAGE> 26
Receivables"). Syms shall do this by giving irrevocable written notice of
exercise of this option to CRS or its affiliate, (i) not less than ninety days
prior to the Termination Date if terminated pursuant to the last sentence of
Section 9.01 (except that Syms shall have an additional 10 days if CRS is the
one terminating), (ii) two months prior to the Termination Date if terminated
pursuant to Section 6.04, (iii) together with any notice of termination given by
Syms under Section 8.01, (iv) within 10 days after the giving of the notice of
termination by CRS under Section 8.01 or (v) within ten days of receiving notice
of termination pursuant to Section 7.13. Upon the giving of such notice of
exercise, CRS shall be obligated to sell and Syms shall be obligated to cause
the designated bank to purchase in accordance with the terms of this Section.
The purchase price shall be equal to the amount of the Final Receivables as of
the close of business on the day prior to the Purchase Date.
(b) In connection with any such purchase CRS may elect to refund all
credit balances in cash in lieu of credit for the amount thereof assumed by the
purchaser. The purchase price shall be payable in full on the Purchase Date in
same day funds by wire transfer to an account of CRS at Citibank, N.A. against
delivery by CRS of an assignment of all of its right, title and interest in and
to the Accounts, Receivables, Credit Agreements and credit cards and all Records
and other data obtained in connection with the operation of the Credit Plan or
otherwise pursuant to this Agreement, without recourse and without warranty of
any kind except that the amounts of the Final Receivables are correct, based
(except for finance charges) upon information provided by Syms and that the
assets so conveyed are the property of CRS free and clear of any Adverse Claim
arising out of any act or omission of CRS. In the event Syms purchases or causes
another bank to purchase the Final Receivables, the names, addresses and credit
histories of the Charge Customers and, if CRS is the owner, the credit
standards, except for proprietary credit scores, used by CRS in evaluating
applications for credit under the Credit Plan shall be included among the assets
conveyed to such purchaser and shall be the exclusive property of the purchaser
after the Purchase Date. The purchaser shall not be entitled to set off against
the purchase price any disputed claim it or Syms may have against CRS for
damages, and CRS shall not be entitled to withhold delivery of the assignment on
account of any disputed claim it may have against Syms for damages.
(c) CRS shall cooperate in good faith with the purchaser in transferring
the Final Receivables sold to the purchaser and the operation of the Charge Plan
to the purchaser and shall make available to the purchaser in advance the master
file tape or extracts therefrom and other records necessary to assist the
purchaser in analyzing such Receivables and in establishing its own records for
operations after the Termination Date. On the Purchase Date CRS will deliver one
or more computer tapes containing all of the information normally maintained by
CRS with respect to the assets being conveyed for purposes of billing, credit
review, dunning and collection, and a description of the format in which such
information is recorded on tape, and all of the written records and documents
maintained by CRS with respect to the foregoing, and all unused supplies for the
Credit Plan which do not include the name of CRS. CRS shall be entitled to
retain copies of any of the foregoing only to the extent required by law (after
which such copies shall be destroyed), and CRS shall preserve the
confidentiality of and shall not permit the use of or disclose any documents or
26
<PAGE> 27
information so conveyed, whether for commercial gain or any other purpose. CRS
shall provide such additional cooperation and information as the purchaser shall
reasonably request. Without limitation to the foregoing, CRS shall use good
faith efforts to assist any successor provider to understand the record layout
and file structure of the database and to analyze pertinent account information
and portfolio characteristics and shall provide all access, information,
assistance and documentation that CRS has required or requested of GECC and Syms
in connection with the conversion hereunder (including, without limitation, with
regard to the matters addressed in Article I and II and Schedule 1).
SECTION 9.03. Special Compensation. In the event that Syms does not
elect to purchase or cause a bank to purchase the Receivables, or having so
elected the designated bank does not purchase the Receivables, Syms shall
(unless this Agreement was terminated by Syms under Section 8.01):
(a) compensate CRS to collect-out- the Receivables, upon billing in an
amount equal to: (i) CRS's Net Credit Losses after the termination date, plus
(ii) 110% of CRS's programming, processing, administrative and collection agency
expenses, plus or minus the net of (iii) the actual costs for CRS to fund the
Receivables over the total amount of finance charges CRS assesses to Charge
Customer's each month. If the costs of funds exceeds the finance charges, the
net amount will be added to the above subsection (i) and (ii). If the finance
charges exceed the costs of funds, the net amount will reduce the total of
subsections (i) and (ii).
(b) not take any action which might diminish CRS's ability to collect
the Receivables in full (including but not limited to honoring or otherwise
extending credit on the basis of CRS's cards, utilizing CRS's numbering system
for credit accounts, or issuing new cards or opening new accounts as
replacements for CRS's card or accounts), but this shall not prevent Syms from
introducing a new credit plan for its customers if each customer is required to
apply for a new account and card and provides the usual credit information to
Syms.
SECTION 9.04. Post-Termination Matters. (a) If Syms purchases or causes
a bank to purchase the Receivables, it will cause CRS to assume all of the
duties which CRS may have to the Charge Customers under their Credit Agreements
and all laws and regulations applicable thereto arising after the Purchase Date
and cause CRS to perform them in full compliance with law and good business
practice.
(b) On the Termination Date (regardless of the reason for termination)
all obligations of CRS to Syms to make Loans to Charge Customers or render
services of any kind to Syms, and all obligations of Syms to honor the Charge
Plan or its cards or to render services of any kind to CRS, shall terminate. Any
obligation of either party to the other to make any payment hereunder accrued
prior to or on the Termination Date, or thereafter under Section 9.03 or 10.01,
shall continue in effect.
27
<PAGE> 28
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Indemnification. (a) Syms will indemnify and hold CRS and
its affiliates and their directors, officers, employees and agents harmless from
and against any and all claims, damages, liabilities and expenses (including,
without limitation, fees and disbursements of counsel) which may arise out of or
relate to any Receivable sold to CRS or generated pursuant to the Charge Plan
hereunder or arise by reason of (i) any act or omission by Syms or any of its
directors, officers, employees, or agents which constitutes a failure by Syms to
comply or causes CRS to fail to comply with any law or regulation governing the
transactions or operations contemplated hereby or which violates the personal or
property rights of any third party, or (ii) any sale of goods or services
allegedly financed under the Credit Plan (including any alleged defect therein
or misrepresentation), or (iii) any failure by GECC or Syms to comply fully with
all federal, state and local laws and regulations governing the relationship
between merchant and consumer or between creditor and debtor, including (laws
relating to Truth-In-Lending, credit opportunity, credit reporting, billing, the
correction of billing errors, usury and finance charges) (collectively,
"Consumer Credit Laws") prior to the Conversion Date, except that this indemnity
shall not apply to any failure to perform any duty or function which CRS has
agreed to perform under this Agreement. CRS will indemnify and holds Syms and
its directors, officers, employees and agents harmless from and against any and
all claims, damages, liabilities and expenses (including, without limitation,
fees and disbursements of counsel) which may arise by reason of (i) any act or
omission by CRS or any of its directors, officers, employees, or agents which
constitutes a failure by CRS to comply or causes Syms to fail to comply with any
law or regulation governing the transactions or operations contemplated hereby
(including, without limitation, applicable Consumer Credit Laws) or which
violates the personal or property rights of any third party, (ii) any sale made
by a third party pursuant to Section 7.08(a), or (iii) any claim or complaint
made by a third party in connection with advertisements or promotions that CRS
approved relating to the Credit Plan, except that this indemnity shall not apply
to any failure to perform any duty or function which Syms has agreed to perform
under this Agreement. Each indemnified party shall promptly notify the other
with respect to any claim, damage, liability or expense which may be covered by
this indemnity and permit the indemnifying party to assume the defense thereof,
and such indemnified party will not settle such matter without the approval of
the indemnifying party. An indemnitee's right to indemnification hereunder shall
not be subject to set off for any claims by the indemnitor against any
indemnitee.
(b) Syms will indemnify and hold CRS and its affiliates harmless from
and against any taxes imposed on Syms for which CRS or any of its affiliates may
be held liable as successor to, or transferee of, Syms with respect to the
Credit Plan, for periods (or portions thereof) ending on or prior to the Closing
Date.
28
<PAGE> 29
SECTION 10.02. Amendments. Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by either party therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
party or parties to be bound thereby.
SECTION 10.03. Complete Understanding, Etc. This Agreement incorporates
all of the understanding of the parties with respect to the subject matter and
no representation, warranty or agreement not set forth herein shall be binding
on either party. This Agreement shall be binding upon and inure to the benefit
of Syms and CRS and their respective successors and assigns, except that no
party shall have the right to assign its rights hereunder or any interest herein
without the prior written consent of the other, provided that (i) CRS may assign
its rights hereunder or its interests herein to any affiliated bank, but CRS
shall remain liable to Syms for performance of its duties hereunder by any such
assignee and (ii) Syms may assign its rights hereunder or its interests herein
to any affiliate, but Syms shall remain liable to CRS for performance of its
duties hereunder by any such assignee.
SECTION 10.04. Notices Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing and
mailed (by certified or registered mail return receipt requested or nationally
recognized private courier) or delivered, to Syms at its address at 1 Syms Way,
Secaucus, New Jersey 07094, Attention: Chief Financial Officer with a copy to
Steve Armstrong, Esquire, Paul Hastings, Janofsky & Walker, 1055 Washington
Blvd., Stamford, Connecticut 06905 and to CRS at its address at 245 Old Country
Road, Melville, New York 11747, Attention: President, or at such other address
as shall be designated by such party in a written notice to the other party
hereto. All such notices and communications shall be effective, upon receipt.
SECTION 10.05. No Waiver; Remedies. No failure on the part of any party
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 10.06. Confidentiality. CRS shall keep confidential, during and
after the term of this Agreement, all information and knowledge regarding the
Credit Plan, including all Records and other data relating thereto, and the
policies, plans and operations of Syms, both with respect to the Credit Plan and
to the business of Syms generally, which is communicated to it in confidence by
Syms and is not available to the general public, provided that CRS may make such
information available, as necessary to carry out its obligations hereunder or to
comply with applicable law or regulations, to its directors, officers,
employees, agents, auditors, attorneys and business consultants (who will be
required to preserve the confidentiality of such information), to any regulatory
agency asserting jurisdiction over it, or otherwise as required by law. CRS will
treat such information with the same degree of care that it treats its own
confidential information. This section shall not restrict the rights of CRS to
utilize the names, addresses, credit histories, Records, etc. of Charge
Customers pursuant to Section 7.08 and Section 9.03. This Section 10.06 shall
survive the termination of this Agreement.
29
<PAGE> 30
SECTION 10.07. Coordination of Public Statements. Neither party will
make any public announcement of the Credit Plan or provide any information
concerning the Credit Plan to any representative of any news, trade or other
media, or respond to any inquiry from any public or governmental authority
concerning the Credit Plan without prior consultation and coordination with the
other party.
SECTION 10.08. Status of Parties. It is expressly understood and agreed
between the parties that each party is an independent contractor and that
nothing herein shall be construed as creating a partnership, joint venture, or
agency relationship between the parties hereto and that neither of the parties
shall have the power or authority to bind or obligate the other party.
SECTION 10.09 Audit and Access Rifts. (a) In addition to the other
rights set forth in this Agreement, Syms shall, subject to the confidentiality
provisions set forth in Section 10.06, permit CRS and its designees, and their
respective officers, employees, attorneys, and/or accountants during normal
business hours with reasonable advance notice, in such a manner as to minimize
interference with Syms normal business operations, to examine, inspect, and make
copies of all of the data, records, files, and books of account under the
control of Syms relating to Accounts, Charge Customers, Receivables and all
aspects of the Credit Plan and the transactions contemplated by this Agreement.
Syms shall use commercially reasonable efforts to deliver any document or
instrument necessary for CRS to obtain such information from any person
maintaining records for Syms. Except as otherwise specifically provided in this
Agreement, the cost and expense of any such examinations shall be borne solely
by CRS.
(b) In addition to the other rights set forth in this Agreement, CRS
shall permit Syms and its designees, and their respective officers, employees,
attorneys, accountants and/or other representatives, during normal business
hours with reasonable advance notice, in such a manner as to minimize
interference with CRS's or its affiliate's normal business operations, to
examine, inspect, and make copies of all of the data, records, files and books
of account under the control of Bank or its affiliate relating to Accounts,
Charge Customers, Receivables and all aspects of the Program and the
transactions contemplated by this Agreement. CRS shall use commercially
reasonable efforts to deliver any document or instrument necessary for Syms to
obtain such information from any person maintaining records for CRS. Except as
otherwise specifically provided in this Agreement, the cost and expense of all
such examinations shall be borne solely by Syms.
SECTION 10.11. Waiver of Jury Trial. Notwithstanding anything stated
herein, if either party brings any action against the other party, whether at
law or equity regarding such offer party's performance under this Agreement or
brings any action connected in any way with this Agreement, the parties hereby
waive any right they may now or hereafter possess to a trial by jury.
30
<PAGE> 31
SECTION 11. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SYMS CORPORATION CITICORP RETAIL SERVICES, INC.
By: /s/ MARCY SYMS By: /s/ JOSEPH CERULLO
-------------------------- ---------------------------
Its: President Its: Chief Financial Officer
------------------------- --------------------------
31
<PAGE> 32
SCHEDULE 1
PREPARATION FOR CONVERSION
In preparation for a conversion, information will be required to enable CRS to
execute the conversion and manage the program going forward. These requirements
are expected by third party providers as standard in any changeover.
1. Credit Plan Information. (a) SYMS or GECC will provide CRS or its
affiliate with computer tapes, file layouts, Credit Plan records and the like as
set out more fully in List A. These items of information are required to enable
CRS to convert and service the Eligible Receivables. If such information is not
provided to CRS as often and within the time frames indicated in Attachment A
and CRS determines that the failure to provide such information materially
impairs CRS's ability to convert, CRS may terminate this Agreement and neither
party shall be obligated to the other.
List A
SYMS CONVERSION REQUIREMENTS
Items Frequency*
- --------------------------------------------------------------- ----------
1. File layouts with field definitions and explanations 1X
for all data elements on each file.
2. A complete Masterfile Tape (with control totals.) Multiple
3. Tape(s) for unbilled financial and non-financial trans- Multiple
actions files (with control totals) and corporate program
related files.
4. Deferred transactions and associated detail to provide Multiple
for conversion and billing (with control totals) if any
programs are in effect.
<PAGE> 33
List A
SYMS CONVERSION REQUIREMENTS
(Cont'd.)
Items Frequency*
- ----------------------------------------------------------------- ----------
5. Credit (credit lines and authorizations) aging, curing and 1X
write-off policies.
6. Fiche of customer billing statements for 24 months. If 1X
unavailable, then SYMS/GECC to provide copy of same
upon request.
7. Transaction data: Payment fiche only assuming all sales, 1X
adjustments, media, etc. are held at SYMS and are avail-
able. If payment fiche is not available, then SYMS/GECC
to provide copy of payment upon request.
8. Account number and magnetic stripe structures and 1X
contents.
Note: Once the file contents are reviewed, there may be additional requests for
specific data.
<PAGE> 34
1. Credit Plan Information. (b) SYMS agrees to use its best effort,
including exercising all its rights under the GECC Agreement to supply CRS or
its affiliate with data records and information that is substantially the same
as currently exists on CRS's system (collection, customer service and
authorizations) which records and information is identified in List B. If SYMS
is unable to provide such information, SYMS recognizes that CRS's ability to
service and administer the Credit Plan may be materially affected until such
time as CRS is able to develop sufficient information on its own to be able to
service and administer the Eligible Receivables in accordance with the policies
and procedures and to provide an acceptable level of service. In addition, SYMS
will indemnify CRS against any liability arising by reason of CRS's failure to
comply with any laws governing the relationship with Charge Customers caused by
SYMS inability to provide such information to CRS.
List B
SYMS CONVERSION REQUIREMENTS
Items Frequency *
- ------------------------------------------------------------- -----------
1. All approved and declined applications with correspond- 1X
ing credit reports for the prior 24 months (in machine
readable format.)
2. Open billing inquiries. (Transactions in dispute, etc.) 1X
3. Collection customer documents (such as arrangement 1X
letters, CCCS, etc.)
4. Test tape(s) for: Multiple
a. Collection System (collector notes, etc.)
b. C/S Message Module
c. Outstanding Authorizations
d. On-line Statement File
5. File layouts for above. 1X
6. Purged account file tape with layout (with control totals.) Multiple
7. Credit procedure and policy manuals excluding 1X
proprietary data.
8. Samples of completed credit forms, statements, plastics, etc. 1X
* All with control totals.
<PAGE> 35
1. Credit Plan Information. (c) SYMS will also use its best efforts,
including exercising all its rights under the GECC Agreement to obtain from GECC
the information identified in List C, but shall not be obligated to provide such
information. Notwithstanding the foregoing, if SYMS is unable to provide such
information, SYMS recognizes that CRS's ability to provide an acceptable level
of service may be adversely affected.
List C
SYMS CONVERSION REQUIREMENTS
Items Frequency*
- --------------------------------------------------- ----------
1. Resolved billing inquiries for prior 6 months. 1X
***
2. Credit Criteria. To the extent SYMS may obtain copies thereof after
expending commercially reasonable efforts, SYMS will deliver to CRS copies of
all written Operating Procedures which contain the criteria used by GECC in
determining persons eligible to become Charge Customers and the credit limit of
each such Charge Customer. SYMS or GECC will not, without the prior written
consent of CRS, materially change such criteria nor accept as a Charge Customer
any person who does not meet such criteria nor permit any Charge Customer to
incur receivables in excess of such credit limit (except in each case to the
extent required by law.)
3. Cooperation. SYMS will cooperate and will use commercially reasonable
efforts to cause GECC to cooperate, consult with, and assist CRS or its
affiliate in its examination thereof, and to provide to CRS adequate office
space and facilities for the employees thereof to examine any such records,
including facilities for copying portions thereof, and to provide such summaries
and tabulations as are readily available and as CRS shall reasonably request;
and, except to the extent that transfer of such records would interfere with
SYMS present business operations of SYMS or its obligations hereunder, will
deliver such records as required hereunder to CRS or its affiliate upon request.
<PAGE> 36
4. Conversion of Computer Records. SYMS will deliver to CRS a description
of its cardholder master record layout including all data elements in detail.
CRS will develop a plan for the conversion of such records to CRS's format. SYMS
will deliver to CRS an IBM compatible conversion test tape. SYMS will also
deliver to CRS a computer tape file in a form and format specified by CRS for
the generation of account numbers for GECC Credit Plan accounts. SYMS will also
deliver to CRS a final conversion computer tape containing all data elements and
financial information in the form and format reasonably specified by CRS.
5. Converted Accounts. CRS will establish account records (in accordance
with information supplied by SYMS or GECC) for all Charge Customers (which shall
include all Existing Customers With current Eligible and Ineligible
Receivables.)
6. Payments and Other Correspondence. Unless the parties shall agree upon
an alternative arrangement, SYMS shall make arrangements for the last billing
statements prepared by GECC to direct all Charge Customer payments and other
correspondence relating to the Credit Plan to a GECC controlled Post Office box.
In the event any payments or other correspondence relating to the Credit Plan
are received by SYMS or GECC after the Closing Date, SYMS will automatically
forward or use commercially reasonable efforts to cause GECC to automatically
forward to CRS all such payments and correspondence within one Business Day
without handling or processing by SYMS or GECC.
<PAGE> 37
SCHEDULE 2
INELIGIBLE CUSTOMERS AND INELIGIBLE RECEIVABLES.
This Schedule applies only to the sale of Receivables which are incurred
prior to the Closing Date.
A Charge Customer will be an Ineligible Customer and the Receivables of
such Customer will be Ineligible Receivables if on the Last Billing Date one or
more of the following criteria shall be applicable, whether or not the relevant
facts are then known to GECC, Syms or CRS:
1. The Customer's Account or Receivables is referred to a collection
agency or an attorney for collection.
2. The Customer is a corporation, partnership, or other business entity.
However, CRS reserves the right to purchase such Ineligible Receivables on a
nonrecourse basis if such entity passes an independent credit check. If such
entity does not pass such independent credit check, then CRS will still purchase
such Ineligible Receivable pursuant to Syms' request, but such purchase by CRS
shall be on a recourse basis to Syms.
3. The Customer is deceased.
4. The Customer is under the age of 18 years.
5. The account is designated in any of GECC's records as a "fraud" or
"forgery" account or a "legal status account" or any similar designation.
6. Proceeding under Bankruptcy Code or any other law for the relief of
debtors or for the custody of the property of incompetents have been commenced
by or against the Customer and are pending.
7. The Customer's Account does not contain a valid mailing address for
such Customer.
8. Any Receivable or any portion of which is more than 180 days past due
as of the Last Billing Date.
<PAGE> 38
SCHEDULE 3
With respect to the following Receivables, Syms or any other financial
institution on behalf of Syms is not obligated to purchase such Receivables on
the Purchase Date set forth in Section 9.02.
1. The Customer's Account or Receivable is referred to a collection
agency or an attorney for collection.
2. The Customer is a corporation, partnership or other business entity.
However, if CRS purchased such Receivables pursuant to Schedule 2, No. 2, then
the purchaser shall be obligated to purchase such Receivables.
3. The Customer is deceased.
4. The Customer is under the age of 18 years.
5. The Account is designated in any of CRS's records as a "fraud" or
"forgery" account or a "legal status account" or any similar designation.
6. Proceeding under Bankruptcy Code or any other law for the relief of
debtors or for the custody of the property of incompetents have been commenced
by or against the Customer and are pending.
7. The Customer's Account does not contain a valid mailing address for
such Customer.
8. Any Receivable or any portion of which is more than 180 days past due
as of the Last Billing Date.
<PAGE> 39
Schedule 4
SYMS PRICING
RATES BY STATE
STATE CRS RATE
CT 18%
FL 18%
GA 18%
IL 18%
MA 18%
MD 18%
MI 18%
MO 18%
NC 18%
NJ 18%
NY 18%
OH 18%
PA 18%
RI 18%
TX 18%/12% @ $2150
VA 18%
<PAGE> 1
EXHIBIT 21
LISTING OF SUBSIDIARIES:
Syms Advertising, Inc.
SYI, Inc.
SYL, Inc.
Generic Products Inc.
The Rothchilds Haberdashery Ltd.
Syms Clothing Inc.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
2-85554 of Syms Corp and Subsidiaries on Form S-8 of our report dated May 9,
1996, appearing in the Annual Report on Form 10-K of Syms Corp for the fiscal
year ended March 2, 1996.
Deloitte & Touche LLP
New York, New York
MAY 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-02-1996
<PERIOD-END> MAR-02-1996
<CASH> 4,804
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 112,954
<CURRENT-ASSETS> 126,500
<PP&E> 193,646
<DEPRECIATION> 64,411
<TOTAL-ASSETS> 260,144
<CURRENT-LIABILITIES> 50,979
<BONDS> 1,304
0
0
<COMMON> 885
<OTHER-SE> 206,484
<TOTAL-LIABILITY-AND-EQUITY> 260,144
<SALES> 334,750
<TOTAL-REVENUES> 334,750
<CGS> 217,561
<TOTAL-COSTS> 217,561
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293
<INCOME-PRETAX> 17,645
<INCOME-TAX> 7,234
<INCOME-CONTINUING> 10,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,411
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
</TABLE>
