As filed with the Securities and Exchange Commission on November 17, 1997.
Registration No. 333-38711
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------
SYMS CORP
(Exact name of Registrant as specified in its charter)
----------
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
----------
22-2465228
(I.R.S. Employer Identification No.)
----------
SYMS WAY
SECAUCUS, NEW JERSEY 07094
(201) 902-9600
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
----------
SY SYMS
SYMS WAY
SECAUCUS, NEW JERSEY 07094
(201) 902-9600
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent for Service)
Copy to:
MATTHEW J. MALLOW, ESQ. STEPHEN H. COOPER, ESQ.
SKADDEN, ARPS, SLATE, WEIL, GOTSHAL & MANGES LLP
MEAGHER & FLOM LLP 767 FIFTH AVENUE
919 THIRD AVENUE NEW YORK, NEW YORK 10153
NEW YORK, NEW YORK 10022 (212) 310-8000
(212) 735-3000
----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
----------
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED MAXIMUM AMOUNT OF
TITLE OF AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE (1)(2) FEE
- --------------------------------------------------------------------------------
Common Stock, $.05 par value ............... $51,439,500 $15,588
================================================================================
(1) Estimated for the sole purpose of computing the registration fee.
(2) Calculated pursuant to Rule 457(c) based on the average of the high and
low prices of the Common Stock on the New York Stock Exchange on October
21, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1997
PROSPECTUS
3,500,000 SHARES
SYMS CORP
COMMON STOCK
All of the shares of Common Stock of Syms Corp (the "Company") offered
hereby will be sold by the Sy Syms Foundation and Sy Syms. See "Principal and
Selling Stockholders." The Company will not receive any proceeds from the sale
of the Common Stock offered hereby.
The Common Stock is listed on the New York Stock Exchange under the symbol
"SYM." On October 23, 1997 the last sale price of the Common Stock as reported
on the New York Stock Exchange Composite Tape was $13.06. See "Price Range of
Common Stock and Dividend Policy."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
- --------------------------------------------------------------------------------
Per Share ..................... $ $ $
Total(3) ...................... $ $ $
================================================================================
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $__________ payable by the Selling
Stockholders. The Company's expenses in connection with this offering are
estimated at $__________.
(3) Certain Selling Stockholders have granted to the Underwriters a 30-day
option to purchase up to 525,000 additional shares of Common Stock solely
to cover over-allotments, if any. If the option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Selling Stockholders will be $__________, $__________ and $__________ ,
respectively. See "Underwriting."
----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify the offer and to reject orders in whole or in part. It is expected
that delivery of the shares will be made against payment thereof on or about
__________________, 1997, at the offices of Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York.
----------
BEAR, STEARNS & CO. INC. SALOMON BROTHERS INC
----------
The date of this Prospectus is __________________, 1997
<PAGE>
[GRAPHICS PAGE]
AN EDUCATED CONSUMER IS OUR BEST CUSTOMER(R) [SYMS LOGO]
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. SEE "UNDERWRITING."
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at the offices of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7
World Trade Center, New York, New York 10048. Copies of such materials can also
be obtained by written request to the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates, and can be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed a Registration Statement under the Securities Act
with the Commission with respect to the Common Stock offered hereby. This
Prospectus, which constitutes part of the Registration Statement, omits certain
of the information contained in the Registration Statement and the exhibits
thereto on file with the Commission pursuant to the Securities Act and the rules
and regulations of the Commission. Statements contained in this Prospectus such
as the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. A copy of
the Registration Statement, including the exhibits thereto, may be inspected
without charge at the Commission's principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and copies of all or any part thereof
may be obtained from the Commission upon the payment of certain fees prescribed
by the Commission. The Commission also maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission. The address of the site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
March 1, 1997.
2. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended May 31, 1997 and August 30, 1997.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus. The Company hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a copy of this Prospectus has
been delivered, upon written or oral request of such person, a copy of any or
all of the foregoing documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Requests for such documents should be
submitted to the Chief Financial Officer of the Company, at the Company's
principal executive offices, which are located at Syms Way, Secaucus, New Jersey
07094 (telephone: (201) 902-9600).
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "COMPANY" AND
"SYMS" REFER TO SYMS CORP AND ITS SUBSIDIARIES. REFERENCES HEREIN TO "COMMON
STOCK" ARE TO THE COMMON STOCK, $.05 PAR VALUE, OF THE COMPANY.
THE COMPANY
Syms operates a chain of forty "off-price" retail apparel stores located
throughout the Northeastern and middle Atlantic regions and in the Midwest,
Southeast and Southwest. The Company's stores feature a wide selection of first
quality, in-season merchandise, bearing nationally-recognized designer or brand
name labels, all of which is offered at prices substantially below those
generally found in department and specialty stores. The Company's merchandise
consists principally of men's tailored clothing and haberdashery and women's
dresses, suits, separates and accessories. For the fiscal year ended March 1,
1997, the Company had net income of approximately $19.1 million on net sales of
approximately $346.8 million, of which over 99% was generated by the sale of
designer and brand name merchandise.
Syms merchandising is predominantly directed toward middle- and
upper-income, fashion-minded and price conscious shoppers and is symbolized by
its widely-recognized slogan: "An Educated Consumer is Our Best Customer." The
Company's stores have a "no frills" atmosphere in order to emphasize Syms focus
on everyday low prices and exceptional value, although the Company's
merchandising approach is to be the off-price equivalent of an upscale specialty
store. For example, the Company is unique among off-price retailers in offering
its customers a relatively high degree of service, including sales associates
(called "Educators") to assist with merchandise selection and sizing and the
convenience of in-store alterations.
The Company is able to consistently offer merchandise at prices
substantially below those found at traditional department and specialty stores
as a result of its substantial purchasing volume and opportunistic and
disciplined buying practices. The Company always seeks the lowest possible price
from its vendors, rather than the special allowances, return privileges and
delayed delivery terms sought by most traditional retailers. Syms ability to
purchase at discounted prices is aided, in many cases, by the Company's
longstanding relationships with its vendors, many of whom have come to view the
Company as an effective and dependable channel for reducing their excess
inventories without compromising brand image.
Syms continues to expand the breadth of its merchandise selection and the
number of designer labels and brand names (currently more than 200) carried in
its stores. Men's and women's apparel accounted for 54% and 31%, respectively,
of the Company's net sales in fiscal 1997. The Company makes a special effort to
consistently carry a wide range of sizes in menswear and women's apparel, with
no pricing differential for special sizes. The Company's stores also carry
children's apparel, accessories (such as hosiery, underwear and sleepwear),
men's, women's and children's shoes, and luggage and smaller leather goods. The
Company believes it offers a wider range and quantity of merchandise in more
styles and sizes than any other off-price retailer.
In 1959, Syms opened its first store, containing 1,600 square feet, in
downtown New York City. Today, the Company's forty stores average 38,400 square
feet of selling space and are found in 28 cities in 16 states, representing 22
radio and television advertising markets. The Company has recently embarked on a
five-year, 19 store expansion program intended to increase its penetration of
various markets in which it currently has a retailing presence and to enter new
markets in Los Angeles, San Francisco, Seattle and Toronto that it does not
currently serve. It is the Company's goal to have at least two stores in each
market that it currently serves with a population greater than two million.
Accordingly, the Company plans to open a second store in suburban Atlanta in
November 1997 and a second store in suburban Detroit in June 1998. Additional
suburban stores are planned for Baltimore, Houston, Miami and New York. The
Company also plans to open center-city stores in Boston, Chicago and Washington,
D.C., where it currently has only a suburban presence.
4
<PAGE>
THE OFFERING
Common Stock to be offered ................ 3,500,000 shares, all of which will
be sold by the Sy Syms Foundation
and Sy Syms.
Common Stock to be outstanding after the
offering ................................ 17,807,890 shares, of which
8,760,136 shares will be held by
the public and 9,044,054 shares
will be held by Sy Syms and members
of the Syms family. (See "Principal
and Selling Stockholders.")(1)
New York Stock Exchange symbol ............ SYM
- ----------
(1) Assumes that the over-allotment option granted to the Underwriters is not
exercised.
5
<PAGE>
SUMMARY FINANCIAL DATA
In 1995, the Company changed its fiscal year end to the Saturday nearest to
the end of February. Prior thereto, the Company's financial statements were
prepared on the basis of a 52-week or 53-week fiscal year ending on the Saturday
closest to the end of December. The following summary income statement and
balance sheet data, other than the data for the interim periods ended August 31,
1996 and August 30, 1997, are derived from the Company's audited financial
statements. All of the financial data presented below should be read in
conjunction with the consolidated financial statements and related notes, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWENTY-SIX
FISCAL YEAR ENDED WEEKS ENDED
---------------------------------------------------------------- ---------------------
(UNAUDITED)
JANUARY 2, JANUARY 1, DECEMBER 31, MARCH 2, MARCH 1, AUGUST 31, AUGUST 30,
1993 1994 1994 1996(1) 1997 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ............................ $319,623 $318,939 $326,651 $334,750 $346,792 $158,505 $164,239
Gross profit ......................... 105,161 103,423 108,739 117,189 133,679 56,589 64,444
Income from operations ............... 25,635 18,839 14,429 17,938 33,839 8,570 12,948
Income before income taxes ........... 25,176 19,082 14,370 17,645 33,742 8,534 12,707
Net income ........................... 15,148 10,847 8,491 10,411 19,065 4,822 7,496
Net income per share ................. $0.86 $0.61 $0.48 $0.59 $1.08 $0.27 $0.42
Weighted average shares
outstanding ......................... 17,690 17,690 17,694 17,694 17,694 17,694 17,739
OTHER DATA:
Gross profit margin .................. 32.9% 32.4% 33.3% 35.0% 38.5% 35.7% 39.2%
Operating income margin .............. 8.0 5.9 4.4 5.4 9.8 5.4 7.9
Depreciation and amortization ........ $ 7,747 $ 7,446 $ 8,854 $ 7,751 $ 7,971 $ 3,830 $ 4,290
Capital expenditures ................. 6,713 17,508 14,591 4,777 21,709 12,716 6,792
Number of stores at end
of period ........................... 29 34 39 38 40 39 40
BALANCE SHEET DATA:
Working capital ...................... $ 61,338 $ 59,871 $ 59,918 $ 75,521 $ 78,228 $ 70,425 $ 84,102
Total assets ......................... 204,071 221,152 245,385 260,144 284,018 289,102 306,114
Long-term debt (including
capitalized leases) (2) ............. 2,209 1,974 1,696 1,304 900 1,111 670
Stockholders' equity ................. 180,625 190,605 197,341 207,369 226,434 212,191 234,657
</TABLE>
- ----------
(1) Fiscal year 1996 was comprised of fifty-three weeks.
(2) Excludes current maturities.
6
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements herein other than statements of historical fact, including, without
limitation, the statements under "Prospectus Summary--The Company,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business--Expansion Program"
regarding the Company's expansion plans, liquidity and capital requirements, are
forward-looking statements. Although management believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that those expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from management's
expectations ("Cautionary Statements") are disclosed in this Prospectus,
including, without limitation, under "Investment Considerations" below. All
written and oral forward-looking statements by or attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by those
Cautionary Statements.
INVESTMENT CONSIDERATIONS
In evaluating the proposed purchase of Common Stock, investors should
carefully consider all of the information in this Prospectus and, in particular,
the following factors:
CHANGING NATURE OF THE APPAREL RETAILING INDUSTRY
The apparel retailing industry has undergone substantial contraction in
recent years, with the closing of more than thirty major retail chains and
significant consolidation among remaining retailers. According to Dun &
Bradstreet's Business Failure Record, over 9,500 retail apparel and accessories
stores closed or failed in the United States between 1991 and 1995. This period
was characterized by intensified competition, reduced consumer spending and
price deflation, all of which resulted in severe pressure on retailers'
operating margins, including those of the Company. Although the Company believes
that conditions have improved during the past two years, during which the
Company's net income improved following three years of decline, there can be no
assurance that the Company will be able to sustain the levels of sales and
operating margins necessary for continuing growth.
RELATIONSHIPS WITH VENDORS
The Company is currently purchasing first-quality, in-season designer and
brand name merchandise from more than 1,200 vendors at prices below those
generally available to major department and specialty stores. Although the
Company has maintained long-term business relationships with many of these
vendors, there can be no assurance that it will be able to continue to purchase
first-quality, in-season merchandise from these vendors in the same breadth of
styles and sizes, in the same or greater volumes and at prices as favorable as
those currently available to the Company.
EXPANSION PROGRAM
The Company's proposed expansion program contemplates a nearly 50% increase
in the number of its stores as well as entry into new markets. When entering new
markets, the Company will be required to obtain suitable store sites, hire
personnel and establish distribution systems in geographic areas in which it has
no prior experience. In addition, the Company must advertise the "Syms" name and
its distinguishing characteristics in new markets where the Company may not be
known. There can be no assurance that the Company will be able to open and
operate new stores on a timely and profitable basis, that the Company will be
able to obtain sufficient merchandise from its vendors to adequately stock its
new stores or that the costs associated with opening such stores will not
adversely affect the Company's profitability.
DEPENDENCE ON KEY MANAGEMENT
The success of the Company's business has depended, to a large extent, on
the contributions of its founder, Chairman and Chief Executive Officer, Sy Syms.
Mr. Syms is 71 years old and, in recent years, has turned over increasing
responsibility for the management of the Company's operations to his daughter,
Marcy Syms, who serves as the Company's President and Chief Operating Officer.
Although Ms. Syms and the other members of the Company's management team have
substantial experience in the off-price apparel retailing industry, the
Company's expansion program and future success will depend, in part, upon the
Company's ability to attract, retain and motivate additional qualified
management personnel.
7
<PAGE>
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 off-price stores, as well as apparel
specialty stores, department stores and manufacturer-owned factory outlet
stores. 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, some of which have indicated their intention to enter the off-price
apparel business. 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 stores and
specialty stores offer brand name merchandise at substantial markdowns.
LACK OF ACTIVE TRADING MARKET FOR THE COMMON STOCK
Although the Common Stock has been listed on the New York Stock Exchange
since September 1983, trading in the Common Stock has been limited. In major
part, this has been a result of the relatively small percentage of the
outstanding stock in public hands. Although a principal purpose of this offering
is to increase the amount of Common Stock available for public trading, Mr. Syms
and members of his family will continue to own approximately 50.8% (47.8% if the
Underwriters' over-allotment option is exercised) of the outstanding stock
following this offering and there can be no assurance that a more active trading
market for the Common Stock will develop.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common Stock
offered hereby. The purpose of this offering is to provide the Selling
Stockholders with greater liquidity and to increase the amount of Common Stock
available for public trading.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is quoted on the New York Stock Exchange under the symbol
"SYM." The following table sets forth for the periods indicated the high and low
sales prices per share of the Common Stock as reported on the New York Stock
Exchange Composite Tape. At October 22, 1997, the Company had approximately 206
stockholders of record.
HIGH LOW
---- ---
Fiscal Third Quarter
1998 (through October 23, 1997) .......... $14.94 $12.63
Second Quarter ....................... 14.00 9.38
First Quarter ........................ 10.00 9.00
Fiscal Fourth Quarter ....................... $10.25 $ 8.75
1997 Third Quarter ........................ 8.88 8.13
Second Quarter ....................... 8.50 7.13
First Quarter ........................ 8.38 7.63
Fiscal Fourth Quarter ....................... $ 8.25 $ 7.13
1996 Third Quarter ........................ 9.50 7.13
Second Quarter ....................... 8.38 6.75
First Quarter ........................ 7.88 6.88
On October 23, 1997 the last sale price of the Common Stock as reported on
the New York Stock Exchange Composite Tape was $13.06 per share.
Payment of dividends is within the discretion of the Company's Board of
Directors and depends upon various factors, including the earnings, capital
requirements and financial condition of the Company. The Company does not
currently pay dividends on its Common Stock and its policy is to retain earnings
to support the growth of its business.
8
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of the
date indicated:
AUGUST 30, 1997
---------------
Long-term debt:
Obligations under capital leases (1) ................ $ 670,000
------------
Stockholders' equity:
Preferred stock, par value $100 per share,
authorized 1,000,000 shares; none outstanding ...... --
Common stock, par value $.05 per share,
authorized 30,000,000 shares; 17,776,000 shares
issued and outstanding(2) .......................... 889,000
Additional paid-in capital .......................... 12,432,000
Retained earnings ................................... 221,336,000
------------
Total stockholders' equity ....................... 234,657,000
------------
Total capitalization ............................. $235,327,000
============
- ----------
(1) Exclusive of current portion, aggregating $441,000.
(2) Exclusive of 512,725 shares issuable upon the exercise of outstanding stock
options.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
In 1995, the Company changed its fiscal year end to the Saturday nearest to
the end of February. Prior thereto, the Company's financial statements were
prepared on the basis of a 52-week or 53-week fiscal year ending on the Saturday
closest to the end of December. The following summary income statement and
balance sheet data, other than the data for the interim periods ended August 31,
1996 and August 30, 1997, are derived from the Company's audited financial
statements. All of the financial data presented below should be read in
conjunction with the consolidated financial statements and related notes, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
FISCAL YEAR ENDED (UNAUDITED)
------------------------------------------------------------ -----------------------------
JANUARY 2, JANUARY 1, DECEMBER 31, MARCH 2, MARCH 1, AUGUST 31, AUGUST 30,
1993 1994 1994 1996(1) 1997 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ..................... $319,623 $318,939 $326,651 $334,750 $346,792 $158,505 $164,239
Gross profit .................. 105,161 103,423 108,739 117,189 133,679 56,589 64,444
Income from operations ........ 25,635 18,839 14,429 17,938 33,839 8,570 12,948
Income before income taxes .... 25,176 19,082 14,370 17,645 33,742 8,534 12,707
Net income .................... 15,148 10,847 8,491 10,411 19,065 4,822 7,496
Net income per share .......... $0.86 $0.61 $0.48 $0.59 $1.08 $0.27 $0.42
Weighted average shares
outstanding .................. 17,690 17,690 17,694 17,694 17,694 17,694 17,739
OTHER DATA:
Gross profit margin ........... 32.9% 32.4% 33.3% 35.0% 38.5% 35.7% 39.2%
Operating income margin ....... 8.0 5.9 4.4 5.4 9.8 5.4 7.9
Depreciation and
amortization ................. $ 7,747 $ 7,446 $ 8,854 $ 7,751 $ 7,971 $ 3,830 $ 4,290
Capital expenditures .......... 6,713 17,508 14,591 4,777 21,709 12,716 6,792
Number of stores at end
of period .................... 29 34 39 38 40 39 40
BALANCE SHEET DATA:
Working capital ............... $ 61,338 $ 59,871 $ 59,918 $ 75,521 $ 78,228 $ 70,425 $ 84,102
Total assets .................. 204,071 221,152 245,385 260,144 284,018 289,102 306,114
Long-term debt (including
capitalized leases)(2) ....... 2,209 1,974 1,696 1,304 900 1,111 670
Stockholders' equity .......... 180,625 190,605 197,341 207,369 226,434 212,191 234,657
</TABLE>
- ----------
(1) Fiscal year 1996 was comprised of fifty-three weeks.
(2) Excludes current maturities.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
In 1995, the Company 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. The following discussion compares the 26 weeks ended August 30, 1997 to the
26 weeks ended August 31, 1996, the fiscal year ended March 1, 1997 ("fiscal
1997") to the fiscal year ended March 2, 1996 ("fiscal 1996") and the fiscal
year ended March 2, 1996 to the fiscal year ended December 31, 1994 ("fiscal
1994"). The fiscal years ended December 31, 1994 and March 1, 1997 were
comprised of 52 weeks. The fiscal year ended March 2, 1996 was comprised of 53
weeks.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the respective
percentages of the Company's net sales attributable to various components of its
income statement:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWENTY-SIX WEEKS ENDED
------------------------------------ ----------------------------
DECEMBER 31, MARCH 2, MARCH 1, AUGUST 31, AUGUST 30,
1994 1996 1997 1996 1997
------------ -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net sales .......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ...................................... 66.7% 65.0% 61.5% 64.3% 60.8%
----- ----- ----- ----- -----
Gross profit ....................................... 33.3% 35.0% 38.5% 35.7% 39.2%
Selling, general & administrative .................. 20.9% 21.1% 20.5% 21.8% 21.5%
Advertising ........................................ 1.6% 1.8% 1.9% 1.8% 2.4%
Occupancy .......................................... 3.7% 3.7% 4.1% 4.2% 4.8%
Depreciation & amortization ........................ 2.7% 2.3% 2.3% 2.4% 2.6%
Special charges .................................... 0.0% 0.8% 0.0% 0.0% 0.0%
----- ----- ----- ----- -----
Operating income ................................... 4.4% 5.4% 9.8% 5.4% 7.9%
Interest--net ...................................... 0.0% 0.1% 0.0% 0.0% 0.1%
----- ----- ----- ----- -----
Income before income taxes ......................... 4.4% 5.3% 9.7% 5.4% 7.7%
Income taxes ....................................... 1.8% 2.2% 4.2% 2.3% 3.2%
----- ----- ----- ----- -----
Net income ......................................... 2.6% 3.1% 5.5% 3.0% 4.6%
===== ===== ===== ===== =====
</TABLE>
TWENTY-SIX WEEKS ENDED AUGUST 30, 1997 COMPARED TO TWENTY-SIX WEEKS ENDED
AUGUST 31, 1996
For the twenty-six weeks ended August 30, 1997 net sales increased
$5,734,000 (3.6%) to $164,239,000 as compared to net sales of $158,505,000 for
the twenty-six weeks ended August 31, 1996. Comparable store sales decreased
2.2% for the twenty-six weeks ended August 30, 1997 from the 1996 period. The
3.6% increase for the twenty-six week period was, for the most part, the result
of the opening of the Company's new store on Park Avenue in New York City.
Gross profit for the twenty-six weeks ended August 30, 1997 was
$64,444,000, an increase of $7,855,000 (13.9%) as compared to $56,589,000 for
the fiscal period ended August 31, 1996. This increase resulted mainly from
increased net sales of $5,734,000 and the Company's gross margin increasing to
39.2% from 35.7%. The 3.5% improvement in gross margin resulted primarily from
increased levels of opportunistic and in-season purchases which created better
values for the Company's customers and lower markdowns.
11
<PAGE>
Selling, general and administrative expense increased $753,000 to
$35,376,000 (21.5% as a percentage of net sales) for the twenty-six weeks ended
August 30, 1997 as compared to $34,623,000 (21.8% as a percentage of net sales)
for the twenty-six weeks ended August 31, 1996.
Advertising expense for the twenty-six weeks ended August 30, 1997
increased to $3,900,000 (2.4% as a percentage of net sales), as compared to
$2,883,000 (1.8% as a percentage of net sales) in the twenty-six week period
ended August 31, 1996, resulting from a commitment to expand the Company's
advertising effort through radio and direct mail advertising during the thirteen
weeks ended August 30, 1997 and an increase of television advertising in single
store markets during the first thirteen weeks of this fiscal period. In
addition, in August 1997 the Company advertised its semi-annual sales event
("bash") in the newspaper for the first time.
Occupancy costs were $7,930,000 (4.8% as a percentage of net sales) for the
twenty-six week period ended August 30, 1997, up from $6,683,000 (4.2% as a
percentage of net sales) for the period ended August 31, 1996. This increase in
the twenty-six week period resulted mainly from the addition of the Park Avenue
store.
Depreciation and amortization for the twenty-six weeks ended August 30,
1997 amounted to $4,290,000, an increase of $460,000 as compared to $3,830,000
for the twenty-six weeks ended August 31, 1996. This increase in the twenty-six
week period resulted mainly from the addition of the Park Avenue store.
Income before income taxes for the twenty-six weeks ended August 30, 1997
of $12,707,000 increased $4,173,000 as compared to $8,534,000 for the twenty-six
weeks ended August 31, 1996. As discussed above, the increase in income before
income taxes reflects for the most part higher gross profit, offset somewhat by
increased selling, general and administrative, advertising and occupancy
expense.
For the twenty-six week period ended August 30, 1997 the effective income
tax rate was 41.0% as compared to 43.5% last year. Last year's rate was
adversely affected by additional tax provisions for certain states.
FISCAL YEAR ENDED MARCH 1, 1997 COMPARED TO MARCH 2, 1996
Net sales of $346,792,000 for the fiscal year ended March 1, 1997 increased
$12,042,000 (3.6%) as compared to net sales of $334,750,000 for the fiscal year
ended March 2, 1996. The increase was, for the most part, the result of an
increase in the number of stores in the year ended March 1, 1997. Comparable
store sales decreased by $736,000 (0.2%), caused mainly by fiscal 1996 being
comprised of 53 weeks versus 52 weeks in fiscal 1997. 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 1, 1997 was $133,679,000, an
increase of $16,490,000 (14.1%), as compared to $117,189,000 for the fiscal year
ended March 2, 1996. This increase resulted mainly from increased net sales of
$12,042,000 and the Company's gross margin increasing to 38.5% from 35.0%. The
3.5% improvement in gross margin resulted primarily from increased levels of
opportunistic and in-season purchases which created better values for the
Company's customers.
Selling, general and administrative expense was $71,028,000 (20.5% as a
percentage of net sales) for the period ended March 1, 1997 as compared to
$70,579,000 (21.1% as a percentage of net sales) for the fiscal year ended March
2, 1996. The increase of $449,000 resulted from three additional stores in
fiscal 1997. As a percentage of sales, SG&A expense decreased in fiscal 1997,
due to a continued effort by management to control store and corporate
operational expenses.
Advertising expense for fiscal 1997 increased to $6,626,000 (1.9% as a
percentage of net sales), as compared to $5,905,000 (1.8% as a percentage of net
sales) for the fiscal year ended March 2, 1996, resulting from a continued
commitment to expand the Company's advertising effort.
Occupancy costs were $14,215,000 (4.1% as a percentage of net sales) for
the period ended March 1, 1997, up from $12,330,000 (3.7% as a percentage of net
sales) for the fiscal year ended March 2, 1996. This increase was the result of
three additional leased locations in fiscal 1997.
Depreciation and amortization in fiscal 1997 amounted to $7,971,000, an
increase of $220,000 as compared to $7,751,000 for the fiscal year ended March
2, 1996, resulting from the opening of new stores and a 40,000 square-foot
addition to the Secaucus, New Jersey distribution center.
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 then current information that a contractor advance
12
<PAGE>
might 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 taken in the two month
period ended February 25, 1995, part of which relates to the write-off of costs
associated with a lease in Cincinnati, Ohio, in which the Company had initially
decided not to open a store. The $714,000 adjustment 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 $33,742,000 increased $16,097,000 (91.2%) in
fiscal 1997, as compared to $17,645,000 for the fiscal year ended March 2, 1996.
This increase for the most part reflects higher gross profit and no special
charge in the current period, offset by increased selling, general and
administrative expense, advertising, and occupancy expense.
For the fiscal year ended March 1, 1997 the effective income tax rate was
43.5% as compared to 41.0% last year. The increase was the result of additional
tax provisions provided for certain states.
FISCAL YEAR ENDED MARCH 2, 1996 COMPARED TO DECEMBER 31, 1994
For the fiscal year ended March 2, 1996, net sales were $334,750,000, an
increase of $8,099,000 or 2.5% from fiscal 1994. The increase was mainly a
result of fiscal 1996 being 53 weeks compared to 52 weeks in the fiscal year
ended December 31, 1994. The extra week added approximately $5,100,000 in net
sales to the 1996 fiscal year.
For the fiscal year ended March 2, 1996, the Company's gross margin
increased to 35.0% from 33.3% in fiscal 1994. The increase was the result of a
higher initial markup partially offset by additional markdowns.
For the fiscal year ended December 31, 1994, the Company's interim gross
margin was estimated based principally upon historical experience. The
determination of cost of sales for that fiscal year was based on a physical
inventory at the end of the fiscal year ended December 31, 1994. Using estimated
gross margins for the first three quarters resulted in upward adjustments to
gross margin in the fourth quarter. In fiscal 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. In January 1995, Syms began utilizing the retail inventory
method for quarterly inventory valuation.
As a percentage of net sales, selling, general and administrative expenses
(excluding occupancy, depreciation and amortization) were 21.1% in fiscal 1996
and 20.9% in fiscal 1994. The increase in the 1996 fiscal year selling, general
and administrative expenses and advertising (excluding occupancy, depreciation
and amortization) was principally due to the added 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 the fiscal year and the proposed, but
subsequently abandoned, "Going Private" transaction.
Advertising expense for fiscal 1996 increased to $5,905,000 (1.8% as a
percentage of net sales), as compared to $5,069,000 (1.6% as a percentage of net
sales) for fiscal 1994, resulting from an additional expenditure for direct
marketing.
As a percentage of net sales, occupancy expenses were 3.7% in fiscal 1996
and fiscal 1994.
Income before income taxes for fiscal 1996 was $17,645,000 (5.3% as a
percentage of net sales), as compared to $14,370,000 (4.4% as a percentage of
net sales) for fiscal 1994. This increase reflects higher gross profit, offset
by an increase in selling, general and administrative expenses as well as
occupancy expenses and the special charges as discussed above.
In the fiscal year ended March 2, 1996 the effective income tax rate
increased to 41.0% from 40.9% in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at August 30, 1997 was $84,102,000, an increase of
$13,677,000 from $70,425,000 at August 31, 1996, and the ratio of current assets
to current liabilities improved to 2.20 to 1 as compared to 1.94 to 1 at August
31, 1996.
Working capital at March 1, 1997 was $78,228,000, an increase of $2,707,000
from March 2, 1996, and the ratio of current assets to current liabilities
decreased to 2.40 to 1 as compared to 2.48 to 1 at March 2, 1996.
13
<PAGE>
Working capital at March 2, 1996 was $75,521,000, an increase of
$15,603,000 from December 31, 1994. The ratio of current assets to current
liabilities improved to 2.48 to 1 at March 2, 1996 as compared to 2.32 to 1 at
December 31, 1994.
Net cash used by operating activities totaled $2,343,000 for the twenty-six
weeks ended August 30, 1997, a decrease of $10,217,000, as compared to
$7,874,000 provided by operating activities for the twenty-six weeks ended
August 31, 1996. Net income for 1997 amounted to $7,496,000 as compared to
$4,822,000 in 1996, an increase of $2,674,000. In the twenty-six week period
ended August 30, 1997, net cash used in operating activities was mainly used to
increase inventory by $16,528,000, offset by an increase in accounts payable of
$8,432,000.
Net cash provided by operating activities totaled $15,573,000 for the
fiscal year ended March 1, 1997 and increased by $4,437,000 compared to
$11,136,000 for the fiscal year ended March 2, 1996. Net income for fiscal 1997
amounted to $19,065,000 compared to $10,411,000 in fiscal 1996, an increase of
$8,654,000. In the period ended March 1, 1997, cash provided by operating
activities was mainly used to increase inventory by $9,586,000.
Net cash provided by operating activities totaled $11,136,000 in fiscal
1996 compared to $12,936,000 in fiscal 1994. Net income for fiscal 1996 amounted
to $10,411,000 compared to $8,491,000 in fiscal 1994, an increase of $1,920,000.
In fiscal 1996, merchandise inventories increased by $2,694,000 and accounts
payable decreased $4,721,000.
Net cash used in investing activities was $6,781,000 and $12,672,000 for
the twenty-six weeks ended August 30, 1997 and August 31, 1996, respectively.
The higher expenditures in 1996 were the result of costs associated with the
opening of the Company's store on Park Avenue in New York City and with the
40,000 square-foot addition to the Company's distribution center in Secaucus,
New Jersey.
Net cash used in investing activities was $21,644,000 for the fiscal year
ended March 1, 1997. Net cash used in investing activities was $4,452,000 in
fiscal 1996 compared to $14,488,000 in fiscal 1994. Purchases of property and
equipment totaled $21,709,000, $4,777,000 and $14,591,000 for the fiscal years
ended March 1, 1997, March 2, 1996 and December 31, 1994, respectively.
Net cash provided by financing activities was $8,983,000 for the twenty-six
weeks ended August 30, 1997, compared to $6,738,000 in fiscal 1996. Both
increases resulted from an increase in revolving line of credit borrowings
amounting to $8,450,000 in 1997 and $6,900,000 in fiscal 1996. At August 30,
1997 and August 31, 1996, the Company had net borrowings of $13,400,000 and
$6,900,000, respectively, under its revolving credit agreement.
Net cash provided by financing activities was $4,611,000 for the fiscal
year ended March 1, 1997, resulting for the most part from the $4,950,000 in
short term borrowings. Net cash used in financing activities was $2,337,000 in
fiscal 1996. Net cash provided by financing activities was $911,000 in fiscal
1994. The Company paid cash dividends of $0.10 per share in fiscal 1994, which
totaled $1,769,000. The Company had net borrowings of $2,900,000 in fiscal 1994.
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. The Company anticipates it will renew this facility for another three
years for the same amount and the same terms, conditions and covenants. 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 twenty-six
weeks ended August 30, 1997, average borrowings under the revolving credit
agreement were $3,818,000 with a weighted average interest rate of 6.26%. For
the twenty-six weeks ended August 31, 1996, average borrowings under the
revolving credit agreement were $1,214,000 with a weighted average interest rate
of 6.40%. For the fiscal year ended March 1, 1997, under the revolving credit
agreement, the borrowings peaked at $21,450,000 and the average amount of
borrowings was $4,122,000 with a weighted average interest rate of 5.97%. For
the fiscal year ended March 2, 1996, under the revolving credit agreement, the
average amount of borrowings was $3,500,000 with a weighted average interest
rate of 7.3%. For the fiscal year ending 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%.
The Company has planned capital expenditures of approximately $12,000,000
for the fiscal year ended February 28, 1998, which includes plans to open one
new store, and to relocate one store from a leased location to a Company built
store. Through the twenty-six week period ended August 30, 1997, the Company has
incurred $6,792,000 of capital expenditures relating to the $12,000,000.
14
<PAGE>
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 1, 1999.
SEASONALITY
Like most retailers, the Company's business is subject to seasonal
fluctuations. Historically, over 28% of the Company's net sales and
approximately 45% of its net earnings have been generated during the third
quarter. Because of the seasonality of the Company's business, results for any
quarter are not necessarily indicative of the results that may be achieved for
the full fiscal year.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"), which is effective for the Company for its current fiscal year, which
will end February 28, 1998. SFAS No. 128 simplifies the standards for computing
earnings per share previously found in Accounting Principles Board Opinion No.
15 and establishes new standards for computing and presenting earnings per
share. Application of SFAS No. 128 is not expected to have a significant effect
on the Company's earnings per share.
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.
15
<PAGE>
BUSINESS
GENERAL
Syms operates a chain of forty off-price retail apparel stores located
throughout the Northeastern and middle Atlantic regions and in the Midwest,
Southeast and Southwest. The Company's stores feature a wide selection of first
quality, in-season merchandise, bearing nationally-recognized designer or brand
name labels, all of which is offered at prices substantially below those
generally found in department and specialty stores. The Company's merchandise
consists principally of men's tailored clothing and haberdashery and women's
dresses, suits, separates and accessories.
MERCHANDISING
The Company believes that it offers more designer and brand name
merchandise in more styles, sizes and price points than any other off-price
retailer. At present, more than 99% of the Company's net sales are generated by
the sale of designer and brand name merchandise. Syms merchandising focus is
predominantly directed toward middle- and upper-income, fashion-minded and price
conscious shoppers and is symbolized by its widely-recognized slogan: "An
Educated Consumer is Our Best Customer." For the year ended March 1, 1997 and
the twenty-six weeks ended August 30, 1997, net sales were generated by the
following principal merchandise categories:
TWENTY-SIX
YEAR ENDED WEEKS ENDED
MARCH 1, 1997 AUGUST 30, 1997
------------- ---------------
(PERCENTAGE OF NET SALES)
Men's tailored clothing and haberdashery ... 54% 55%
Women's dresses, suits, separates and
accessories .............................. 31 30
Shoes ...................................... 7 8
Children's wear ............................ 6 5
Luggage .................................... 2 2
--- ---
100% 100%
=== ===
The Company's merchandise assortment for men's tailored clothing and
haberdashery features a wide selection of business attire (suits, jackets,
shirts and ties), casual wear (slacks, shorts, polo-style shirts, sweaters and
activewear), formal wear (tuxedos and related furnishings), accessories
(underwear, socks, belts, gloves and scarves), outerwear and shoes. Men's
tailored clothing (suits, tuxedos, sportscoats and dress slacks) represents the
largest percentage of the Company's net sales. The Company maintains between
4,500 and 10,000 suits in each store, depending on store size, in a full array
of sizes. The Company believes that the typical Syms store offers a greater
number and assortment of men's suits, in a wider range of sizes, than any other
store in the United States. Recognizing the trend toward casual dressing in the
workplace, the Company has expanded its selection of men's casual sportswear and
carries a broad selection of designer and brand name sportswear.
Women's clothing is the Company's second largest merchandise category. The
Company's selection of women's apparel includes dresses (evening and day),
suits, pantsuits, separates, corporate casual, weekend wear, activewear,
loungewear, intimate apparel, shoes and accessories. The Company makes a special
effort to carry a broad range of sizes, including both petites up to size 12 and
womens up to size 24.
The Company's line of children's merchandise ranges from infant through
early teens and includes tailored clothing, casual apparel, shoes and sneakers.
In addition, the Company offers designer and brand name luggage, as well as
wallets, handbags and briefcases.
VENDOR RELATIONSHIPS AND PURCHASING
The Company purchases first-quality, in-season, designer and brand name
merchandise directly from manufacturers at prices below those generally paid by
department and specialty stores. Syms estimates that approximately 200 brand
names and designer labels are represented in its stores at any time. During
fiscal 1997, the Company purchased merchandise from approximately 1,200 vendors,
and no single brand name or designer label accounted for more than 4.3% of total
purchases. The Company has enjoyed longstanding relationships with many of its
vendors, some of which have been selling merchandise to the Company for as long
as 30 years. The Company believes that these relationships have contributed to a
continuity of buying opportunities for first-quality, in-season merchandise.
Syms is able to obtain its merchandise at advantageous prices because it is
viewed by its vendors as an
16
<PAGE>
effective and dependable channel for reducing their excess inventories without
compromising brand image. The Company does not request advertising allowances,
avoids merchandise returns (except for damaged or nonconforming goods) and buys
in large volumes. Except for purchase order contracts, the Company has no
written agreements with its vendors. Although Syms typically does not maintain
large out-of-season inventories, the Company occasionally makes opportunistic
purchases of certain items of basic clothing, which do not change in style from
year to year, for storage until the next appropriate selling season.
Purchasing is performed by a staff of twelve buyers and seven assistant
buyers in conjunction with various merchandise managers. Individual store
allocations are made by the Company's buying staff. Buyers are typically former
store employees with a strong understanding of Syms customers' needs and are
highly disciplined with respect to margin requirements and quantity limitations.
The Company's buying staff has, on average, 15 years of experience in the
apparel industry and seven years with the Company. In addition to the buying
staff, the Company has two representatives in Europe who are responsible for
identifying European buying opportunities. The Company's buyers make buying
trips to Europe twice a year.
PRICING
The Company's pricing strategy is to enhance customer value by offering
everyday low prices, which are generally 40% to 60% below those offered at
department and specialty stores. In addition, the Company also offers "dividend"
(in-store, unadvertised promotion) prices that reflect further reductions on
various types of merchandise. Merchandise is offered over a wide range of price
points, which contrasts distinctly with the merchandising approach of many
department and specialty stores.
The Company affixes a ticket to each item displaying Syms selling price as
well as the price the Company believes to be the nationally advertised price
(typically double that of the true wholesale price) of that item at department
or specialty stores. All garments carry the manufacturer's brand name or
designer label. Because women's dresses are subject to considerable style
fluctuation, Syms has long utilized a ten-day automatic markdown pricing policy
to promote sales of certain dresses. Women's dresses represent approximately
4.8% of net sales.
The Company's ability to offer its merchandise at everyday low prices is
strengthened by its attention to minimizing operating costs. Syms stores are low
maintenance, functional facilities that are designed to maximize selling space
and contain overhead. The Company's ownership of 21 of its forty stores enables
it to reduce its overall occupancy costs. The Company's incentive compensation
program encourages store managers to maintain low payrolls. The efficient
implementation and management of the Company's advertising program, primarily
radio and television, has resulted in a ratio of advertising expenditures to net
sales that is below that of the industry as a whole.
MARKETING AND ADVERTISING
In 1974, the Company became one of the first clothing retailers to
advertise on television. The original commercials featured the Company's
founder, Sy Syms. In 1979, Mr. Syms' daughter, Marcy, currently President and
Chief Operating Officer, joined her father in the Company's television
commercials. In 1997, Mr. Syms' son, Stephen, a Vice President of the Company
and its Merchandise Manager -- Men's Tailored Clothing and Shoes, also began
appearing in Syms television commercials. The Company believes that the
appearance of members of the Syms family in the Company's commercials has been
an effective marketing practice and personalizes the Company to its customers.
As a result of the Company's extensive use of television advertising, its slogan
- -- "An Educated Consumer is our Best Customer" -- is one of the best known in
the retail apparel industry. In addition to television, the Company has
historically advertised on radio and, more recently, has begun advertising in
print media as well as by direct mail to its Syms credit card customer base. The
Company occasionally makes special offers in mailings to holders of the Syms
credit card and to others who have used national credit cards at Syms stores
within the previous six months. As part of its marketing and advertising effort,
Syms has historically sponsored programs on public television and charitable
events in the communities in which it does business.
The Company generally budgets approximately 1.9% of net sales (equal to
$6.6 million in fiscal 1997), for advertising, but allocates as much as 4.0% of
net sales to advertising for stores in new markets and second stores in existing
markets. The Company does not advertise the brand names of its merchandise.
Management believes that the Company enjoys substantial word-of-mouth publicity
from its customer base, and that this publicity accounts for a significant
portion of the Company's new customers in markets where the Company has existing
stores.
The Company accepts as a form of payment from its customers cash, checks,
national credit cards and its own Syms credit card. At September 30, 1997 there
were approximately 324,000 holders of the Syms credit card.
17
<PAGE>
During fiscal 1997, the Syms credit card accounted for approximately $60.3
million, or 17.4%, of the Company's net sales. Syms credit card receivables are
sold on a non-recourse basis to a third party at a negotiated discount. In lieu
of cash refunds, the Company issues credits toward the Syms credit card or store
credits that may be used toward the purchase of other merchandise. Merchandise
purchased from the Company may be returned within a reasonable amount of time.
CUSTOMER SERVICE
The Company believes that it is distinguished among off-price retailers for
its attentive customer service. The Company's sales associates assist customers
with merchandise selection, including correct sizing. The Company's sales
associates are called "Educators" because their role is to educate customers
about the merchandise. Upon joining the Company, each Educator participates in a
Company-developed training program. In addition to a higher level of customer
service, the Company also offers certain other amenities not typically found in
off-price stores, such as individual fitting rooms for women and in-store
alterations for both men and women. The Company also offers Syms credit card
customers a 10% discount on their initial purchase using the card and a more
favorable return policy than it offers to holders of other credit cards. The
Company believes that, as discounting has become more common, the Company's
customer service and other amenities have become increasingly important factors
in distinguishing the Company from its off-price competitors.
STORE LAYOUT AND OPERATIONS
The Company's store format and merchandise presentation are designed to
emphasize its focus on everyday low prices and exceptional value. However, the
Company seeks to project itself as the off-price equivalent of an upscale
specialty store. In general, Syms stores are designed to convey the impression
of three specialty stores in one building: a men's specialty store, a women's
specialty store and a children's specialty store. The Company has designed its
stores to allow customers to select and purchase apparel with ease and
convenience. Each merchandise category is clearly displayed and organized by
type and size on conveniently arranged racks or counters. Large tickets, each
with a color corresponding to a specific size (for example, yellow always
indicates women's size 8), are attached to each piece of merchandise, allowing
customers to determine sizes from a distance. Unlike other off-price retailers,
the Company does not use printed price tags on its men's suits, relying instead
on handwritten price tickets, which it believes are a more personalized way of
presenting its suits to its customers. In general, no emphasis is placed on any
particular brand or label.
All Syms stores are low maintenance, simple and functional facilities
designed to maximize selling space and contain overhead costs. Store layouts are
flexible so that product groupings can be easily moved or expanded. As the
Company is committed to maintaining virtually all of its in-store inventory on
the selling floor, its stores do not require significant storage space. The
Company considers the ideal selling space of its stores to range from 35,000 to
55,000 square feet. More than 70% of Syms suburban stores are "free standing."
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.
Approximately 30 to 100 persons, consisting mostly of Educators, are
employed at each Syms store, depending upon store size and season. All Syms
stores are directly managed and operated by the Company. Each store has a
management team that consists of a store manager, two first assistant store
managers, two second assistant store managers and three department managers, and
is staffed by a core group of Educators during non-peak hours, with additional
Educators added as needed at peak hours. The various managers and Educators
perform all store operations, from receiving and processing merchandise and
arranging it for display to assisting customers. Each store manager reports to a
District Manager who, in turn, reports directly to the Company's senior
management. The Company currently employs five District Managers. District
Managers typically visit each store at least once every ten days to review
merchandise quantities and presentation, staff training and personnel
performance, expense control, security, cleanliness and adherence to Company
operating procedures. District Managers are also responsible for monitoring
store payrolls. Under the Company's "Management by Objective" program, members
of each store's management team are evaluated and are eligible to receive
additional compensation based upon the store's success in meeting certain gross
sales and payroll budgeting goals.
A typical Syms store is open seven days a week, eleven hours on weekdays,
nine hours on Saturdays and six hours on Sundays. Each store has security
personnel on premises during business hours and uses an electronic security
system after business hours. The Company has installed electronic sensor devices
in each store to detect and deter theft of merchandise.
18
<PAGE>
STORE LOCATIONS
The following table sets forth, as of the date hereof, the location,
selling square footage and ownership status of each of the Company's forty
stores:
<TABLE>
<CAPTION>
SELLING SELLING
SQUARE SQUARE
LOCATION FOOTAGE OWNERSHIP LOCATION FOOTAGE OWNERSHIP
-------- ------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Connecticut New York
Fairfield 32,000 Owned Buffalo 39,000 Owned
Hartford 31,000 Leased Long Island (Commack) 36,000 Owned
Long Island (Westbury) 72,000 Owned
Florida New York City 39,000 Leased
Fort Lauderdale 44,000 Owned (Manhattan/Park Avenue)
Miami 45,000 Owned New York City 40,000 Owned
Tampa 38,000 Owned (Manhattan/Trinity Place)
West Palm Beach 36,000 Leased Rochester 32,000 Owned
Westchester 50,000 Leased
Georgia
Atlanta (Norcross) 51,000 Owned North Carolina
Charlotte 30,000 Leased
Illinois
Chicago (Addison) 47,000 Owned Ohio
Chicago (Gurnee Mills Mall) 33,000 Leased Cincinnati (Sharonville) 31,000 Leased
Chicago (Niles) 32,000 Leased Cleveland (Highland Heights) 36,000 Leased
Maryland Pennsylvania
Baltimore 43,000 Leased Philadelphia (Franklin Mills 22,000 Leased
Washington, D.C. (Rockville) 56,000 Owned Mall)
Philadelphia (King of Prussia) 41,000 Owned
Massachusetts Pittsburgh 40,000 Leased
Boston (Norwood) 36,000 Leased Pittsburgh (Monroeville) 31,000 Owned
Boston (Peabody) 39,000 Leased
Rhode Island
Michigan Providence (N. Cranston) 27,000 Leased
Detroit (Southfield) 46,000 Owned
Texas
Missouri Dallas 42,000 Owned
St. Louis 33,000 Leased Dallas (Hurst) 38,000 Owned
Houston 34,000 Owned
New Jersey
New York City (Paramus) 56,000 Owned Virginia
New York City (Woodbridge) 32,000 Leased Washington, D.C. (Falls 28,000 Leased
Philadelphia (Cherry Hill) 40,000 Owned Church)
Secaucus 25,000 Owned Washington, D.C. (Potomac 33,000 Leased
Mills Mall)
</TABLE>
In addition to the selling space indicated, each store contains between
approximately 2,000 and 14,000 square feet for receiving, inspecting, holding
and ticketing merchandise and other personnel and administrative functions.
Store leases provide for a base rental of between approximately $2.50 and $34.00
per square foot. In addition, under the "net" terms of all of the leases, the
Company pays maintenance expenses, real estate taxes and other charges. Four of
the Company's leased stores have a percentage of sales rental as well as a fixed
minimum rent. Rental payments for Syms leased stores aggregated $5,868,000 for
the fiscal year ended March 1, 1997.
The Company owns a distribution center, located in Secaucus, New Jersey.
The facility contains approximately 277,000 square feet of warehouse and
distribution space, 34,000 square feet of office space and 29,000 square feet of
retail selling space.
19
<PAGE>
EXPANSION PROGRAM
The Company has recently embarked on a five-year, 19 store expansion
program intended to increase its penetration of certain markets in which it
currently has a retailing presence and to enter new markets in Los Angeles, San
Francisco, Seattle and Toronto that it does not currently serve. Each of these
new markets includes a population of more than two million persons, high income
demographics and significant consumer awareness of designer and brand name
labels. In addition, the Company believes that it possesses a high level of name
recognition in Toronto because it has advertised for twenty years in nearby
Buffalo. It is the Company's goal to have at least two stores in each market
that it currently serves with a population greater than two million.
Accordingly, the Company plans to open a second store in suburban Atlanta in
November 1997 and a second store in suburban Detroit in June 1998. Additional
suburban stores are planned for Baltimore, Houston, Miami and New York. The
Company also plans to open center-city stores in Boston, Chicago and Washington,
D.C., where it currently has only a suburban presence.
MANAGEMENT INFORMATION SYSTEMS
The Company has implemented a merchandise control system that tracks
product inventory in approximately 750 categories from its arrival at the
distribution center to its ultimate sale at the Company's stores. Information is
electronically transmitted daily to the Company's database at its headquarters,
where executives can obtain detailed reports on demand regarding sales and
inventory levels (in units and dollars) on a store-by-store basis.
The Company's merchandise control system enhances management's ability to
make informed buying decisions and to respond to unexpected increases or
decreases in demand for a particular item. The inventory management system is
capable of reporting product information, such as style, fabric, vendor lot,
model number, size and color, and enables management to distribute merchandise
on a store-by-store basis, utilizing geographical selling trends.
The Company believes that its present management information systems can
support substantially expanded operations without significant additional capital
investment.
20
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE TITLE
---- --- -----
Sy Syms 71 Chairman of the Board, Chief Executive
Officer and a Director of the Company
Marcy Syms 46 President, Chief Operating Officer and
a Director of the Company
Antone F. Moreira 61 Vice President, Treasurer, Chief Financial
Officer and a Director of the Company
Stephen A. Merns 44 Vice President, Secretary, Merchandise
Manager--Men's Tailored Clothing and Shoes
and a Director of the Company
Wilbur L. Ross, Jr. 59 Director of the Company
Harvey A. Weinberg 60 Director of the Company
Philip G. Barach 67 Director of the Company
David A. Messer 36 Director of the Company
The members of the Company's Board of Directors hold office until the next
annual meeting of stockholders 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.
SY SYMS has been Chairman of the Board, Chief Executive Officer and a
Director of the Company (including its predecessors) since 1959. 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,
Chief Operating Officer of the Company (including its predecessors) since 1984.
ANTONE F. MOREIRA has been Vice President, Treasurer and Chief Financial
Officer of the Company since May 1997. From 1996 to May 1997 Mr. Moreira was a
financial consultant with Equitable Life Assurance Society of the United States,
a financial services organization. From 1990 to 1995, Mr. Moreira was Executive
Vice President, Chief Financial Officer of Stuarts Department Stores, Inc., a
regional discount department store chain operating in New England.
STEPHEN A. MERNS has been Vice President, Secretary and Merchandise Manager
- -- Men's Tailored Clothing and Shoes of the Company since January 1, 1986. He
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. He has been a
Director of the Company since July 1996.
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 A. 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 is a trustee of Glimcher Realty Trust (a real estate
investment trust). He has been a Director of the Company since December 1992.
During 1994 HSSI, Inc. filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division.
21
<PAGE>
PHILIP G. BARACH has been a consultant since March 1993. From 1968 to March
1993 he was Chairman of the Board or Chairman of the Board, President and Chief
Executive Officer of the United States Shoe Corp. (manufacturer and retailer of
footwear, apparel and eyewear). He is a member of the Board of Directors of
Bernard Chaus, Inc. (manufacturer of women's apparel), Glimcher Realty Trust (a
real estate investment trust), R.G. Barry Corp. (manufacturer of foldable
slippers and heat/cold preservation products) and Union Central Insurance Co.
(life insurance). He has been a Director of the Company since July 1996.
DAVID A. MESSER has been President of AIG Trading Corporation, a subsidiary
of American International Group, Inc. (New York Stock Exchange: AIG), since
January 1994. Prior to January 1994, Mr. Messer was a Senior Vice President of
AIG Trading Corporation, where he has been employed since March 1990. He has
been a Director of the Company since July 1996.
PRINCIPAL AND SELLING STOCKHOLDERS
Of the 3,500,000 shares of Common Stock offered hereby, 2,500,000 shares
will be sold by the Sy Syms Foundation and 1,000,000 shares will be sold by Mr.
Syms. In addition, Mr. Syms, Marcy Syms and Stephen A. Merns have granted to the
Underwriters an option to purchase an aggregate of up to 525,000 additional
shares of Common Stock solely to cover over-allotments. (See "Underwriting.")
As of the date hereof, the Sy Syms Foundation owned 2,500,000 shares of
Common Stock, Mr. Syms owned 7,052,145 shares and other members of the Syms
family, including Marcy Syms and Stephen A. Merns, owned 2,991,909 shares,
representing in the aggregate approximately 70.4% of the outstanding Common
Stock. In addition, certain members of the Syms family have currently
exercisable options to purchase up to 129,000 shares of the Company's Common
Stock. After completion of this offering (assuming the Underwriters'
over-allotment option is not exercised), Mr. Syms will own 6,052,145 shares,
representing, together with shares owned by other members of the Syms family,
approximately 50.8% of the outstanding Common Stock. If the Underwriters'
over-allotment option is exercised in full, Mr. Syms will own 5,707,145 shares,
and the percentage of the Company's outstanding Common Stock owned in the
aggregate by the Syms family will be reduced to 47.8%. In addition, at October
22, 1997, 1,226,647 shares (representing 6.9% of the outstanding Common Stock)
were owned by Tweedy, Browne Company, L.P., a private investment partnership.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock.
Subject to any preferences, limitations and relative rights that may be fixed
for any series of Preferred Stock that may be issued as described below, the
holders of Common Stock of the Company are entitled, among other things, (1) to
share ratably in dividends if, when, and as declared by the Board of Directors
out of funds legally available therefor (see "Dividends"), (2) to one vote per
share at all meetings of stockholders, and (3) in the event of liquidation, to
share ratably in the distribution of assets remaining after payment of debts,
expenses and the liquidation preference of any outstanding shares of Preferred
Stock. Holders of shares of Common Stock have no cumulative voting rights or
pre-emptive rights to subscribe for or purchase any additional shares of capital
stock issued by the Company. The Company's Certificate of Incorporation provides
that the affirmative vote of holders of 70% of the outstanding shares of Common
Stock are required to effect or validate any merger or consolidation of the
Company with or into any other corporation, any sale or lease of all or any
substantial part of the assets of the Company or any sale or lease to the
Company of assets (having an aggregate fair market value in excess of
$1,000,000) in exchange for voting securities (or rights to acquire voting
securities or securities convertible into voting securities) of the Company,
except where the merger or similar transaction with another corporation has been
approved by a 75% vote of the entire Board of Directors of the Company or where
the Company owns a majority of every class of voting stock of such other
corporation. The affirmative vote of a majority of the outstanding shares of
Common Stock is required to amend the foregoing provisions of the Certificate of
Incorporation. The Company's Certificate of Incorporation provides that the
affirmative vote of a majority of the outstanding shares of Common Stock is
sufficient to effect the removal of a director with or without cause, and
similar action by a majority of the Board of Directors is sufficient to effect
the
22
<PAGE>
removal of a director with cause. Such provisions could be utilized, under
certain circumstances, as a method of preventing a takeover of the Company.
American Stock Transfer & Trust Company is the Transfer Agent and Registrar
for the Common Stock.
PREFERRED STOCK
The Board of Directors is authorized to issue 1,000,000 shares of Preferred
Stock, par value $100, without further action by the stockholders, in one or
more series and to fix as to any such series the dividend rate, redemption
prices, preferences on liquidation or dissolution, sinking fund terms, if any,
conversion rights, voting rights and any other preference or special rights and
qualifications. Shares of Preferred Stock issued by the Board of Directors could
be utilized, under certain circumstances, as a method of preventing a takeover
of the Company. As of the date of this Prospectus, the Board of Directors has
not authorized any series of Preferred Stock. There are no agreements or
understandings for the issuances of any shares of Preferred Stock.
ANTI-TAKEOVER PROVISIONS
The Company is governed by the provisions of Section 14A: 10A-1 et seq.,
the New Jersey Shareholders Protection Act (the "New Jersey Act"), of the New
Jersey Business Corporation Act, an anti-takeover law. In general, the statute
prohibits a publicly-held New Jersey corporation from engaging in a "business
combination" with an "interested shareholder" for a period of five years after
the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested shareholder. An "interested
shareholder" is a person who, together with affiliates and associates, owns (or
within three years, did own) 10% or more of the corporation's voting stock.
After the five-year waiting period has elapsed, a business combination between a
corporation and an interested shareholder will be prohibited unless the business
combination is approved by the holders of at least two-thirds of the voting
stock not beneficially owned by the interested shareholder, or unless the
business combination satisfies the New Jersey Act. The New Jersey Act's fair
price provision is intended to provide that all shareholders (other than the
interested shareholders) receive a fair price for their shares.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 17,807,890 shares
of Common Stock outstanding. All of the shares to be sold in the offering will
be freely tradeable without restrictions or further registration under the
Securities Act, unless purchased by an "affiliate" of the Company (as that term
is defined in Rule 144 adopted under the Securities Act ("Rule 144")), in which
case such shares would be subject to the resale limitations of Rule 144. None of
the outstanding shares of Common Stock to be beneficially owned by the Syms
family following this offering may be publicly sold in the absence of an
effective registration statement under the Securities Act, other than in
accordance with Rule 144 or another exemption from registration.
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated) who has beneficially owned shares of Common Stock for at least
one year, including a person who may be deemed an "affiliate," is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of one percent of the total number of shares of the class of stock sold
or the average weekly reported trading volume of the class of stock being sold
or the average weekly reported trading volume of the class of stock being sold
during the four calendar weeks preceding such sale. A person who is not deemed
an "affiliate" of the Company at any time during the three months preceding a
sale and who has beneficially owned shares for at least two years is entitled to
sell such shares under Rule 144 without regard to the volume limitations
described above. As defined in Rule 144, an "affiliate" of an issuer is a person
that directly or indirectly through the use of one or more intermediaries
controls, is controlled by, or is under common control with, such issuer. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof.
Although the Common Stock has been listed on the New York Stock Exchange
since September 1983, trading in the Common Stock has been limited. In major
part, this has been a result of the relatively small percentage of the
outstanding stock in public hands. The Company is unable to predict the effect
that sales made under Rule 144, pursuant to future registration statements, or
otherwise, may have on the market price of the Common Stock prevailing from time
to time. Nevertheless, sales of a substantial amount of Common Stock by the Syms
family in the public market, or the
23
<PAGE>
perception that such sales could occur, could adversely affect prevailing market
prices. See "Underwriting" for a discussion of certain contractual restrictions
on resales of the Common Stock by the Syms family.
The Company has granted options to purchase 381,500 shares of Common Stock
to certain officers, directors and employees of the Company pursuant to the
Company's stock option plan and an additional 458,000shares are available for
future grant thereunder. As of October 17, 1997, options with respect to
approximately 301,500 shares were exercisable and options with respect to 80,000
shares were subject to vesting provisions.
UNDERWRITING
The Underwriters named below, acting through their representatives, Bear,
Stearns & Co. Inc. and Salomon Brothers Inc (the "Representatives"), have
severally agreed, subject to the terms and conditions of the Underwriting
Agreement (the form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part), to purchase from the Sy Syms
Foundation and Sy Syms (collectively, with Marcy Syms and Stephen A. Merns, the
"Selling Stockholders") the numbers of shares of Common Stock set forth opposite
their respective names below:
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
Bear, Stearns & Co. Inc. ..........................
Salomon Brothers Inc ..............................
---------
Total .......................................... 3,500,000
=========
The nature of the obligations of the Underwriters is such that they must
purchase all of such shares if any are purchased. Those obligations are subject,
however, to various conditions, including the approval of certain matters by
counsel.
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the Common Stock to the public initially
at the offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not to exceed $____ per share.
The Underwriters may allow, and such dealers may reallow, a concession to
certain other dealers not to exceed $___ per share. After the commencement of
the offering, the public offering price and concessions may be changed.
Sy Syms, Marcy Syms and Stephen A. Merns have granted to the Underwriters
an option to purchase up to an aggregate of 525,000 additional shares of Common
Stock at the public offering price less the underwriting discount set forth on
the cover page of this Prospectus, solely to cover over-allotments, if any. The
option may be exercised at any time within 30 days after the date of this
Prospectus. To the extent that the option is exercised, the Underwriters will be
severally committed, subject to certain conditions, to purchase the additional
shares in proportion to their respective purchase commitments as indicated in
the preceding table. Of the shares subject to such option, 345,000 are owned by
Sy Syms, 50,000 are owned by Marcy Syms and 130,000 are owned by Stephen A.
Merns.
The Company, the Selling Stockholders and the Company's directors and
executive officers have agreed that, for a period of 90 days following the date
of this Prospectus, they will not, without the prior written consent of Bear,
Stearns & Co. Inc., directly or indirectly offer or agree to sell, sell or
otherwise dispose of any shares of Common Stock (or securities convertible into,
exchangeable for or evidencing the right to purchase shares of Common Stock),
other than, in the case of the Selling Stockholders, the shares to be sold by
them to the Underwriters, and, in the case of the Company, the grant of options
(and the issuance of shares upon the exercise of outstanding options) under the
Company's existing stock option plan.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and, where such indemnification is unavailable, to contribute to
payments that the Underwriters may be required to make in respect of such
liabilities.
In order to facilitate the offering, certain persons participating in the
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the Common Stock during and after the offering. Specifically, the
Underwriters may over-allot or otherwise create a short position in the Common
Stock for their own account by
24
<PAGE>
selling more shares than have been sold to them by the Company. The Underwriters
may elect to cover any such short position by purchasing shares in the open
market or by exercising the over-allotment option granted to them. In addition,
the Representatives, on behalf of the Underwriters, may stabilize or maintain
the price of the Common Stock by bidding for or purchasing shares in the open
market and may impose penalty bids, under which selling concessions allowed to
syndicate members or other broker-dealers participating in the offering are
reclaimed if shares previously distributed in the offering are repurchased in
connection with stabilization transactions or otherwise. The effect of these
transactions may be to stabilize or maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the Common Stock to
the extent that it discourages resales thereof. No representation is made as to
the magnitude or effect of any such stabilization or other transactions. Such
transactions may be effected on the New York Stock Exchange or otherwise and, if
commenced, may be discontinued at any time.
Bear, Stearns & Co. Inc. acted as one of the representatives of the
underwriters of the initial public offering of the Company's Common Stock in
September 1983.
Rothschild Inc. has been retained by Sy Syms as his personal financial
advisor in connection with this offering, and will be paid a fee for its
services not to exceed $50,000. Wilbur L. Ross, Jr., a director of the Company,
is a Managing Director of Rothschild Inc.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed upon
for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Weil, Gotshal & Manges LLP, New York, New York.
EXPERTS
The consolidated balance sheets of the Company and its subsidiaries as of
March 2, 1996 and March 1, 1997 and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three fiscal years
ended December 31, 1994, March 2, 1996 and March 1, 1997, and the two month
period ended February 25, 1995, included herein and in the Company's Annual
Report on Form 10-K for the year ended March 1, 1997 which is incorporated by
reference into this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is included and
incorporated herein by reference, and have been so included and incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
25
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants ................................. F-1
Consolidated Balance Sheets as of March 2, 1996 and March 1, 1997 ........ F-2
Consolidated Statements of Income for each of the three fiscal
years ended December 31, 1994, March 2, 1996 and March 1, 1997
and the two months ended February 26, 1994 and February 25, 1995 ....... F-3
Consolidated Statements of Stockholders' Equity for each of the
three fiscal years ended December 31, 1994, March 2, 1996 and
March 1, 1997 .......................................................... F-4
Consolidated Statements of Cash Flows for each of the three
fiscal years ended December 31, 1994, March 2, 1996 and
March 1, 1997 and the two months ended February 26, 1994 and
February 25, 1995 ...................................................... F-5
Notes to Consolidated Financial Statements ............................... F-6
Condensed Consolidated Balance Sheets as of August 31, 1996,
March 1, 1997 and August 30, 1997 ...................................... F-16
Condensed Consolidated Statements of Income for the twenty-six
weeks ended August 31, 1996 and August 30, 1997 ........................ F-17
Consolidated Statements of Cash Flows for the twenty-six
weeks ended August 31, 1996 and August 30, 1997 ........................ F-18
Notes to Condensed Consolidated Financial Statements ..................... F-19
26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders 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 March 1, 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three fiscal years ended December 31, 1994, March 2, 1996 and March 1,
1997 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 March 1, 1997 and the results of their operations and their
cash flows for each of the three fiscal years ended December 31, 1994, March 2,
1996 and March 1, 1997 and the two month period ended February 25, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
April 28, 1997
F-1
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 2, MARCH 1,
1996 1997
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 4,804 $ 3,344
Merchandise inventories ................................. 112,954 122,540
Deferred income taxes ................................... 5,221 6,639
Prepaid expenses and other current assets ............... 3,521 1,756
-------- --------
Total current assets ................................. 126,500 134,279
PROPERTY AND EQUIPMENT--Net of accumulated depreciation
and amortization ........................................ 129,235 142,741
DEFERRED INCOME TAXES .................................... -- 197
OTHER ASSETS ............................................. 4,409 6,801
-------- --------
TOTAL ASSETS ............................................. $260,144 $284,018
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................ $ 30,900 $ 28,723
Accrued expenses ........................................ 9,918 11,055
Obligations to customers ................................ 4,490 5,085
Income taxes payable .................................... 5,331 5,833
Short term borrowings ................................... -- 4,950
Current portion of obligations under capital lease ...... 340 405
-------- --------
Total current liabilities ............................ 50,979 56,051
-------- --------
OBLIGATIONS UNDER CAPITAL LEASE .......................... 1,304 900
-------- --------
DEFERRED INCOME TAXES .................................... 255 --
-------- --------
OTHER LONG TERM LIABILITIES .............................. 237 633
-------- --------
COMMITMENTS (Note 7) ..................................... -- --
STOCKHOLDERS' EQUITY
Preferred stock, par value $100 per share
authorized 1,000 shares; none outstanding .............. -- --
Common stock, par value $0.05 per share
authorized 30,000 shares; 17,694 shares issued and
outstanding as of March 2, 1996 and March 1, 1997 ...... 885 885
Additional paid-in capital .............................. 11,709 11,709
Retained earnings ....................................... 194,775 213,840
-------- --------
Total stockholders' equity ........................... 207,369 226,434
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $260,144 $284,018
======== ========
F-2
<PAGE>
<TABLE>
<CAPTION>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED TWO MONTHS ENDED
----------------------------------------- ---------------------------
DECEMBER 31, MARCH 2, MARCH 1, FEBRUARY 26, FEBRUARY 25,
1994 1996 1997 1994 1995
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES .......................................... $326,651 $334,750 $346,792 $41,642 $ 46,632
Cost of goods sold ................................. 217,912 217,561 213,113 28,108 29,776
-------- -------- -------- ------- --------
Gross profit ....................................... 108,739 117,189 133,679 13,534 16,856
EXPENSES
Selling, general and administrative ................ 68,370 70,579 71,028 10,133 10,652
Advertising ........................................ 5,069 5,905 6,626 364 576
Occupancy .......................................... 12,017 12,330 14,215 1,702 1,841
Depreciation and amortization ...................... 8,854 7,751 7,971 1,190 1,359
Provision for contractor advance
and special charges ............................... -- 2,686 -- -- 2,935
-------- -------- -------- ------- --------
Income (loss) from operations ...................... 14,429 17,938 33,839 145 (507)
Interest expense (income)--net ..................... 59 293 97 61 60
-------- -------- -------- ------- --------
Income (loss) before income taxes .................. 14,370 17,645 33,742 84 (567)
Provision (benefit) for income taxes .............. 5,879 7,234 14,677 34 (184)
-------- -------- -------- ------- --------
NET INCOME (LOSS) .................................. $ 8,491 $ 10,411 $ 19,065 $ 50 $ (383)
======== ======== ======== ======= ========
Net income (loss) per share ........................ $ 0.48 $ 0.59 $ 1.08 $ -- $ (0.02)
======== ======== ======== ======= ========
Weighted average shares
outstanding ....................................... 17,694 17,694 17,694 17,692 17,694
======== ======== ======== ======= ========
Cash dividends per share ........................... $ 0.10 $ -- $ -- $ -- $ --
======== ======== ======== ======= ========
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PREFERRED STOCK, COMMON STOCK,
1,000 SHARES; 30,000 SHARES;
$100 PAR VALUE $0.05 PAR VALUE ADDITIONAL
---------------- ----------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994 .......................... -- -- 17,692 $885 $11,695 $178,025 $190,605
Exercise of stock options ........................ -- -- 2 -- 14 -- 14
Cash dividend .................................... -- -- -- -- -- (1,769) (1,769)
Net income ....................................... -- -- -- -- -- 8,491 8,491
------ ----- ------ ---- ------- -------- --------
BALANCE DECEMBER 31, 1994 ........................ -- -- 17,694 885 11,709 184,747 197,341
Net loss for the two months ended--
February 25, 1995 ............................... -- -- -- -- -- (383) (383)
Net income for the fiscal year ended--
March 2, 1996 ................................... -- -- -- -- -- 10,411 10,411
------ ----- ------ ---- ------- -------- --------
BALANCE MARCH 2, 1996 ............................ -- -- 17,694 885 11,709 194,775 207,369
Net income ....................................... -- -- -- -- -- 19,065 19,065
------ ----- ------ ---- ------- -------- --------
BALANCE MARCH 1, 1997 ............................ -- -- 17,694 $885 $11,709 $213,840 $226,434
====== ===== ====== ==== ======= ======== ========
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED TWO MONTHS ENDED
---------------------------------- -----------------------------
DECEMBER 31, MARCH 2, MARCH 1, FEBRUARY 26, FEBRUARY 25,
1994 1996 1997 1994 1995
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................... $ 8,491 $10,411 $19,065 $ 50 $ (383)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .............................. 8,854 7,751 7,971 1,190 1,359
Deferred income taxes ...................................... (1,484) (3,539) (1,870) -- 47
(Gain) loss on sale of property and equipment .............. (73) 10 (52) -- (16)
Loss on disposal of assets ................................. -- 1,142 244 -- 1,360
(Increase) decrease in operating assets:
Merchandising inventories .................................. (17,389) (2,694) (9,586) (9,000) (13,453)
Prepaid expenses and other current assets .................. (418) 2,158 1,765 2,403 (404)
Other assets ............................................... (290) (306) (2,417) (2) 4
Increase (decrease) in operating liabilities:
Accounts payable ........................................... 8,535 (4,721) (2,177) 14,573 12,222
Accrued expenses ........................................... 4,164 1,203 1,137 (2,596) 133
Obligations to customers ................................... 805 (271) 595 (166) 456
Other long term liabilities ................................ -- 237 396 -- --
Income taxes ............................................... 1,741 (245) 502 (3,036) (306)
------- ------- ------- ------- --------
Net cash provided by operating activities ............... 12,936 11,136 15,573 3,416 1,019
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .......................... (14,591) (4,777) (21,709) (1,910) (388)
Proceeds from sale of property and equipment ................ 103 325 65 -- 13
------- ------- ------- ------- --------
Net cash used in investing activities ................... (14,488) (4,452) (21,644) (1,910) (375)
------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends ........................................ (1,769) -- -- -- --
Repayments of obligations under capital lease ............... (234) (287) (339) (36) (43)
Revolving line of credit (repayments) borrowings ............ 2,900 (2,050) 4,950 -- (850)
Exercise of options ......................................... 14 -- -- -- --
------- ------- ------- ------- --------
Net cash provided by (used in) financing activities ..... 911 (2,337) 4,611 (36) (893)
------- ------- ------- ------- --------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS ........................................... (641) 4,347 (1,460) 1,470 (249)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ........................................ 1,347 457 4,804 1,347 706
------- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD .............................................. $ 706 $ 4,804 $ 3,344 $ 2,817 $ 457
======= ======= ======= ======= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) ....................... $ 253 $ 399 $ 291 $ -- $ --
======= ======= ======= ======= ========
Income taxes paid (refunds received)--net .................. $ 5,106 $11,026 $16,041 $ -- $ (33)
======= ======= ======= ======= ========
See notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principal Business
Syms Corp and subsidiaries (the "Company") operates a chain of forty
"off-price" retail stores (thirty-eight in 1996) 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 the Company
and wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the two months ended February 26, 1994 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ended December 31, 1994.
c. Accounting Period
The Company changed its fiscal year end to the Saturday nearest to the end
of February. This change was reported on March 17, 1995. The fiscal years ended
December 31, 1994 and March 1, 1997 were comprised of 52 weeks. The fiscal year
ended March 2, 1996 was comprised of 53 weeks.
d. Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market on a
first-in-first-out (FIFO) basis, 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. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided by the straight-line method over the following estimated useful
lives:
Buildings and improvements 15-30 years
Machinery and equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of life of the asset or life of lease
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
Deferred income taxes reflect the future tax consequences of differences
between the tax basis of assets and liabilities and their financial reporting
amounts at year end.
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
F-6
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
outstanding stock options and for the periods ended December 31, 1994, March 2,
1996 and March 1, 1997, 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. 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.
j. Closed Store Expense
Closed store costs, such as future rent and real estate taxes net of
expected sublease recovery, are accrued when management makes the determination
that no future economic benefit from operations exists and are recorded in
selling, general and administrative expenses.
k. Obligation 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.
l. 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.
m. Recent Accounting Pronouncement
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, and is effective for fiscal
years beginning after December 15, 1995. The Company evaluated its investment in
long-lived assets to be held and used in operations on an individual store basis
and determined that, based upon its history of operating results and operating
projections, the adoption of SFAS No. 121 did not have an effect on the
Company's financial position or results of operations.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"), which is effective for the Company for the year ended February 28, 1998.
SFAS No. 128 simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion No. 15 and establishes
new standards for computing and presenting earnings per share. Application of
SFAS No. 128 is not expected to have a significant effect on the Company's
earnings per share.
n. Reclassification
Certain items in prior years in specific captions of the accompanying
consolidated financial statements and notes to consolidated financial statements
have been reclassified for comparative purposes.
F-7
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consists of:
MARCH 2, MARCH 1,
1996 1997
-------- --------
(IN THOUSANDS)
Land ............................................ $ 34,060 $ 40,061
Buildings and building improvements ............. 102,244 105,511
Leasehold and leasehold improvements ............ 20,365 32,142
Machinery and equipment ......................... 14,893 16,747
Furniture and fixtures .......................... 15,547 15,661
Capital lease ................................... 3,763 3,763
Construction in progress ........................ 2,774 692
-------- --------
193,646 214,577
Less accumulated depreciation and amortization .. 64,411 71,836
-------- --------
$129,235 $142,741
======== ========
NOTE 3--INCOME TAXES
The provision for income taxes is as follows:
FISCAL YEAR ENDED
-------------------------------- TWO MONTHS ENDED
DECEMBER 31, MARCH 2, MARCH 1, FEBRUARY 25,
1994 1996 1997 1995
----------- -------- -------- -----------------
(IN THOUSANDS)
Current:
Federal $5,956 $ 9,109 $13,799 $(223)
State 1,407 1,664 2,748 (8)
------ ------- ------- -----
7,363 10,773 16,547 (231)
------ ------- ------- -----
Deferred:
Federal (1,202) (2,622) (1,560) 43
State (282) (917) (310) 4
------ ------- ------- -----
(1,484) (3,539) (1,870) 47
------ ------- ------- -----
$5,879 $ 7,234 $14,677 $(184)
====== ======= ======= =====
F-8
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
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
DECEMBER 31, MARCH 2, MARCH 1, February 25,
1994 1996 1997 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 .............................. 5.5 5.3 8.4 (3.2)
Officers' life insurance ................... 0.4 0.7 0.1 5.2
Other, net ................................. -- -- -- 0.6
---- ---- ---- -----
Effective income tax rate .................. 40.9% 41.0% 43.5% (32.4)
==== ==== ==== =====
</TABLE>
The composition of the Company's deferred tax assets and liabilities is as
follows:
<TABLE>
<CAPTION>
MARCH 2, MARCH 1,
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Capitalization of inventory costs ................................... $3,800 $4,085
Capital lease ....................................................... 333 404
Accounts receivable ................................................. 1,018 1,143
Other ............................................................... 650 2,645
------ ------
Total deferred tax assets .......................................... 5,801 8,277
------ ------
Deferred tax liability:
Depreciation method and different estimated lives ................... (835) (425)
Other ............................................................... -- (1,016)
------ ------
Total deferred tax liabilities ...................................... (835) (1,441)
------ ------
Net .................................................................. ($4,966) $6,836
Classified in balance sheet as follows:
Current deferred tax asset .......................................... $5,221 $6,639
Long term deferred tax asset (net of non-current
deferred tax liability) ............................................ -- 197
Long term deferred tax liability (net of non-current tax asset) ..... (255) --
------ ------
Net ................................................................. $4,966 $6,836
====== ======
</TABLE>
NOTE 4--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. The
interest rate on short term borrowings was 6.75% at March 1, 1997. At March 2,
1996 there were no outstanding borrowings, and at March 1, 1997 there was
$4,905,000 in outstanding borrowings.
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 December 31, 1994,
March 2, 1996 and March 1, 1997 including amounts related to capital leases,
were $865,000, $623,000 and $586,000, respectively, of which $612,000, $105,000
and $152,000 were capitalized in fiscals 1994, 1996 and 1997, respectively, in
connection with the purchase and construction of new facilities.
F-9
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
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 March 1, 1997, the Company had $3,786,000 and $6,094,000,
respectively, in outstanding letters of credit.
NOTE 5--FAIR VALUE DISCLOSURES
The estimated fair values of financial instruments which are presented
herein have been determined by the Company using available market information
and appropriate valuation methodologies. However, considerable judgement is
required in interpreting market data to develop estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
amounts the Company could realize in a current market exchange.
The fair value of the Company's cash and cash equivalents, accounts
receivable and short-term borrowings approximates their carrying values at March
2, 1996 and at March 1, 1997 due to the short-term maturities of these
instruments.
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, MARCH 1,
1996 1997
-------- --------
(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 $3,128 at March 1, 1997 .................................. $2,711 $3,254
====== ======
Projected benefit obligation ........................................................... $3,592 $4,180
Plan assets at fair value, primarily mutual funds and United States Treasury bills ..... 3,249 3,869
------ ------
Plan assets less than projected benefit obligation ..................................... (343) (311)
Unrecognized net loss .................................................................. 186 147
Unamortized net asset at transition .................................................... (152) (127)
------ ------
Accrued pension cost (included in accrued expenses) .................................... $ (309) $ (291)
====== ======
</TABLE>
F-10
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
Pension expense includes the following components:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------
DECEMBER 31, MARCH 2, MARCH 1,
1994 1996 1997
------------ ------------------ ---------
(in thousands)
<S> <C> <C> <C>
Service cost benefits earned during the period ............... $384 $330 $326
Interest cost on the projected benefit obligation ............ 248 242 282
Actual return on plan assets ................................. (193) (191) (159)
Net amortization and deferral ................................ (82) (80) (155)
---- ---- ----
Net periodic pension cost .................................... $357 $301 $294
==== ==== ====
</TABLE>
The weighted average discount rate and 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 December
31, 1994, March 2, 1996 and March 1, 1997. The expected long-term rate of return
on plan assets was 8.5% during each of the years ended December 31, 1994, March
2, 1996 and March 1, 1997.
b. PROFIT-SHARING AND 401(K) PLAN--The Company has a profit-sharing and
401(K) plan for all employees other than those covered under collective
bargaining agreements. 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 matching contributions to this plan.
However, profit-sharing contributions were made in the amounts of $130,000 for
each of the years ended December 31, 1994 and March 2, 1996, $200,000 for year
ended March 1, 1997 and $39,000 for the two months ended February 25, 1995.
NOTE 7--COMMITMENTS
a. LEASES--The Company has various operating leases and one capital lease
for its retail stores, with terms expiring between 1997 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.
F-11
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
Future minimum lease payments at March 1, 1997 are as follows:
CAPITAL
LEASE
REAL OPERATING
ESTATE LEASES
-------- ----------
(IN THOUSANDS)
1998 ................................................. $ 600 $ 6,974
1999 ................................................. 600 6,158
2000 ................................................. 450 5,442
2001 ................................................. -- 5,062
2002 ................................................. -- 5,171
2003 and thereafter--cumulative ...................... -- 39,785
----- -------
Total minimum payments ............................... 1,650 $68,592
=======
Less amount representing interest .................... 345
------
Present value of net minimum lease payments .......... 1,305
Less current maturities .............................. 405
------
$ 900
======
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 December 31, 1994, March 2, 1996, and March 1,
1997 and $100,000 for the two months ended February 25, 1995.
Rent expense for operating leases is as follows:
FISCAL YEAR ENDED TWO MONTHS
-------------------------------- ENDED
DECEMBER 31, MARCH 2, MARCH 1, FEBRUARY 25,
1994 1996 1997 1995
----------- -------- -------- -----------
(IN THOUSANDS)
Minimum rentals ................. $4,030 $4,308 $5,832 $ 698
Escalation rentals .............. 9 24 413 28
Contingent rentals .............. 25 40 36 4
Sublease rentals ................ (192) (386) (743) (32)
------ ------ ------ ------
$3,872 $3,986 $5,538 $ 698
====== ====== ====== ======
b. EMPLOYMENT AGREEMENT--At March 1, 1997 the Company had an employment
agreement with its General Merchandising Manager, expiring 2009, pursuant to
which annual compensation of approximately $300,000 is required. In addition,
that employee is entitled to additional compensation upon occurrence of certain
events.
c. 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 statements 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.
F-12
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
NOTE 8--PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of preferred
stock, in one or more series of preferred stock. The Board of Directors is
authorized to establish the number of shares to be included in each such series,
and to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series.
NOTE 9--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 1986 (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).
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), was effective for the Company for
fiscal 1997. SFAS No. 123 encourages (but does not require) compensation expense
to be measured based on the fair value of the equity instrument awarded. In
accordance with APB No. 25, no compensation cost has been recognized in the
Consolidated Statements of Income for the Company's stock option plans. If
compensation cost for the Company's stock option plans had been determined in
accordance with the fair value method prescribed by SFAS No. 123, the Company's
net income would have been $10,411,000 and $19,042,000 for 1996 and 1997,
respectively, and the earnings per share would have been $0.59 and $1.08 for
1996 and 1997, respectively. This pro forma information may not be
representative of the amounts to be expected in future years as the fair value
method of accounting prescribed by SFAS No. 123 has not been applied to options
granted prior to 1997.
Stock option transactions are summarized below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS ENDED
-------------------------------------------------------------------------- ------------------
DECEMBER 31, 1994 MARCH 2, 1996 MARCH 1, 1997 FEBRUARY 25, 1995
------------------- -------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------ ------- ------ ------- ------ ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED OPTIONS
Outstanding beginning
of year ..................... 547 $10.04 464 $ 9.90 426 $ 9.83 496 $ 9.96
Granted .................... 57 8.50 -- -- 100 8.00 -- --
Exercised .................. (2) 8.63 -- -- -- -- -- --
Cancelled .................. (106) 9.81 (38) 9.53 (36) 10.27 (32) 10.65
--- ------ --- ------ --- ------ --- ------
Outstanding, end of
period ...................... 496 $ 9.96 426 $ 9.94 490 $ 9.52 464 $ 9.91
=== ====== === ====== === ====== === ======
Options exercisable
at year end ................. 288 $10.11 320 $10.02 360 $ 9.83 256 $10.04
Weighted-average
fair value of
options granted
during the year ............ $ 4.99 -- $ 4.99 --
</TABLE>
F-13
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
The following table summarizes information about stock options outstanding
at March 1, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------------------- ----------------------------------------
WEIGHTED-AVERAGE
NUMBER REMAINING NUMBER
RANGE OF OUTSTANDING AT CONTRACTUAL WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-AVERAGE
EXERCISE PRICES MARCH 1, 1997 LIFE (YEARS) EXERCISE PRICE MARCH 1, 1997 EXERCISE PRICE
- --------------- ------------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$7.125-$12.250 490,625 4.8 $9.52 359,815 $9.83
</TABLE>
The fair value of each option grant is estimated on the date of each grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997: risk-free interest rate of 6.83%, expected
life of 10 years, expected volatility of 33.29% and dividend yield of 0%. The
fair value generated by the Black-Scholes model may not be indicative of the
future benefit, if any, that may be received by the option holder.
NOTE 10--OTHER TRANSACTIONS
Included in cost of sales for the three fiscal years ended December 31,
1994, March 2, 1996 and March 1, 1997 are purchases of approximately $6,322,000,
$5,139,000 and $5,471,000, 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. Included in prepaid expenses and other current assets at
March 2, 1996 and March 1, 1997 are advances to the licensee totaling
approximately $2,182,000 and $3,438,000, respectively. The advances at March 1,
1997 are for purchases to be received in the Spring and Fall of 1997 and are to
be received by the Company prior to December 31, 1997. 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 totaling approximately $150,000, which expires on July 5,
1997 and at March 1, 1997 has advanced fabric in the approximate amount of
$311,000.
F-14
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED DECEMBER 31, 1994, MARCH 2, 1996, MARCH 1, 1997
AND THE TWO MONTHS ENDED FEBRUARY 25, 1995
The Company has entered into a capital lease with the Chief Executive
Officer. Included in the Statement of Income are the following expenses relating
to this agreement:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWO MONTHS
-------------------------------------------------- ENDED
DECEMBER 31, MARCH 2, MARCH 1, FEBRUARY 25,
1994 1996 1997 1995
-------------------------------------------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Depreciation .......... $ 238 $ 238 $ 238 $ 40
Interest .............. 366 313 261 57
</TABLE>
The balance sheet includes the following items relating to this agreement:
MARCH 2, MARCH 1,
1996 1997
-------- --------
(IN THOUSANDS)
Assets under Capital Lease .................. $ 3,763 $ 3,763
Accumulated Depreciation .................... (3,101) (3,339)
Capital Lease Obligation .................... 1,644 1,305
On November 22, 1996 the Company loaned the Marcy Syms Revocable Trust
$500,000 toward the purchase of a house for Ms. Syms in Westchester County, New
York. The loan is evidenced by the Trust's note, which is guaranteed by Ms.
Syms, and is secured by a first priority mortgage on the real estate purchased.
The note bears interest at the rate of 6.6% per annum (the then Federal Mid-Term
Rate) payable annually, and the principal of the note is due November 22, 2001.
NOTE 11--UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
QUARTER
-------------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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 MARCH 1, 1997
Net Sales ....................... $83,377 $75,128 $96,225 $92,062
Gross profit .................... $30,456 $26,133 $41,494 $35,596
Net income ...................... $ 3,381 $ 1,441 $ 8,637 $ 5,606
Net income per share ............ $ 0.19 $ 0.08 $ 0.49 $ 0.32
F-15
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
AUGUST 31, MARCH 1, AUGUST 30,
1996 1997 1997
-------- -------- --------
(UNAUDITED) (NOTE) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 6,744 $ 3,344 $ 3,203
Merchandise inventories ................................... 128,867 122,540 139,068
Deferred income taxes ..................................... 5,977 6,639 5,170
Prepaid expenses and other current assets ................. 3,501 1,756 6,647
-------- -------- --------
TOTAL CURRENT ASSETS .................................... 145,089 134,279 154,088
PROPERTY AND EQUIPMENT--
Net of accumulated depreciation and amortization .......... 137,870 142,741 145,266
DEFERRED INCOME TAXES ...................................... 686 197 222
OTHER ASSETS--Net of accumulated amortization .............. 5,457 6,801 6,538
-------- -------- --------
TOTAL ASSETS ............................................. $289,102 $284,018 $306,114
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .......................................... $ 49,748 $ 28,723 $ 37,155
Accrued expenses .......................................... 9,734 11,055 11,508
Obligations to customers .................................. 4,313 5,085 4,174
Income taxes payable ...................................... 3,598 5,833 3,308
Short term borrowings ..................................... 6,900 4,950 13,400
Current portion of obligations under capital lease ........ 371 405 441
-------- -------- --------
Total current liabilities ................................ 74,664 56,051 69,986
-------- -------- --------
OBLIGATIONS UNDER CAPITAL LEASE ............................ 1,111 900 670
-------- -------- --------
DEFERRED INCOME TAXES ...................................... 667 -- --
-------- -------- --------
OTHER LONG TERM LIABILITIES ................................ 469 633 801
-------- -------- --------
COMMITMENTS ................................................ -- -- --
STOCKHOLDERS' EQUITY
Preferred stock, par value; $100 per share
authorized 1,000 shares; none outstanding ................ -- -- --
Common stock, par value; $0.05 per share
authorized 30,000 shares; 17,776 issued and
outstanding as of August 31, 1996, March1,1997
and August 30, 1997 ...................................... 885 885 889
Additional paid-in capital ................................ 11,709 11,709 12,432
Retained earnings ......................................... 199,597 213,840 221,336
-------- -------- --------
Total Stockholders' Equity ............................... 212,191 226,434 234,657
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................................... $289,102 $284,018 $306,114
======== ======== ========
</TABLE>
Note: The balance sheet at March 1, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
F-16
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
TWENTY-SIX WEEKS ENDED
----------------------
AUGUST 31, AUGUST 30,
1996 1997
-------- --------
(UNAUDITED)
NET SALES .......................................... $158,505 $164,239
Cost of goods sold ................................. 101,916 99,795
-------- --------
Gross profit ....................................... 56,589 64,444
EXPENSES
Selling, general and administrative ................ 34,623 35,376
Advertising ........................................ 2,883 3,900
Occupancy .......................................... 6,683 7,930
Depreciation and amortization ...................... 3,830 4,290
-------- --------
Income from operations ............................. 8,570 12,948
Interest expense--net .............................. 36 241
Income before income taxes ......................... 8,534 12,707
Provision for income taxes ......................... 3,712 5,211
-------- --------
NET INCOME ......................................... $ 4,822 $ 7,496
======= =======
Net income per shares .............................. $ 0.27 $ 0.42
======= =======
Weighted average shares outstanding ................ 17,694 17,739
======= =======
F-17
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-----------------------------
AUGUST 31, AUGUST 30,
1996 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME .......................................................... $ 4,822 $ 7,496
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization ....................................... 3,830 4,290
Deferred income taxes ............................................... (710) 1,444
(Gain) on sale of property and equipment ............................ (37) (8)
Loss on disposal of assets .......................................... 244 --
(Increase) decrease in operating assets:
Merchandise inventories ............................................ (15,913) (16,528)
Prepaid expenses and other current assets .......................... 20 (4,891)
Other assets ....................................................... (1,048) 237
Increase (decrease) in operating liabilities:
Accounts payable ................................................... 18,848 8,432
Accrued expenses ................................................... (184) 453
Obligations to customers ........................................... (177) (911)
Other long term liabilities ........................................ 232 168
Income taxes ....................................................... (2,053) (2,525)
------- -------
Net cash (used in) provided by operating activities ............... 7,874 (2,343)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment ............................. (12,716) (6,792)
Proceeds from sale of property and equipment ........................ 44 11
------- -------
Net cash used in investing activities ............................. (12,672) (6,781)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease ....................... (162) (194)
Revolving line of credit borrowings--net ............................ 6,900 8,450
Proceeds from exercise of stock options ............................. -- 727
------- -------
Net cash provided by financing activities ......................... 6,738 8,983
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ................. 1,940 (141)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....................... 4,804 3,344
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................. $ 6,744 $ 3,203
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) ............................... $ 57 $ 169
======= =======
Income taxes paid--net ............................................. $ 3,977 $10,846
======= =======
</TABLE>
F-18
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 30, 1997 AND AUGUST 31, 1996
(Unaudited)
NOTE 1--THE COMPANY
Syms Corp (the "Company") operates a chain of forty "off-price" retail
stores located throughout the Northeastern and Middle Atlantic regions and in
the Midwest, Southeast and Southwest. Each store offers a broad range of first
quality, in-season merchandise bearing nationally recognized designer or
brand-name labels for men, women and children.
NOTE 2--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen and twenty-six week periods
ended August 30, 1997 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending February 28, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the fiscal year
ended March 1, 1997.
NOTE 3--ACCOUNTING PERIOD
The Company maintains its records on the basis of a 52-53 week fiscal year
ending the Saturday closest to the end of February. The fiscal year ending
February 28, 1998 and March 1, 1997 are both comprised of 52 weeks.
NOTE 4--MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost (first in, first
out) or market, as determined by the retail inventory method.
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 Company
anticipates it will renew this facility for another three years for the same
amount and the same terms, conditions and covenants. The average interest rate
on short term borrowings was 6.13% at August 30, 1997. The average daily unused
portion is subject to a commitment fee of 1/8 of 1% per annum. The Company had
outstanding borrowings of $13,400,000, $4,950,000, and $6,900,000 as of August
30, 1997, March 1, 1997 and August 31, 1996, respectively.
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.
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
August 30, 1997, March 1, 1997 and August 31, 1996 the Company had $7,436,000,
$6,094,000 and $7,896,000, respectively, in outstanding letters of credit.
F-19
<PAGE>
[GRAPHICS PAGE]
AN EDUCATED CONSUMER
IS OUR BEST CUSTOMER(R)
[SYMS LOGO]
<PAGE>
================================================================================
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------
TABLE OF CONTENTS
PAGE
----
Available Information ..................................................... 3
Incorporation of Certain Documents by Reference ........................... 3
Prospectus Summary ........................................................ 4
Forward-Looking Statements ................................................ 7
Investment Considerations ................................................. 7
Use of Proceeds ........................................................... 8
Price Range of Common Stock and Dividend Policy ........................... 8
Capitalization ............................................................ 9
Selected Consolidated Financial and Operating Data ........................ 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................... 11
Business .................................................................. 16
Management ................................................................ 21
Principal and Selling Stockholders ........................................ 22
Description of Capital Stock .............................................. 22
Shares Eligible for Future Sale ........................................... 23
Underwriting .............................................................. 24
Legal Matters ............................................................. 25
Experts ................................................................... 25
Index to Financial Statements ............................................. 26
Report of Independent Accountants ......................................... F-1
================================================================================
================================================================================
3,500,000 SHARES
SYMS CORP
COMMON STOCK
----------
PROSPECTUS
----------
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
________________, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses to be borne by the Company in
connection with the offering described in this Registration Statement. All such
expenses other than the Securities and Exchange Commission registration fee are
estimates. The Selling Stockholders shall bear__________portion of the following
expenses:
Securities and Exchange Commission Registration Fee .....
Transfer Agents Fees and Expenses .......................
Printing Fees and Expenses ..............................
Accounting Fees and Expenses ............................
Legal Fees and Expenses .................................
Miscellaneous ...........................................
Total ................................................
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Seven of the Company's Certificate of Incorporation and Article 10
of the Company's By-Laws each require the Company to indemnify, to the fullest
extent permitted by Section 14A:3-5 of the Business Corporation Act of New
Jersey, as the same may be amended or supplemented, any and all persons whom it
shall have power to indemnify under such Section from and against any and all of
the expenses, liabilities or other matters referred to in or covered by such
Section.
Section 14A:3-5 of the Business Corporation Act of New Jersey permits a
corporation to indemnify all corporate agents, defined to include (among other
persons) current and former officers and directors of the indemnifying
corporation, against proceedings by or in the right of the corporation, if such
corporate agent acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation. With respect to
proceedings other than those in the right of the corporation, which are criminal
in nature, such right to indemnify is further conditioned on such corporate
agent's having had no reasonable belief that his conduct was unlawful.
Each of the directors has entered into an agreement with the Company that
provides that the Company will indemnify such director to the fullest extent
permitted by the Business Corporation Act of New Jersey. The Company maintains
directors and officers liability insurance which insures against liabilities
that directors or officers of the Company may incur in such capacities.
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
Exhibit
Number Description of Exhibits
- ------- -----------------------
1.1 Form of Underwriting Agreement*
4.1 Specimen Certificate of Common Stock (incorporated by reference to 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)**
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP*
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit
5.1)
23.2 Consent of Deloitte & Touche LLP**
24.1 Power of Attorney (included on signature page)**
- ----------
* Filed herewith.
** Previously filed.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions set forth in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, in the State of New York, on
November 17, 1997.
SYMS CORP
By /s/ SY SYMS
----------------------------
Name: Sy Syms
Title: Chairman & Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ SY SYMS Chairman of the Board, Chief Executive November 17, 1997
- -------------------- Officer and a Director of the Company
Sy Syms
* President, Chief Operating Officer and November 17, 1997
- -------------------- a Director of the Company
Marcy Syms
* Vice President, Treasurer, Chief November 17, 1997
- -------------------- Financial Officer and a Director
Antone F. Moreira of the Company
* Vice President, Secretary, November 17, 1997
- -------------------- Merchandise Manager Men's Tailored
Stephen A. Merns Clothing and Shoes, and a Director of
the Company
* Director of the Company November 17, 1997
- --------------------
Wilbur L. Ross, Jr.
* Director of the Company November 17, 1997
- --------------------
Philip G. Barach
Director of the Company November __, 1997
- --------------------
David A. Messer
Director of the Company November __, 1997
- --------------------
Harvey A. Weinberg
*By: /s/ SY SYMS
----------------
Attorney-in-Fact
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- ------ -----------------------
1.1 Form of Underwriting Agreement*
4.1 Specimen Certificate of Common Stock (incorporated by reference to 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)**
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP*
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP**
24.1 Power of Attorney (included on signature page)**
- ----------
* Filed herewith.
** Previously filed.
II-4
3,500,000 SHARES OF COMMON STOCK
SYMS CORP
UNDERWRITING AGREEMENT
November ___, 1997
Bear, Stearns & Co. Inc.
Salomon Brothers Inc
as Representatives of the
several Underwriters named
in Schedule I hereto
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, N.Y. 10167
Ladies and Gentlemen:
Upon the terms and subject to the conditions herein set forth, the Sy Syms
Foundation (the "Foundation") and Sy Syms (through the Sy Syms aka Sy Syms Merns
Revocable Living Trust referred to in Section 2.B(a) below) (collectively, the
"Firm Share Sellers") propose to sell to the several underwriters named in
Schedule I hereto (the "Underwriters"), for whom you are acting as
representatives, an aggregate of 3,500,000 shares (the "Firm Shares") of the
Common Stock, $.05 par value (the "Common Stock"), of Syms Corp, a New Jersey
corporation (the "Company"). In addition, Sy Syms, Marcy Syms and Stephen A.
Merns (collectively, the "Option Share Sellers") propose to grant to the
Underwriters the option (the "Option") to purchase from the Option Share Sellers
an aggregate of up to 525,000 additional shares of Common Stock (the "Option
Shares") for the purposes set forth herein. The number of Firm Shares to be sold
by each Firm Share Seller is set forth opposite the name of such Firm Share
Seller in Schedule II hereto and the maximum number of Option Shares that may be
purchased by the Underwriters from each Option Share Seller upon exercise of the
Option is set forth opposite the name of such Option Share Seller in Schedule II
hereto. The Firm Shares and the Option Shares are referred to collectively
herein as the "Shares" and the Firm Share Sellers and the Option Share Sellers
are referred to collectively herein as the "Selling Stockholders." The Company
and the Selling Stockholders hereby confirm their agreements with the
Underwriters as follows:
1. UNDERWRITERS AND REPRESENTATIVES. The term "Underwriters", as used
herein, refers collectively to you and the other underwriters named in Schedule
I annexed hereto and made a part hereof and the term "Representatives" refers to
you in your capacity as representatives of the Underwriters. Except
<PAGE>
as may be expressly set forth below, any reference to you in this Agreement
shall be solely in your capacity as Representatives, and the Company and the
Selling Stockholders shall be entitled to act and rely upon any statement,
request, notice, consent, waiver or agreement made or given by Bear, Stearns &
Co. Inc. ("Bear Stearns") purportedly on behalf of the Representatives or any
Underwriter.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
STOCKHOLDERS.
A. The Company and the Firm Share Sellers, jointly and severally, represent
and warrant to each Underwriter as follows:
(a) The Company meets the requirements for the use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has prepared and
filed with the Securities and Exchange Commission (the "Commission"),
pursuant to the Act and the rules and regulations promulgated by the
Commission thereunder (the "Regulations"), a registration statement on Form
S-3 (File No. 333-38711) relating to the Shares and one amendment thereto,
each including a preliminary prospectus. The Company next proposes to file
with the Commission, after the effectiveness of such registration
statement, a final prospectus in accordance with Rules 430A and 424(b)(1)
or 424(b)(4) of the Regulations, the documents so filed in either case to
include all Rule 430A Information (as hereinafter defined) and to conform,
in content and form, to the last printer's proof thereof furnished to and
approved by the Representatives immediately prior to such filing. As used
in this Agreement, (i) the term "Effective Date" means the date that the
registration statement hereinabove referred to is declared effective by the
Commission, (ii) the term "Registration Statement" means such registration
statement as last amended prior to the time the same was declared effective
by the Commission, including all exhibits and schedules thereto, all
documents (including financial statements, financial schedules and
exhibits) incorporated therein by reference and all Rule 430A Information
deemed to be included therein at the Effective Date pursuant to Rule 430A
of the Regulations, (iii) the term "Rule 430A Information" means
information with respect to the Shares and the public offering thereof
permitted, pursuant to the provisions of paragraph (a) of Rule 430A of the
Regulations, to be omitted from the form of prospectus included in the
Registration Statement at the time it is declared effective by the
Commission, (iv) the term "Prospectus" means the form of final prospectus
relating to the Shares first filed with the Commission pursuant to Rule
424(b) of the Regulations or, if no filing pursuant to Rule 424(b) is
required, the form of final prospectus included in the Registration
Statement at the Effective Date and (v) the term
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"preliminary prospectus" means any preliminary prospectus (as described in
Rule 430 of the Regulations) with respect to the Shares that omits Rule
430A Information. Any reference herein to any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 that were
filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on or before the date of such preliminary prospectus or the date of
the Prospectus, as the case may be, except that any such documents shall be
deemed to be modified or superseded to the extent that a statement
contained in such preliminary prospectus or the Prospectus or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference therein modifies or supersedes such statement (all such documents
being hereinafter referred to as the "Incorporated Documents").
(b) On the Effective Date, the date the Prospectus is first filed with
the Commission pursuant to Rule 424(b) of the Regulations (if required), at
all times subsequent thereto to and including the Closing Date and, if
later, the Additional Closing Date (each as hereinafter defined), when any
post-effective amendment to the Registration Statement becomes effective or
any supplement to the Prospectus is filed with the Commission, and during
such longer period as the Prospectus may be required to be delivered in
connection with sales of Shares by the Underwriters or a dealer, the
Registration Statement and the Prospectus (as amended or supplemented if
the Company shall have filed with the Commission an amendment or supplement
thereto) complied and will comply in all material respects with the
applicable provisions of the Act and the Regulations, and did not and will
not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements made therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading. When any
preliminary prospectus was first filed with the Commission (whether filed
as part of the Registration Statement or an amendment thereof or pursuant
to Rule 424(a) of the Regulations) and when any amendment thereof or
supplement thereto was first filed with the Commission, such preliminary
prospectus and any amendments thereof and supplements thereto complied in
all material respects with the applicable provisions of the Act and the
Regulations and did not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under
which they were made, not misleading. No representation and warranty,
however, is made in this paragraph (b) with respect to written
3
<PAGE>
information contained in or omitted from the Registration Statement, the
Prospectus, any preliminary prospectus, or any amendment or supplement in
reliance upon and in conformity with information furnished to the Company
by or on behalf of the Representatives with respect to the Underwriters and
the plan of distribution of the Shares expressly for use in connection with
the preparation thereof. Each of the Incorporated Documents, when the same
was first filed with the Commission, complied in all material respects with
the applicable provisions of the Exchange Act and the rules and regulations
of the Commission thereunder and any further documents so filed and
incorporated by reference will, when they are filed with the Commission,
comply in all material respects with the applicable provisions of the
Exchange Act and such rules and regulations. None of such filed documents
when they were filed (or, if an amendment with respect thereto was filed,
when such amendment was filed), contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of circumstances under
which they were made, not misleading, and no such further document, when it
is filed with the Commission, will contain an untrue statement of a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(c) Each contract, agreement, instrument, lease, license or other
document required to be described in the Registration Statement or the
Prospectus or in any Incorporated Document has been properly described in
all material respects. Each contract, agreement, instrument, lease,
license, or other document required to be filed as an exhibit to the
Registration Statement has been filed with the Commission as an exhibit to,
or has been incorporated by reference as an exhibit into, the Registration
Statement.
(d) Deloitte & Touche LLP, whose reports have been filed with the
Commission and appear in the Prospectus, are independent public accountants
with regard to the Company, as required by and within the meaning of the
Act and the Regulations. The consolidated financial statements of the
Company and its subsidiaries contained in the Registration Statement and
the Prospectus fairly present the consolidated financial position, results
of operations and cash flows of the Company and its subsidiaries, and the
other information purported to be shown therein, at the respective dates
and for the respective periods to which they apply. Those financial
statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved, and
4
<PAGE>
are, in all material respects, prepared in accordance with the books and
records of the Company and its subsidiaries. No other financial statements
are required by Form S-3 or otherwise to be included or incorporated by
reference in the Registration Statement or the Prospectus.
(e) Subsequent to the respective dates as of which information is
given in the Registration Statement, except as set forth in the
Registration Statement, there has not been any material adverse change in
the business, properties, operations, condition (financial or other) or
results of operations of the Company and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary course of
business, and since the date of the latest balance sheet of the Company
included or incorporated by reference in the Registration Statement,
neither the Company nor any of its subsidiaries (A) has incurred or
undertaken any liabilities or obligations, direct or contingent, that are,
individually or in the aggregate, material to the Company and its
subsidiaries taken as a whole, or (B) entered into any transaction not in
the ordinary course of business that is material to the Company and its
subsidiaries taken as a whole; and the Company has not declared or paid any
dividend on or made any distribution of or with respect to any shares of
its capital stock or redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or otherwise acquire any shares of its or its
subsidiaries' capital stock.
(f) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly and validly authorized, executed and delivered by
the Company and is a legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding
at law or in equity), and except insofar as rights to indemnification and
contribution contained herein may be limited by federal or state securities
laws or related public policy.
(g) The Company's execution and delivery of, and its performance of
its obligations under, this Agreement and the consummation of the
transactions contemplated hereby will not (i) conflict with or result in a
breach of any of the terms and provisions of, or constitute a default (or
an event which with notice or lapse of time, or both, would
5
<PAGE>
constitute a default) or require consent under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to the terms of,
any agreement, instrument, franchise, license or permit to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or its or their respective properties or assets may
be bound and that is material to the Company and its subsidiaries taken as
a whole, or (ii) violate or conflict with any provision of the certificate
of incorporation, by-laws or similar governing instruments of the Company
or any of its subsidiaries or (iii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties or
assets, except for those violations that individually or in the aggregate
would not have a material adverse effect on the financial condition,
results of operations or business of the Company and its subsidiaries taken
as a whole (hereafter, a "Material Adverse Effect").
(h) No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties or
assets is required for the Company's execution and delivery of, and its
performance of its obligations under, this Agreement and the consummation
of the transactions contemplated hereby, except the registration of the
Shares under the Act, and such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits as may be
required under state securities laws in connection with the purchase and
distribution of the Shares by the Underwriters. No consent of any party to
any material contract, agreement, instrument, lease, license, arrangement
or understanding to which the Company or any subsidiary is a party, or to
which any of their respective properties or assets is subject, is required
for the Company's execution and delivery of, and its performance of its
obligations under, this Agreement or for the sale or delivery by the
Selling Stockholders of the Shares as contemplated hereby.
(i) All of the currently outstanding shares of Common Stock, including
the Shares, and the outstanding shares of capital stock of each of the
Company's subsidiaries, have been duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of or subject
to any preemptive rights. The Company had, at August 30,
6
<PAGE>
1997, an authorized and outstanding capitalization as set forth in the
Registration Statement and as shall be set forth in the Prospectus. The
Common Stock conforms to the description thereof set forth in the
Registration Statement and as shall be set forth in the Prospectus. The
Company owns directly or indirectly all of the outstanding capital stock of
each of its subsidiaries, free and clear of all claims, liens, security
interests, pledges, charges, encumbrances, stockholders agreements and
voting trusts.
(j) There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the issuance of, any
shares of capital stock of the Company or of any subsidiary of the Company
or any security or other instrument that, by its terms, is convertible
into, exercisable or exchangeable for or evidences the right to acquire
shares of the capital stock of the Company or any subsidiary of the
Company, except as described in the Registration Statement and as shall be
described in the Prospectus.
(k) The Company has no subsidiaries other than those listed in
Schedule III hereto. The Company and each of its subsidiaries has been duly
organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and is duly qualified and in
good standing as a foreign corporation in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary,
except for those failures to be so qualified or in good standing as a
foreign corporation that will not in the aggregate have a Material Adverse
Effect. The Company and each of its subsidiaries has all requisite power
and authority, and all necessary consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and permits of and
from all public, regulatory or governmental agencies and bodies, to own,
lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and as shall be
described in the Prospectus (except for those the absence of which,
individually or in the aggregate would not have a Material Adverse Effect),
and no such consent, approval, authorization, order, registration,
qualification, license or permit contains a materially burdensome
restriction that is not adequately disclosed in the Registration Statement
and Prospectus.
(l) Neither the Company nor any of its subsidiaries, nor to the best
knowledge of the Company, any other party, is in violation or breach of, or
in default (nor has an event occurred that with notice, lapse of time or
both,
7
<PAGE>
would constitute a default) with respect to complying with, any material
provision of any contract, agreement, instrument, lease, license,
arrangement, or understanding that is material to the Company and its
subsidiaries taken as a whole, except for such violations, breaches and
defaults as, individually or in the aggregate, would not have a Material
Adverse Effect; and each such contract, agreement, instrument, lease,
license, arrangement, and understanding is in full force and effect, and is
the legal, valid, and binding obligation of the Company or such subsidiary,
as the case may be, and (subject to applicable bankruptcy, insolvency, and
other laws affecting the enforceability of creditors' rights generally) is
enforceable as to the Company or such subsidiary, as the case may be, in
accordance with its terms. The Company and each of its subsidiaries enjoys
peaceful and undisturbed possession in all material respects under all
material leases and licenses under which it is operating. Neither the
Company nor any of its subsidiaries is in violation of its certificate of
incorporation, by-laws or similar governing instrument.
(m) Except as disclosed in the Registration Statement and as may be
described in the Prospectus, there is no litigation, arbitration, claim,
governmental or other proceeding or investigation pending or, to the best
knowledge of the Company, threatened with respect to the Company or any
subsidiary thereof, or any of their respective operations, businesses,
properties or assets, that, individually or in the aggregate, if adversely
determined, would have a Material Adverse Effect. Neither the Company nor
any subsidiary thereof is, or, to the best knowledge of the Company, with
the giving of notice or lapse of time or both will be, in violation of or
non-compliance with the requirements of any permit or license that is
material to its business or the provisions of any law, rule, regulation,
order, judgment or decree, including, but without limitation thereto, all
applicable federal, state and local laws and regulations relating to (i)
zoning, land use, protection of the environment, human health and safety or
hazardous or toxic substances, wastes, pollutants or contaminants and (ii)
employee or occupational safety, discrimination in hiring, promotion or pay
of employees, employee hours and wages or employee benefits, except for
such violations or failures of compliance that, individually or in the
aggregate, would not have a Material Adverse Effect.
(n) Each of the Company and its subsidiaries has (i) good and
marketable title to all real and personal properties and assets owned by
it, free and clear of all liens, security interests, pledges, charges,
encumbrances,
8
<PAGE>
and mortgages and (ii) valid, subsisting and enforceable leases for all
real and personal properties leased by them, in each case, subject to such
exceptions as, individually or in the aggregate, do not have and are not
reasonably likely to have a Material Adverse Effect. No real property
owned, leased, licensed, or used by the Company or a subsidiary thereof
lies in an area that is, or to the best knowledge of the Company will be,
subject to zoning, use, or building code restrictions that would prohibit,
and no state of facts relating to the actions or inaction of another person
or entity or his or its ownership, leasing, licensing, or use of any real
or personal property exists that would prevent, the continued effective
ownership, leasing, licensing, or use of such real property in the business
of the Company or such subsidiary as presently conducted or as the
Prospectus indicates is contemplated to be conducted subject to such
exceptions as, individually or in the aggregate, do not have and are not
reasonably likely to have a Material Adverse Effect.
(o) All material patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, franchises, and other
intangible properties and assets (all of the foregoing being herein called
"Intangibles") that the Company or any subsidiary thereof owns or has
pending, or under which the Company or any such subsidiary is licensed, are
in good standing, are uncontested and are set forth in the Registration
Statement or the Incorporated Documents. Neither the Company nor any such
subsidiary has received notice of its alleged infringement of the asserted
rights of others with respect to Intangibles. To the best knowledge of the
Company, there is no infringement by others of any Intangibles of the
Company or any subsidiary that has or may in the future have a Material
Adverse Effect.
(p) To the knowledge of the Company and the Selling Stockholders,
neither the Company nor any subsidiary thereof, nor any director, officer
or employee of the Company or any such subsidiary has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(q) No person has the right by contract or otherwise to require
registration under the Act of shares of Common
9
<PAGE>
Stock or other securities of the Company because of the filing or
effectiveness of the Registration Statement.
(r) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Regulations) has taken or will take, directly
or indirectly, prior to the termination of the offering of the Shares
contemplated by this Agreement, any action designed to stabilize or
manipulate the price of any security of the Company, or that has caused or
resulted in, or that might reasonably be expected to cause or result in,
stabilization or manipulation of the price of the Common Stock.
(s) Neither the Company nor any of its subsidiaries is, or intends to
conduct its business in such a manner that it would become, an "investment
company" as defined in the Investment Company Act of 1940, as amended.
(t) Except as may be set forth in the Prospectus, neither the Company
nor any Selling Stockholder has incurred any liability for a fee,
commission, or other compensation on account of the employment of a broker
or finder in connection with the transactions contemplated by this
Agreement.
(u) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions by or
involving the Company or any of its subsidiaries are executed in accordance
with management's general or specific authorization, (ii) such transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets, (iii)
access to the respective assets of the Company and each of its subsidiaries
is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(v) Other than as disclosed in the Registration Statement and as shall
be disclosed in the Prospectus, no labor dispute with employees of the
Company or any of its subsidiaries exists or, to the knowledge of the
Company, is imminent that, individually or in the aggregate, is or is
reasonably likely to have a Material Adverse Effect, and the Company is not
aware of any existing or imminent labor disturbance by the employees of any
of its principal vendors that reasonably can be expected to have a Material
Adverse Effect.
10
<PAGE>
(w) (A) All United States Federal income tax returns of the Company
and each of its subsidiaries required by law to be filed have been filed
and all taxes shown by those returns or otherwise assessed that are due and
payable have been paid, except assessments against which appeals have been
or will be promptly taken and (B) the Company and its subsidiaries have
filed all other tax returns that are required to have been filed by them
pursuant to the applicable laws of all other jurisdictions, except, as to
each of the foregoing clauses (A) and (B), insofar as the failure to file
such returns, individually and in the aggregate, would not have a Material
Adverse Effect, and the Company and its subsidiaries have paid all taxes
due pursuant to said returns or pursuant to any assessment received by the
Company or any such subsidiary, except for such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been
provided in accordance with GAAP. The charges, accruals and reserves on the
consolidated books of the Company and its subsidiaries in respect of any
tax liability for any years not finally determined are adequate to meet any
assessments or re-assessments for additional tax for any years not finally
determined, except to the extent of any inadequacy that would not have a
Material Adverse Effect.
(x) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. The Company has no reason to
believe it will not be able to renew its existing insurance coverage from
the same or similar insurers as may be necessary to continue its business.
(y) Except as disclosed in the Registration Statement and as shall be
disclosed in the Prospectus, there are no business relationships or related
party transactions of the nature described in Item 404 of Regulation S-K of
the Commission involving the Company or any other persons referred to in
such Item 404, except for transactions that would be considered immaterial
under said Item 404.
B. Each of the Selling Stockholders, severally and not jointly and as to
such Selling Stockholder only, represents and warrants to each Underwriter, the
Company and each of the other Selling Stockholders as follows:
(a) Those of the Shares to be sold to the Underwriters hereunder by Sy
Syms (i) are owned beneficially by Sy Syms and of record by The Sy Syms aka
Sy Syms Merns Revocable Living Trust (the "Trust") created by Sy Syms, as
settlor, under the laws of the State of New York, by a Trust
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Indenture dated March 17, 1989, as amended and restated May 23, 1995 and
further amended August 12, 1996 (the "Trust Indenture"), and (ii) will be
so sold for the benefit of Sy Syms, as beneficiary of the Trust, by the
Trust. The Trust has been duly and validly formed and is a legal and valid
revocable trust under the laws of the State of New York and the Trustee has
full power and authority under the terms of the Trust Indenture, in the
name and on behalf of the Trust, to execute and deliver this Agreement and
to sell and deliver those of the Shares as are to be sold and delivered by
the Trust pursuant hereto. All references herein to Sy Syms in his capacity
as a Selling Stockholder (including as a Firm Share Seller and as an Option
Share Seller) shall be deemed to refer to and include Sy Syms individually,
the Trust and Sy Syms in his capacity as Trustee of the Trust.
(b) The Foundation is a non-profit corporation duly organized and
validly existing in good standing under the laws of the State of New
Jersey.
(c) The execution and delivery of this Agreement and, in the case of
Marcy Syms and Stephen A. Merns, the Deposit Agreement (as hereinafter
defined) by such Selling Stockholder and the performance by such Selling
Stockholder of such Selling Stockholder's obligations hereunder and
thereunder does not and will not (i) conflict with or result in the breach
of any of the terms and provisions of, or constitute a default (or an event
which with notice or lapse of time, or both, would constitute a default) or
require consent under, any material agreement, instrument, franchise,
license or permit to which such Selling Stockholder is a party or by which
such Selling Stockholder or any of such Selling Stockholder's property or
assets is bound, or (ii) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental
or regulatory agency or body having jurisdiction over such Selling
Stockholder or such Selling Stockholder's properties or assets, or (iii) in
the case of the Foundation, violate or conflict with any provision of its
certificate of incorporation, by-laws or similar governing instrument, or
(iv) in the case of the Trust, violate or conflict with any provision of
the Trust Indenture.
(d) Such Selling Stockholder has, and at the time of delivery to the
Underwriters of those of the Shares as are to be sold by such Selling
Stockholder hereunder will have, full legal right, power, authority and
capacity, and, except as required under the Act and state securities laws,
all necessary consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses and permits of and from all regulatory or
governmental agencies and
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<PAGE>
bodies as are required, to execute and deliver this Agreement and, in the
case of Marcy Syms and Stephen A. Merns, the Deposit Agreement, to perform
such Selling Stockholder's obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, including the
sale and delivery of those of the Shares as are to be sold by such Selling
Stockholder hereunder. No consent of any party to any material contract,
agreement, instrument, lease, license, arrangement or understanding to
which such Selling Stockholder is a party, or to which any of such Selling
Stockholder's properties or assets is subject, is required for the
execution, delivery or performance of this Agreement or for the issuance,
sale and delivery by such Selling Stockholder of those of the Shares as are
to be sold by such Selling Stockholder hereunder.
(e) Each of Marcy Syms and Stephen A. Merns, as an Option Share
Seller, has caused certificates in negotiable form for not less than the
maximum number of Option Shares that she or he has agreed to sell hereunder
to be deposited in custody with Sy Syms pursuant to a Deposit Agreement and
Power of Attorney substantially in the form annexed hereto as Exhibit A
(the "Deposit Agreement") for delivery to or upon the order of the
Underwriters pursuant to this Agreement. Pursuant to such Deposit
Agreement, each of Marcy Syms and Stephen A. Merns has appointed Sy Syms to
act as such Option Share Seller's attorney-in-fact (the
"Attorney-in-Fact"), with full power and authority, in the name and on
behalf of such Option Share Seller, to execute and deliver one or more
counterparts of this Agreement and such other agreements, certificates,
instruments and documents as may be necessary or appropriate to deliver to
or upon the order of the Underwriters of the Option Shares to be sold by or
for the account of such Option Share Seller hereunder, to receive the
proceeds of such sale from the Representatives for the account of such
Option Share Seller, to remit such proceeds to such Option Share Seller and
otherwise to act in the name and on behalf of such Option Share Seller in
respect of the consummation of the transactions contemplated hereby as
fully as if such Option Share Seller were so acting personally. The
arrangements made by each of Marcy Syms and Stephen A. Merns for deposit of
such certificates with the Attorney-in-Fact pursuant to the Deposit
Agreement and grant by each of Marcy Syms and Stephen A. Merns to the
Attorney-in-Fact of the power of attorney provided in the Deposit Agreement
are, to the extent therein set forth, irrevocable and may not be
terminated, whether by operation of law or the death or incapacity of Marcy
Syms or Stephen A. Merns, as the case may be, or the occurrence of any
other event. If either Marcy Syms or Stephen A. Merns should die or become
incapacitated or if any other such event should occur before
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the delivery to the Underwriters of those of the Option Shares as are to be
sold by her or him hereunder, the certificates for such Shares shall be so
delivered on behalf of Marcy Syms or Stephen A. Merns, as the case may be,
in accordance with the terms and conditions of this Agreement and the
Deposit Agreement, and all actions taken by the Attorney-in-Fact pursuant
to the power of attorney granted by Marcy Syms or Stephen A. Merns, as the
case may be, in the Deposit Agreement shall be as valid as if such death,
incapacity or other event had not occurred, regardless of whether or not
the Attorney-in-Fact shall have received notice of such death, incapacity
or other event.
(f) This Agreement and, in the case of Marcy Syms and Stephen A.
Merns, the Deposit Agreement has been duly and validly executed and
delivered by or on behalf of such Selling Stockholder (and, in the case of
the Foundation, all corporate action required for such execution and
delivery has been duly and validly taken) and is a valid and binding
obligation of such Selling Stockholder, enforceable against such Selling
Stockholder in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity), and except insofar as rights to indemnification and contribution
contained herein may be limited by federal or state securities laws or
related public policy.
(g) Such Selling Stockholder has, and on the Closing Date will have,
good and valid title to those of the Shares to be sold by such Selling
Stockholder pursuant to this Agreement, free and clear of all liens,
adverse claims, security interests, restrictions on transfer, shareholders'
agreements and voting trusts, and, upon the delivery of and payment for
such Shares as herein contemplated, each Underwriter will receive good and
valid title to those of such Shares as are purchased by it from such
Selling Stockholder, free and clear of all liens, adverse claims, security
interests, restrictions on transfer, shareholders' agreements and voting
trusts.
(h) Such Selling Stockholder has not taken and will not take, directly
or indirectly, any action that constituted, was designed to constitute or
reasonably might be expected to cause or result in stabilization or
manipulation of the market price of the Common Stock.
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(i) The sale of Shares by such Selling Stockholder pursuant to this
Agreement has not been prompted or motivated by any adverse information
concerning the Company or its prospects known to such Selling Stockholder
that is not set forth in the Registration Statement or the Prospectus.
(j) When the Registration Statement shall become effective, when any
post-effective amendment to the Registration Statement becomes effective,
when the Prospectus is first filed with the Commission pursuant to Rule
424(b) of the Regulations, when any supplement to the Prospectus is filed
with the Commission and at each of the Closing Date and the Additional
Closing Date, and during such longer period as the Prospectus may be
required to be delivered in connection with sales of Shares by the
Underwriters or any dealer, such parts of the Registration Statement and
the Prospectus and any amendments thereof and supplements thereto as relate
to such Selling Stockholder and are based upon information furnished to the
Company by or on behalf of such Selling Stockholder expressly for use
therein did not and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein (in the case of the
Prospectus, in the light of the circumstances under which they were made)
not misleading.
3. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a)(i) Subject to the terms and conditions herein set forth, each of
the Firm Share Sellers, severally and not jointly, agrees to sell to the
Underwriters the number of Firm Shares set forth opposite the name of such
Firm Share Seller in Schedule II hereto and, subject to the terms and
conditions set forth herein and in reliance upon the representations and
warranties of the Company and the Selling Stockholders contained herein,
each of the Underwriters, severally and not jointly, agrees to purchase
from the Firm Share Sellers the aggregate number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto, all at a
purchase price per share of $________ (the "Purchase Price"). The number of
Firm Shares to be purchased from each Firm Share Seller by each Underwriter
(as adjusted by Bear Stearns to eliminate fractions) shall be determined by
multiplying the number of Firm Shares to be sold by such Firm Share Seller
by a fraction, the numerator of which is the number of Firm Shares set
opposite the name of such Underwriter in Schedule I annexed hereto and the
denominator of which is the total number of Firm Shares.
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(ii) Delivery of the Firm Shares and payment of the Purchase Price
therefor shall be made at the offices of Bear, Stearns & Co. Inc. at 245
Park Avenue, New York, New York 10167, or such other location in the New
York City metropolitan area as Bear Stearns shall determine and advise the
Company and the Firm Sellers upon at least two full business days' notice
in writing. Such delivery and payment shall be made at 10:00 A.M., New York
City time, on the [__________] full business day following the
determination of the Purchase Price, or at such other time as may be agreed
upon by Bear Stearns, the Company and the Selling Stockholders. The time
and date of such delivery and payment are herein called the "Closing Date".
Delivery of the Firm Shares shall be made to or upon the order of Bear
Stearns, for the respective accounts of the Underwriters, against payment
to the respective accounts of the Firm Share Sellers, of the aggregate
Purchase Price therefor, by wire transfer of same day funds to such account
as the Attorney-in-Fact shall have designated in writing to Bear Stearns at
least two business days prior to the Closing Date.
(iii) Certificates for the Firm Shares shall be registered in such
name or names and in such authorized denominations as Bear Stearns may
request in writing at least two full business days prior to the Closing
Date, provided that, if so specified by the Representatives, the Firm
Shares may be represented by a global certificate registered in the name of
Cede & Co., as nominee of the Depositary Trust Company ("Cede"). Bear
Stearns shall be permitted to examine and package such certificates for
delivery at least one full business day prior to the Closing Date, unless
the Firm Shares are to be represented by a global certificate.
(b)(i) The Option Share Sellers hereby grant to the Underwriters an
option (the "Option") to purchase the Option Shares from the Option Share
Sellers, at the Purchase Price and upon the terms herein set forth, for the
sole purpose of covering over-allotments in the offering of the Firm Shares
by the Underwriters. The Option shall be exercisable by the Underwriters,
on one occasion only, at any time before the expiration of 30 days from the
date of the Prospectus, for the purchase of all or part of the Option
Shares, such exercise to be made by notice, given by Bear Stearns to the
Attorney-in-Fact in the manner specified in Section 13 hereof, which notice
shall set forth the aggregate number of Option Shares with respect to which
the Option is being exercised, the denominations and the name or names in
which certificates evidencing the Option Shares so purchased are to be
registered, and the date and time of delivery of such Option Shares, which
date may be at or subsequent to the Closing Date and shall not be less than
two nor more than
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ten days after such notice (unless otherwise mutually agreed to by Bear
Stearns, the Company and Sy Syms). The maximum number of Option Shares that
each Option Share Seller shall be obligated to sell upon exercise of the
Option by the Underwriters is set forth opposite the name of such Option
Share Seller in Schedule II hereto. If the Option is exercised for less
than all of the Option Shares, then the number of Option Shares to be sold
by and purchased from each Option Share Seller (as adjusted by Bear Stearns
to eliminate fractions) shall be determined by multiplying the total number
of Option Shares set forth opposite such Option Share Seller's name in
Schedule II hereto by a fraction, of which the numerator is the aggregate
number of Option Shares with respect to which the Option is exercised and
the denominator is the total number of Option Shares. The aggregate number
of Option Shares to be purchased from the Option Share Sellers by each
Underwriter (as adjusted by Bear Stearns to eliminate fractions) shall be
determined by multiplying the total number of Option Shares with respect to
which the Option is exercised by a fraction, of which the numerator is the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I annexed hereto and the denominator is the total number of Firm
Shares.
(ii) Delivery of the Option Shares so purchased and payment of the
purchase price therefor shall be made at the offices of Bear, Stearns & Co.
Inc. at 245 Park Avenue, New York, New York 10167, or such other location
in the New York City metropolitan area as Bear Stearns shall determine and
advise the Company and the Option Share Sellers upon at least two full
business days' notice in writing. Such delivery and payment shall be made
at 10:00 A.M., New York City time, on the date designated in such notice or
at such other time and date as may be agreed upon by Bear Stearns, the
Option Share Sellers and the Company. The time and date of such delivery
and payment are herein called the "Additional Closing Date". Delivery of
Option Shares with respect to which the Option is exercised shall be made
to or upon the order of Bear Stearns, for the respective accounts of the
several Underwriters, against payment to Sy Syms, in his capacity as
Trustee of the Trust and as the Attorney-in-Fact for Marcy Syms and Stephen
A. Merns, for the respective accounts of the Option Share Sellers, of the
aggregate Purchase Price therefor, by wire transfer of same day funds to
the account designated by the Attorney-in-Fact as provided in paragraph
(a)(ii) of this Section 3.
(iii) Certificates for the Option Shares purchased by the
Underwriters, when so delivered, shall be registered in such name or names
and in such authorized denominations as Bear Stearns shall have requested
in the notice of exercise of the Option, provided that, if so specified by
Bear
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Stearns, such Option Shares may be represented by a global certificate
registered in the name of Cede. Bear Stearns will be permitted to examine
and package such certificates for delivery at least one full business day
prior to the Additional Closing Date, unless the Option Shares are to be
represented by a global certificate.
(c) The Underwriters shall not be obligated to purchase any Firm
Shares from the Firm Sellers except upon tender to the Underwriters by the
Firm Sellers of all of the Firm Shares and the Underwriters shall not be
obligated to purchase any Option Shares from the Option Sellers except upon
tender to the Underwriters by the Option Sellers of all of the Option
Shares specified in the notice of exercise of the Option. The Firm Sellers
shall not be obligated to sell or deliver any Firm Shares, and the Option
Sellers shall not be obligated to sell and deliver any Option Shares,
except in each case upon tender of payment by the Underwriters for all the
Firm Shares or the Option Shares, as the case may be, agreed to be
purchased by the Underwriters hereunder.
4. OFFERING. The Company has been advised by Bear Stearns that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Underwriting
Agreement have become effective as in the judgment of Bear Stearns is advisable.
The Company is further advised by Bear Stearns that the Shares are to be offered
to the public initially at a price of $_____ per share and to certain selected
dealers at a price that represents a concession not in excess of $ _____ per
share, and that any Underwriter may allow, and such dealers may reallow, a
further concession, not in excess of $_____ a share, to any Underwriter or to
certain other dealers, and that after the initial offering of the Shares the
public offering price and such concessions may be changed by the
Representatives, on behalf of the Underwriters.
5. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS.
A. The Company covenants and agrees with each Underwriter as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective as promptly as possible and to maintain it in
effect. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Regulations, or filing of the Prospectus with
the Commission is otherwise required under Rule 424(b) of the Regulations,
the Company will file the Prospectus, properly completed, with the
Commission pursuant to Rule 424(b) of the Regulations within the time
period therein
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<PAGE>
prescribed and will provide evidence satisfactory to the Representatives of
such timely filing. The Company will promptly advise the Representatives,
and confirm such advice in writing, (1) when the Registration Statement or
any post-effective amendment thereto has become effective, (2) of the
initiation or threatening of any proceedings for, or receipt by the Company
of any notice with respect to, the suspension of the qualification of the
Shares for sale in any jurisdiction or the issuance by the Commission of
any order suspending the effectiveness of the Registration Statement and
(3) of receipt by the Company or any representative of or attorney for the
Company of any other communications from the Commission relating to the
Company, the Registration Statement, any preliminary prospectus, the
Prospectus or the transactions contemplated by this Agreement. The Company
will make every reasonable effort to prevent the issuance of an order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto and, if any such order is issued, to
obtain its lifting as soon as possible. The Company will not file any
amendment to the Registration Statement or any amendment of or supplement
to the Prospectus before or after the Effective Date to which the
Representatives shall reasonably object in writing after being timely
furnished in advance a copy thereof unless the Company shall conclude, upon
the advice of counsel, that any such amendment must be filed at a time
prior to obtaining such consent.
(b) During the period of time when the Prospectus is required to be
delivered under the Act, the Company shall comply with all requirements
imposed upon it by the Act, as now or hereafter amended, and by the
Regulations, as from time to time in force, so far as may be necessary to
permit the continuance of sales of and dealings in the Shares as
contemplated by the provisions hereof and by the Prospectus. If, at any
time when a prospectus relating to the Shares is required to be delivered
under the Act, any event shall occur as a result of which the Prospectus as
then amended or supplemented shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading, or if it
shall be necessary at any time to amend the Registration Statement or
supplement the Prospectus to comply with the Act and the Regulations, the
Company shall notify the Representatives promptly and prepare and file with
the Commission an appropriate post-effective amendment to the Registration
Statement or supplement to the Prospectus (in either case, in form and
substance reasonably satisfactory to the Representatives) that will correct
such untrue statement or such omission and will use its best efforts to
have any such post-effective
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<PAGE>
amendment to the Registration Statement declared effective as soon as
possible.
(c) The Company shall promptly deliver to the Representatives two
manually-signed copies of the Registration Statement, including exhibits
and all documents incorporated by reference therein and all amendments
thereto, and to those persons (including the Representatives and counsel
for the Underwriters) whom the Representatives identify to the Company,
such number of conformed copies of the Registration Statement, each
preliminary prospectus, the Prospectus, all amendments of and supplements
to such documents, if any, and all documents incorporated by reference in
the Registration Statement and the Prospectus or any amendment thereof or
supplement thereto, without exhibits, as the Representatives reasonably may
request.
(d) If and to the extent such qualification or registration may be
necessary, the Company shall cooperate with the Underwriters and Weil,
Gotshal & Manges LLP ("Underwriters' Counsel") in connection with their
efforts to qualify or register the Shares for sale under the securities (or
"Blue Sky") laws of such jurisdictions as the Representatives shall
request, will execute such applications and documents and furnish such
information as may be reasonably required for such purpose and will comply
with such laws so as to continue such qualification in effect for so long
as may be required to complete the distribution of the Shares; provided,
however, that the Company shall not be required to qualify as a foreign
corporation in any jurisdiction or to file a consent to service of process
in any jurisdiction in any action other than one arising out of the
offering or sale of the Shares in such jurisdiction.
(e) The Company shall make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to the
Representatives, in such numbers as the Representatives may reasonably
request for distribution to the Underwriters, as soon as practicable but in
no event later than 45 days after the end of the Company's fiscal quarter
in which the first anniversary of the Effective Date occurs, an earnings
statement, covering a period of at least twelve consecutive full calendar
months commencing after the Effective Date, that satisfies the provisions
of Section 11(a) of the Act and Rule 158 of the Regulations.
(f) During a period of 90 days from the date of this Agreement, the
Company will not, without the prior written consent of Bear Stearns, issue,
sell, offer or agree to sell, or otherwise dispose of, directly or
indirectly, any shares of Common Stock (or any securities convertible into,
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<PAGE>
exchangeable for or evidencing the right to purchase shares of Common Stock
or Class B Common Stock) other than the grant of options and the issuance
of Common Stock upon the exercise of options under the Company's stock
option plan or pursuant to any other employee benefit plan or program. In
addition, the Company has obtained and delivered to Bear Stearns a letter
from (i) each of its directors, each of its executive officers and each
member of the family of Sy Syms who, beneficially or of record, owns shares
of Common Stock, pursuant to which such person shall agree that, during the
period of 90 days from the date of the Prospectus, without the prior
written consent of Bear Stearns, such person will not sell, offer or agree
to sell, or otherwise dispose of, directly or indirectly, any shares of
Common Stock (or any securities convertible into, exchangeable for or
evidencing the right to purchase shares of Common Stock).
(g) During the three years following the Effective Date, the Company
will furnish to the Representatives, in such numbers as the Representatives
may reasonably request for distribution to the Underwriters, copies of (i)
all reports to its stockholders and (ii) all reports, financial statements,
and proxy or information statements filed by the Company with the
Commission or any national securities exchange.
(h) The Company will continue to comply with all registration, filing,
and reporting requirements of the Exchange Act that may from time to time
be applicable to the Company.
(i) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
(j) Prior to the Closing Date and, if the Option is exercised, until
the Additional Closing Date, the Company will not issue any press release
or other communication or hold any press conference with respect to the
offering of the Shares, or the financial condition, results of operations,
business or prospects of the Company, without the Representatives' prior
consent, which shall not unreasonably be withheld.
B. Each Selling Stockholder, severally and not jointly, covenants and
agrees with each Underwriter and the Company as follows:
(a) During the period of 90 days from the date of the Prospectus, such
Selling Stockholder will not, without the prior written consent of Bear
Stearns, sell, offer or agree to sell, or otherwise dispose of or grant to
any third party the right to acquire any shares of Common Stock, or
purchase
21
<PAGE>
from any third party the right to sell to such third party any shares of
Common Stock, other than those of the Shares as are to be sold by such
Selling Stockholder hereunder.
(b) If, within the time during which a prospectus is required under
the Act to be delivered in connection with sales of the Shares, such
Selling Stockholder shall believe or have any reasonable grounds to believe
that the Prospectus as then amended or supplemented includes any untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements made therein, in
the light of the circumstances under which they were made, not misleading,
or that any representation of such Selling Stockholder contained in this
Agreement is untrue, such Selling Stockholder shall notify you and the
Company promptly to such effect.
(c) Prior to the termination of the offering of the Shares
contemplated by this Agreement, such Selling Stockholder will not take,
directly or indirectly, any action designed to stabilize or manipulate the
market price of the Common Stock, or that might reasonably be expected to
cause or result in stabilization or manipulation of the market price of the
Common Stock.
(d) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Internal Revenue Code of 1986,
as amended, such Selling Stockholder shall deliver to you on or prior to
the Closing Date, a properly completed and executed United States Treasury
Department Form W-9, as applicable (or other applicable form or statement
specified by Treasury Department Regulations in lieu thereof).
6. PAYMENT OF EXPENSES. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the Company
agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement (including all amendments thereof and exhibits thereto), each
preliminary prospectus, the Prospectus and any supplements thereto, this
Agreement, the Deposit Agreement and all related agreements, and all other
documents relating to the public offering of the Shares (including those
supplied to the Underwriters in quantities as hereinabove stated), (ii) the
transfer and delivery of the Shares to the Underwriters, excluding any transfer
or other taxes payable thereon (which shall be paid by the Selling
Stockholders), (iii) the qualification, if any, of the Shares under state
securities laws, and (iv) the review of the terms of the public offering of
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the Shares by the National Association of Securities Dealers Inc. and the
reasonable fees and disbursements of counsel for the Underwriters in connection
therewith. The Selling Stockholders, pro rata in accordance with the ratio that
the number of Shares sold by each to the Underwriters bears to the total number
of Shares purchased by the Underwriters, shall reimburse the Company, out of the
net proceeds from the sale of the Shares, for such portion of the foregoing
costs and expenses as shall be mutually agreed upon by the Company and the
Selling Stockholders.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares, as provided herein,
shall be subject to the accuracy of the representations and warranties of the
Company and the Selling Stockholders herein contained, as of the date hereof, as
of the Closing Date and, with respect to the Option Shares, as of the Additional
Closing Date, to the absence from any certificates, opinions, written statements
or letters furnished pursuant to this Section 7 to the Representatives or to
Underwriters' Counsel of any qualification or limitation not previously approved
in writing by the Representatives, to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder, and to the
following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M., New York City time, on the date of this Agreement or at
such later time and date as shall have been consented to in writing by Bear
Stearns, any post-effective amendments to the Registration Statement
required to be filed by the Company prior to the Closing Date shall have
become effective and no stop order suspending the effectiveness of the
Registration Statement or any such post-effective amendment shall have been
issued and no proceedings therefor shall have been initiated or threatened
by the Commission. If the Company shall have relied upon Rule 430A of the
Regulations, the Prospectus shall have been filed with the Commission in a
timely fashion in accordance with the provisions of subsection 5.A(a)
hereof. All filings required by Rule 424 of the Regulations shall have been
made but no such filing shall have been made without your consent.
(b) At the Closing Date (and, with respect to the Option Shares, the
Additional Closing Date), you shall have received the written opinion of
Skadden, Arps, Slate, Meagher and Flom LLP, counsel for the Company and the
Selling Stockholders, dated the date of its delivery, addressed to the
Underwriters, in form and scope satisfactory to Weil, Gotshal & Manges LLP
("Underwriters' Counsel"), substantially to the effect set forth in Exhibit
B hereto.
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In rendering such opinion, such counsel may (i) limit its opinions to
the laws of the States of New Jersey and New York, the corporate laws of
the State of Delaware and the federal laws of the United States of America
and (ii) rely (A) as to matters involving the application of laws other
than the laws referred to in clause (i), to the extent such counsel deems
proper and to the extent specified in its opinion letter, if at all, upon
the written opinion or opinions (in form and scope reasonably satisfactory
to Underwriters' Counsel) of other counsel reasonably acceptable to
Underwriters' Counsel, knowledgeable and qualified to opine with respect to
the applicable laws; and (B) as to matters of fact, to the extent they deem
proper, on certificates of the Selling Stockholders and of responsible
officers of the Company and certificates or other written statements of
officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the
Company and its subsidiaries. The opinion of counsel for the Company shall
specifically state that the opinion of any such other counsel is in form
and scope satisfactory to counsel for the Company and that, in such
counsel's opinion, such counsel and the Underwriters are justified in
relying thereon. A copy of the opinion of any such other counsel shall be
delivered to Underwriters' Counsel.
(c) At the Closing Date (and, with respect to the Option Shares, the
Additional Closing Date), the Representatives shall have received a
certificate, executed by each of the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the date of its delivery, to the
effect that the conditions set forth in subsection (a) of this Section 7
have been satisfied, that as of the date of such certificate the
representations and warranties of the Company set forth in subsection 2.A
hereof are accurate and the obligations of the Company to be performed
hereunder on or prior to the Closing Date have been duly performed.
(d) At the Closing Date (and, with respect to the Option Shares, the
Additional Closing Date), the Representatives shall have received a
certificate executed by each Selling Stockholder, dated the date of its
delivery, to the effect that the representations and warranties of such
Selling Stockholder set forth in Section 2 hereof are accurate and that the
obligations of such Selling Stockholder to be performed hereunder on or
prior to the Closing Date have been duly performed.
(e) At the time this Agreement is executed and at the Closing Date
(and, with respect to the Option Shares, the Additional Closing Date), you
shall have received a letter,
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<PAGE>
from Deloitte & Touche LLP, dated the date of its delivery, addressed to
the Underwriters and in form and substance reasonably satisfactory to you,
to the effect that: (i) they are independent accountants with respect to
the Company within the meaning of the Act and the Regulations; (ii) in
their opinion, the consolidated financial statements of the Company and its
subsidiaries audited by such firm and included in the Registration
Statement and the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the applicable
Regulations; (iii) on the basis of procedures (but not an audit made in
accordance with generally accepted auditing standards) consisting of a
reading of the latest available unaudited interim consolidated financial
statements of the Company and its subsidiaries, a reading of the minutes of
meetings and consents of the stockholders and boards of directors of the
Company and the subsidiaries and the committees of such boards subsequent
to March 1, 1997, inquiries of certain officials of the Company and its
subsidiaries who have responsibility for financial and accounting matters
of such companies with respect to transactions and events subsequent to
March 1, 1997, and other specified procedures and inquiries to a date not
more than five days prior to the date of such letter, nothing has come to
their attention that would cause them to believe that: (A) the unaudited
historical consolidated financial statements of the Company, its
subsidiaries and their predecessors included in the Registration Statement
and the Prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the published rules
and regulations thereunder or that any material modification should be made
to such unaudited consolidated financial statements for them to be in
conformity with GAAP; (B) with respect to the period subsequent to March 1,
1997 there were, as of the date of the most recent available monthly
consolidated financial data of the Company and the subsidiaries, if any,
and as of a specified date not more than five days prior to the date of
such letter, any changes in the capital stock or increases in long-term
debt of the Company or any decrease in shareholders' equity of the Company,
in each case as compared with the amounts shown in the most recent balance
sheet included in the Registration Statement and the Prospectus except for
changes or decreases that the Registration Statement and the Prospectus
disclose have occurred or may occur; or (C) that during the period from
March 1, 1997 to the date of the most recent available monthly consolidated
financial data of the Company and its subsidiaries, if any, and to a
specified date not more than five days prior to the date of such letter,
there was any decrease, as compared with the corresponding period in the
prior fiscal year, in total revenues, or total or per share
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net income, except for decreases that the Prospectus discloses have
occurred or may occur; and (iv) stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings and
other financial information pertaining to the Company and its subsidiaries
set forth in the Prospectus, which have been specified by you prior to the
date of this Agreement, to the extent that such dollar amounts, numbers,
percentages and information may be derived from the general accounting and
financial records that are subject to the internal control policies and
procedures of the Company's and its subsidiaries' accounting systems or
that have been derived directly from such accounting records by analysis or
computation, and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of specified
readings, inquiries, and other appropriate procedures specified by you
(which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in such letter, and found
them to be in agreement.
(f) All proceedings taken in connection with the sale of the Shares as
herein contemplated shall be reasonably satisfactory in form and substance
to the Representatives and to Underwriters' Counsel, and the
Representatives shall have received from Underwriters' Counsel a written
opinion, dated as of the Closing Date with respect to the sale of the Firm
Shares, and dated as of the Additional Closing Date with respect to the
sale of the Option Shares, as to such matters as the Representatives
reasonably may require, and the Company and the Selling Stockholders shall
have furnished to Underwriters' Counsel such documents as Underwriters'
Counsel reasonably may have requested for the purpose of enabling
Underwriters' Counsel to pass upon such matters.
(g) The National Association of Securities Dealers, Inc., upon review
of the terms of the underwriting arrangements for the public offering of
the Shares, shall have raised no objections thereto.
(h) At the time this Agreement is executed, the Company shall have
furnished to the Underwriters the letters referred to in subsection 5.A(f),
in form and substance satisfactory to Underwriters' Counsel.
(i) Prior to the Closing Date and, with respect to the Option Shares,
the Additional Closing Date, the Company and the Selling Stockholders shall
have furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably request.
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If any of the conditions specified in this Section 7 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements, or letters furnished to the Representatives or to
Underwriters' Counsel pursuant to this Section 7 shall not be in all material
respects reasonably satisfactory in form and substance to the Representatives
and in form and scope to Underwriters' Counsel, all obligations of the
Underwriters hereunder not theretofore discharged may be canceled by the
Representatives at, or at any time prior to, the Closing Date and with respect
to the Option Shares, the Additional Closing Date. Notice of such cancellation
shall be given to the Company and the Selling Stockholders in writing, or by
telephone or telephonic facsimile transmission, confirmed in writing.
8. INDEMNIFICATION.
(a) The Company and the Firm Share Sellers jointly and severally, agree to
indemnify and hold harmless each Underwriter, and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all losses, liabilities, claims,
damages and expenses whatsoever (including but not limited to attorneys' fees
and any and all expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation, provided that such settlement was effected with the Company's
written consent in accordance with subsection (d) of this Section 8), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus or any Preliminary Prospectus, or in
any supplement thereto or amendment thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading; provided, however, that neither the Company nor any of the Selling
Stockholders shall be liable under this subsection 8(a) to any Underwriter in
any such case to the extent but only to the extent that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company (i) by or on your behalf with respect to the Underwriters or (ii) by
or on behalf of any Selling Stockholder with respect to such Selling
Stockholder, in each such case for inclusion in the Registration Statement, the
Prospectus, any Preliminary Prospectus or any amendment or
27
<PAGE>
supplement; and provided further, that with respect to any Preliminary
Prospectus, such indemnity shall not inure to the benefit of any Underwriter (or
the benefit of any person controlling such Underwriter) if the person asserting
any such losses, liabilities, claims, damages or expenses purchased the Shares
that are the subject thereof from such Underwriter and if such person was not
sent or given a copy of the Prospectus at or prior to confirmation of the sale
of such Shares to such person in any case where such sending or giving is
required by the Act and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus. These
indemnity agreements will be in addition to any liability that the Company or
the Selling Stockholders may otherwise have to any Underwriter or to any
controlling person of such Underwriter, including under this Agreement.
(b) Each Selling Stockholder, severally, agrees to indemnify and hold
harmless each Underwriter, the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company or any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation) to which they or any
of them may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus or any preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, in each case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information relating to such Selling Stockholder furnished to the Company by or
on behalf of such Selling Stockholder expressly for use therein; provided,
however, that such indemnity with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter (or the benefit of any person
controlling such Underwriter) if the person asserting any such losses,
liabilities, claims, damages or expenses purchased the Shares which are the
subject thereof from such Underwriter and if such person was not sent or given a
copy
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<PAGE>
of the Prospectus, excluding documents incorporated therein by reference,
at or prior to confirmation of the sale of such Shares to such person in any
case where such sending or giving is required by the Act and the untrue
statement or omission of a material fact contained in such preliminary
prospectus was corrected in the Prospectus; and, provided further, that the
indemnification obligation of the Selling Stockholder under this subsection 8(b)
shall be limited to the actual net proceeds (before deducting expenses) received
by such Selling Stockholder from the sale by such Selling Stockholder of Shares
hereunder. This indemnity will be in addition to any liability that such Selling
Stockholder otherwise may have to the Underwriters, the Company or any other
indemnified person specified in this subsection 8(b), including under this
Agreement.
(c) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Company, each Selling Stockholder, each of the directors of
the Company, each of the officers of the Company who shall have signed the
Registration Statement, and each other person, if any, who controls the Company
or any Selling Stockholder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any losses, liabilities, claims,
damages and expenses whatsoever (including but not limited to attorneys' fees
and any and all expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or any
preliminary prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, in each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Representatives with respect to such Underwriter expressly for use in the
Registration Statement or Prospectus; provided, however, that in no case shall
such Underwriter be liable or responsible for any amount in excess of the
aggregate public offering price of the Shares underwritten by it and distributed
to the public. This indemnity will be in addition to any liability that such
Underwriter may otherwise have to the Company, the Selling Stockholders or any
other
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<PAGE>
indemnified person specified in this subsection 8(c), including under this
Agreement. The Company and the Selling Stockholders acknowledge that the
statements set forth in the last paragraph on the cover page of the Prospectus
and in each paragraph under the caption "Underwriting" in the Prospectus (other
than in the last such paragraph) constitute the only information furnished in
writing by or on behalf of any Underwriter expressly for use in the Registration
Statement, each Preliminary Prospectus and the Prospectus.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the assertion of any claim, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may have
otherwise). In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
take charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties with respect to such different defenses), in any of which events such
fees and expenses shall be borne by the indemnifying parties. The indemnifying
party under subsection (a), (b) or (c) above shall only be liable for the legal
expenses of one counsel for all indemnified parties in each jurisdiction in
which any claim or action is brought; provided, however, that the indemnifying
party shall be liable for separate counsel for any indemnified party in a
jurisdiction, if counsel to the indemnified parties shall have reasonably
concluded that there may be defenses available to such indemnified party that
are
30
<PAGE>
different from or additional to those available to one or more of the other
indemnified parties and that separate counsel for such indemnified party is
prudent under the circumstances. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such written consent was not unreasonably withheld.
9. CONTRIBUTION. In order to provide for contribution in circumstances in
which the indemnification provided for in subsections (a) or (b) of Section 8
hereof is for any reason held to be unavailable from the Company or the Selling
Stockholders or is insufficient to hold harmless a party indemnified thereunder,
the Company, the Selling Stockholders and the Underwriters shall contribute to
the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provisions (including any investigation,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting in the case of losses, claims, damages, liabilities and
expenses suffered by the Company and the Selling Stockholders, any contribution
received by the Company or the Selling Stockholders from persons, other than one
or more of the Underwriters, who may also be liable for contribution, including
persons who control the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, officers of the Company who signed the
Registration Statement and directors of the Company) to which the Company, the
Selling Stockholders and one or more of the Underwriters may be subject, in such
proportions as are appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders, on the one hand, and the Underwriters, on
the other hand, from the offering of the Shares or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 8
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
several Selling Stockholders, on the one hand, and the Underwriters, on the
other hand, in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
Selling Stockholders, on the one hand, and the Underwriters, on the other hand,
shall be deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Selling Stockholders and (y) the underwriting
discounts received by the Underwriters, respectively, in each case as set forth
in the table on the cover page of the Prospectus. The relative fault of the
Company and each Selling Stockholder, on the one hand, and of the Underwriters,
on the other hand, shall be
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<PAGE>
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or such Selling
Stockholder, on the one hand, or the Underwriters, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 9, (i) in no case shall any Underwriter be required to
contribute any amount in excess of the amount by which the aggregate public
offering price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or such
omission or alleged omission, (ii) in no case shall any Selling Stockholder be
required to contribute any amount in excess of the aggregate Purchase Price of
those of the Shares as are sold by such Selling Stockholder to the Underwriters
pursuant to his Agreement and (iii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, (i) each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, (ii) each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company and (iii) each person, if any, who controls any Selling Stockholder
(including, in the case of the Foundation, each trustee thereof) shall have the
same rights to contribution as such Selling Stockholder, subject in each case to
the provisions of the immediately preceding sentence. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section 9,
notify such other party or parties from whom contribution may be sought, but the
omission to so notify such other party or parties shall not relieve such other
party or parties from any obligation such party or parties may have under this
Section 9 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its written consent; provided, however,
that such written consent was not unreasonably withheld.
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<PAGE>
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and
warranties, covenants and agreements of the Company and the Selling Stockholder
contained in this Agreement, including without limitation the agreements
contained in Sections 5 and 6, the indemnity agreements contained in Section 8
and the contribution agreements contained in Section 9, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Underwriters or any controlling person of any Underwriter or by or
on behalf of the Company, any of its officers and directors or the Selling
Stockholder or any controlling person thereof, and shall survive delivery of the
Shares to and payment for the Shares by the Underwriters. The representations
contained in Section 2 and the agreements contained in Sections 5, 6, 8, 9 and
12(d) hereof shall survive the termination of this Agreement including pursuant
to Section 12 hereof.
11. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Option Shares hereunder, and if the Firm
Shares or Option Shares with respect to which such default relates do not (after
giving effect to arrangements, if any, made pursuant to subsection (b) below)
exceed in the aggregate 10% of the total number of Firm Shares or Option Shares,
as the case may be, that all Underwriters have agreed to purchase hereunder,
then the Firm Shares or Option Shares to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to the respective
proportions that the numbers of Firm Shares set forth opposite their respective
names in Schedule I hereto bear to the aggregate number of Firm Shares set forth
opposite the names of the non-defaulting Underwriters.
(b) If such default relates to more than 10% of the Firm Shares or Option
Shares, as the case may be, the Representatives may in their discretion arrange
for another party or parties (including any non-defaulting Underwriter or
Underwriters who so agree) to purchase such Firm Shares or Option Shares, as the
case may be, to which such default relates on the terms contained herein. If
within five (5) calendar days after such a default the Representatives do not
arrange for the purchase of the Firm Shares or Option Shares, as the case may
be, to which such default relates as provided in this Section 11, this Agreement
(or, in the case of a default with respect to the Option Shares, the obligations
of the Underwriters to purchase and of the Option Sellers to sell the Option
Shares) shall thereupon terminate, without liability on the part of the Company
and the Selling Stockholders with respect thereto (except in each case as
provided in Sections 6, 8 and 9 hereof) or the several non-defaulting
Underwriters (except as provided in Sections 8 and 9 hereof), but nothing in
this Agreement shall relieve a defaulting
33
<PAGE>
Underwriter or Underwriters of its or their liability, if any, to the other
several Underwriters, the Company and the Selling Stockholders for damages
occasioned by its or their default hereunder.
(c) If the Firm Shares or Option Shares to which the default relates are to
be purchased by the non-defaulting Underwriters, or are to be purchased by
another party or parties as aforesaid, the Representatives or the Company shall
have the right to postpone the Closing Date or Additional Closing Date, as the
case may be, for a period not exceeding five (5) business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus that, in the opinion of Underwriters' Counsel, may
thereby be made necessary or advisable. The term "Underwriter" as used in this
Agreement shall include any party substituted under this Section 11 with like
effect as if it had originally been a party to this Agreement with respect to
such Firm Shares and Option Shares.
12. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective when the Representatives, the
Company and the Selling Stockholders shall have received notification of the
effectiveness of the Registration Statement. Until this Agreement becomes
effective as aforesaid, this Agreement may be terminated by the Company by
notifying the Representatives and the Selling Stockholders, or by the Firm Share
Sellers (acting unanimously) by notice to the Representatives and the Company or
by the Representatives by notifying the Company and the Selling Stockholders
without any liability of any party to any party hereunder. Notwithstanding the
foregoing, the provisions of this Section 12 and of Sections 5, 8, 9 and 10
hereof shall at all times be in full force and effect.
(b) This Agreement and the obligations of the Underwriters hereunder may be
terminated by the Representatives by written notice to the Company and the
Selling Stockholders at any time at or prior to the Closing Date (and, with
respect to the Option Shares, the Additional Closing Date), without liability
(other than with respect to Sections 8 and 9) on the part of any Underwriter to
the Company or the Selling Stockholders if, on or prior to such date, (i) the
Company or any of the Selling Stockholders shall have failed, refused or been
unable to perform in any material respect any agreement on the part of the
Company or such Selling Stockholders to be performed hereunder, (ii) any other
condition to the obligations of the Underwriters set forth in Section 7 hereof
is not fulfilled when and as required in any material respect, (iii) trading in
securities generally on the
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<PAGE>
New York Stock Exchange, the American Stock Exchange or the NASDAQ Stock Market
or in the over-the-counter market shall have been suspended or materially
limited, or minimum prices shall have been established on either such exchange
or in either such market by the Commission, or by such exchange or other
regulatory body or governmental authority having jurisdiction, (iv) a general
banking moratorium shall have been declared by Federal or New York State
authorities, (v) there shall have occurred any outbreak or escalation of armed
hostilities involving the United States on or after the date hereof, or there
shall have been a declaration by the United States of a national emergency or
war, the effect of which shall be, in the Representatives' judgment, to make it
inadvisable or impracticable to proceed with the sale and delivery of the Shares
on the terms and in the manner contemplated in the Prospectus, (vi) in the
Representatives' reasonable opinion any material adverse change shall have
occurred since the respective dates as of which information is given in the
Registration Statement or the Prospectus in the condition (financial or other)
of the Company and its subsidiaries taken as a whole, whether or not arising in
the ordinary course of business other than as set forth in the Prospectus or
contemplated thereby, or (vii) there shall have occurred such a material adverse
change in the financial markets in the United States as, in the Representatives'
judgment, makes it inadvisable or impracticable to proceed with the sale and
delivery of the Shares on the terms and in the manner contemplated in the
Prospectus. The right of the Representatives to terminate this Agreement will
not be waived or otherwise relinquished by their failure to give notice of
termination prior to the time that the event giving rise to the right to
terminate shall have ceased to exist, provided that notice is given prior to the
Closing Date (and, with respect to the Option Shares, the Additional Closing
Date).
(c) Any notice of termination pursuant to this Section 12 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant to any of the provisions
hereof (otherwise than pursuant to notification by the Representatives as
provided in subsection (a) or (b) of this Section 12), or if the sale of the
Shares provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth herein is not satisfied or because of
any refusal, inability or failure on the part of the Company or any Selling
Stockholder to perform any agreement herein or to comply with any provision
hereof, the Company agrees, subject to demand by the Representatives, to
reimburse the Representatives for all reasonable out-of-pocket expenses
(including the reasonable fees and expenses of Underwriters' Counsel), incurred
by the Underwriters in connection herewith.
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13. NOTICES. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any one or
more of the Underwriters, shall be mailed, delivered, or telexed or telegraphed
or faxed and confirmed in writing, to Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167, Attention: Corporate Finance Department (Fax No. (212)
272-3092); if sent to the Company or any of the Selling Stockholders, shall be
mailed, delivered, or telegraphed or faxed and confirmed in writing, to the
Company (to the attention of the Chief Executive Officer) or such Selling
Stockholder (in care of the Attorney-in-Fact), at Syms Way, Secaucus, New Jersey
07094 (Fax No. (201) 902-9270).
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
15. PARTIES. This Agreement shall inure solely to the benefit of, and shall
be binding upon, each of the Underwriters, the Selling Stockholders and the
Company and the controlling persons, directors, officers, employees and agents
referred to in Sections 8 and 9, and their respective successors and assigns,
and with respect to the Selling Stockholders, their respective heirs, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Shares from the Underwriters.
16. CONSTRUCTION. This Agreement shall be construed in accordance with the
laws of the State of New York, but without regard to principles of conflicts of
laws.
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<PAGE>
If the foregoing correctly sets forth the complete agreement between the
Underwriters, on the one hand, and the Company and the Selling Stockholders, on
the other hand, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
SYMS CORP ___________________________
Sy Syms,
individually and as
By:______________________ Trustee of the Sy Syms
Name: aka Sy Syms Merns
Title: Revocable Living Trust
SY SYMS FOUNDATION __________________________
Marcy Syms aka
Marcy Syms Merns
By:______________________
Name:
Title: __________________________
Stephen A. Merns
Accepted as of the date first above written:
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
as Representatives of the several Underwriters
named in Schedule I annexed hereto.
By: BEAR, STEARNS & CO. INC.
By:______________________
Name:
Title:
37
<PAGE>
Schedule I
UNDERWRITERS
Number of
Firm Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
Bear, Stearns & Co. Inc. .....................................
Salomon Brothers Inc. ........................................
---------
TOTAL: .............................................. 3,500,000
=========
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Schedule II
SELLING STOCKHOLDERS
Firm Share Sellers:
No. of
Firm Shares
Name to be Sold
---- -----------
Sy Syms Foundation ........................ 2,500,000
Sy Syms (as Trustee of the
Sy Syms aka Sy Syms Merns
Revocable Living Trust) ................. 1,000,000
---------
Total: ............... 3,500,000
=========
Option Share Sellers:
No. of
Option Shares
Name Subject to Option
---- -----------------
Sy Syms (as Trustee of the
Sy Syms aka Sy Syms Merns
Revocable Living Trust) ................. 345,000
Marcy Syms aka
Marcy Syms Merns ........................ 50,000
Stephen A. Merns .......................... 130,000
-------
Total: ............... 525,000
=======
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<PAGE>
Schedule III
SUBSIDIARIES
PERCENT OF
NAME JURISDICTION OWNERSHIP**
- ---- ------------ -----------
Syms Advertising Inc. ................. Delaware 100%
SYL, Inc. ............................. Delaware 100%
SYI, Inc. ............................. Delaware 100%
Syms Clothing Inc.* ................... New York 100%
Generic Products, Inc.* ............... New York 100%
Rothschild Haberdashery, Inc.* ........ New York 100%
- ------------------------------
* Inactive
** All of the shares of each subsidiary
are owned directly by Syms Corp.
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Exhibit A
FORM OF DEPOSIT AGREEMENT AND POWER OF ATTORNEY
November ___, 1997
Mr. Sy Syms
c/o Syms Corp
Syms Way
Secaucus, New Jersey 07094
Dear Sir:
Syms Corp (the "Company"), of which the undersigned is a stockholder, has
filed with the Securities and Exchange Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Registration
Statement") with respect to the public offering and sale of shares of its
outstanding Common Stock for the account of certain selling stockholders (the
"Selling Stockholders"), including the undersigned, pursuant to the terms of an
underwriting agreement (the "Underwriting Agreement") among the Company, the
Selling Stockholders and Bear, Stearns & Co. Inc. and Salomon Brothers Inc, as
representatives (the "Representatives") of the several underwriters named in
Schedule I thereto, substantially in the form filed as an exhibit to the
Registration Statement. Capitalized terms used but not separately defined herein
are defined in the Underwriting Agreement and are used herein as so defined.
Copies of the Registration Statement and the form of the Underwriting Agreement
have been furnished to and reviewed by the undersigned. The number of Shares
that may be sold by the undersigned pursuant to the terms of the Underwriting
Agreement is set forth opposite the name of the undersigned in Schedule II
thereto.
As an inducement to the Company, the Underwriters and each of the other
Selling Stockholders to enter into the Underwriting Agreement and to consummate
the transactions contemplated thereby and by the Registration Statement, the
undersigned hereby agrees as follows:
1. Deposit of Shares.
The undersigned hereby delivers to you (the "Attorney-in-Fact"), one or
more certificates (endorsed in blank or accompanied by a stock power endorsed in
blank, with the signature thereon guaranteed by a member firm of the New York
Stock Exchange or a banking institution that is a member of the Federal Reserve
System) evidencing at least the maximum number of
<PAGE>
Option Shares that may be sold by the undersigned to the several Underwriters
pursuant to the terms of the Underwriting Agreement.
2. Return of Certificates.
(a) If the Underwriting Agreement has not been executed and delivered,
or the Option has not been exercised, on or before December 31, 1997, then
promptly after such date the Attorney-in-Fact shall return to the
undersigned the certificate or certificates theretofore deposited by the
undersigned with the Attorney-in-Fact pursuant hereto.
(b) If the number of Option Shares purchased by the Underwriters from
the undersigned is less than the total number of shares evidenced by the
certificate or certificates deposited by the undersigned with the
Attorney-in-Fact pursuant hereto, then, promptly following the Additional
Closing Date, the Attorney-in-Fact shall cause the Transfer Agent for the
Common Stock to issue to and in the name of the undersigned, and shall
deliver to the undersigned, a new certificate evidencing the balance of
such shares.
3. Grant of Power of Attorney.
The undersigned hereby irrevocably constitutes and appoints the
Attorney-in-Fact the true and lawful agent and attorney-in-fact of and for the
undersigned, to act for and on behalf of and in the name of the undersigned in
respect of all matters relating to the Underwriting Agreement and the
transactions contemplated thereby. In furtherance and not in limitation of the
foregoing grant, the Attorney-in-Fact shall have full power and authority, in
the name and on behalf of the undersigned, --
(a) To negotiate, determine and agree with the Representatives as to
the Purchase Price to be paid for the Shares by the Underwriters and the
price at which the Shares are to be initially offered to the public by the
Underwriters, and to execute and deliver on behalf of the undersigned the
Underwriting Agreement substantially in the form filed as an exhibit to the
Registration Statement, with such changes thereto as the Attorney-in-Fact,
acting in his sole discretion, may approve, which approval shall be
conclusively evidenced by his execution of the Underwriting Agreement.
(b) To instruct the Transfer Agent for the Common Stock with respect
to all matters pertaining to the certificates for the Option Shares
deposited with the Attorney-in-Fact hereunder; to cause the Company's
Transfer Agent to issue and register a certificate or certificates
representing those of the Option Shares as are purchased
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<PAGE>
from the undersigned by the Underwriters in such names and denominations as
may be specified by the Representatives, and to permit inspection and
packaging of such certificates by the Representatives, in each case as
provided in the Underwriting Agreement.
(c) To take any and all steps deemed necessary or desirable by the
Attorney-in-Fact in connection with the registration of the Shares under
the Act, including, without limitation, arranging for, preparing or causing
to be prepared all amendments to the Registration Statement, the final
Prospectus, the requesting of acceleration of effectiveness of the
Registration Statement, and such undertakings, representations and other
steps as the Attorney-in-Fact, acting in his sole discretion, may deem
necessary or advisable.
(d) To exercise, in his sole discretion, any power conferred upon, and
to take any action authorized to be taken by, the undersigned pursuant to
the Underwriting Agreement.
(e) To deliver to or upon the order of the Representatives,
certificates representing those of the Option Shares as are purchased by
the Underwriters from the undersigned at the Additional Closing Date, as
the same may be fixed in accordance with the terms of the Underwriting
Agreement, against receipt by the Attorney-in-Fact of payment of the
Purchase Price therefor in accordance with the Underwriting Agreement.
(f) To certify to the Transfer Agent for the Common Stock such
instructions and such assurances of the genuineness of any document as may
be reasonably required in connection with the consummation of the sale to
the Underwriters of those of the Option Shares as are purchased by the
Underwriters from the undersigned pursuant to the Underwriting Agreement.
(g) To remit to the undersigned the net proceeds of sale of those of
the Option Shares as are purchased by the Underwriters from the undersigned
(after deduction therefrom of the undersigned's proportionate share of any
expenses to be paid by the Selling Stockholders) or make such other
disposition thereof as the undersigned may specify in written instructions
delivered to the Attorney-in-Fact.
(h) To employ legal counsel for the undersigned, in the undersigned's
capacity as an Option Share Seller, such counsel being hereby authorized to
rely upon the
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<PAGE>
statements and representations of the undersigned contained herein, and in
the Underwriting Agreement.
(i) Otherwise to do all other things and to perform all other acts,
including, without limitation, the execution and delivery of all
certificates, questionnaires, receipts, notices, instructions and any other
documents or papers required or contemplated by the Underwriting Agreement
or deemed necessary or advisable by the Attorney-in-Fact in his sole
discretion in connection with the transactions contemplated by the
Underwriting Agreement and this Deposit Agreement, as fully as could the
undersigned if then personally present and acting.
The Attorney-in-Fact is hereby granted full power to designate by written
instrument any substitute for himself as attorney-in-fact for the undersigned,
such substitute to have all of the power and authority hereby conferred upon the
Attorney-in-Fact by the undersigned.
4. Compensation, Exculpation and Indemnification of the Attorney-in-Fact
The Attorney-in-Fact shall not receive any compensation for services
rendered hereunder. The Attorney-in-Fact shall not be liable for any action
taken or omission made by him in good faith and the undersigned hereby agrees to
indemnify and hold harmless the Attorney-in-Fact from and against any and all
loss, damage or liability that the Attorney-in-Fact may sustain, or to which the
Attorney-in-Fact may become subject, directly or indirectly as a result of any
action taken or omitted in good faith by the Attorney-in-Fact in connection with
the foregoing. In taking any action hereunder, the Attorney-in-Fact is
authorized to rely absolutely upon advice of counsel and any information or
assurance of fact given to him by the Company, and to accept any document as
authentic and any writing as genuine, if certified to be so by the Company.
5. Purposes of Agreement.
This Deposit Agreement is being entered into and the power of attorney
contained herein is being granted and conferred subject to the interests of the
Underwriters, the Company and each of the Selling Stockholders who may become a
party to the Underwriting Agreement and for the purpose of completing the
transactions contemplated by the Underwriting Agreement. In accordance with the
terms of the Underwriting Agreement, the Underwriters, the Company and the
Selling Stockholders have and have declared a substantial interest in the
assurance that, notwithstanding the death or incapacity of the undersigned or
the occurrence of any act of the undersigned, all of the Option Shares as are to
be purchased by the Underwriters
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<PAGE>
from the undersigned pursuant to the Underwriting Agreement shall be available
for delivery against payment therefor, time being of the essence. Accordingly,
this Deposit Agreement and the power of attorney and all authority herein
granted to the Attorney-in-Fact shall be irrevocable and shall not be terminated
(or be capable of termination) by any act of the undersigned, by operation of
law, by the death or incapacity of the undersigned, or by the occurrence of any
other event except as expressly provided herein. Notwithstanding the occurrence
of such death, incapacity or other event prior to the completion of the
transactions contemplated by the Underwriting Agreement and this Deposit
Agreement, the Attorney-in-Fact is authorized and directed to complete all such
transactions and to carry out the provisions of the Underwriting Agreement and
this Deposit Agreement as if such death, incapacity or other event had not
occurred and regardless of any notice thereof.
6. Voting of Shares.
Until full payment by the Underwriters of the aggregate Purchase Price for
the Option Shares purchased from the undersigned by the Underwriters, the
undersigned shall remain the owner of such Shares and shall have the right to
vote such Shares and all other shares of Common Stock (if any) represented by
the certificates deposited by the undersigned with the Attorney-in-Fact pursuant
hereto and to receive all dividends and distributions thereon.
7. Representations of the Undersigned.
All of the representations and warranties of the undersigned as a Selling
Stockholder set forth in Section 2.B of the Underwriting Agreement are
incorporated herein, mutatis mutandis, and shall be deemed to have been made and
given herein by the undersigned with the same force and effect as if fully set
forth herein.
8. Governing Law; Counterparts.
This Deposit Agreement and the power of attorney contained herein shall be
construed and enforced in accordance with the laws of the State of New York.
This Deposit Agreement may be executed in one or more counterparts, all of
which, taken together, shall constitute one and the same instrument.
5
<PAGE>
Please confirm your acceptance of and agreement with the foregoing by
countersigning and returning to the undersigned the enclosed counterpart hereof.
Very truly yours,
-----------------------------
ACCEPTED AND AGREED TO:
- ----------------------------
Sy Syms
6
<PAGE>
EXHIBIT B
FORM OF OPINION OF SKADDEN, ARPS ET AL.
________________, 1997
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
As representatives of the several
Underwriters referred to herein
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Syms Corp --
Public Offering by Selling Stockholders
of shares of Common Stock
---------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Syms Corp, a New Jersey corporation (the
"Company"), and the several selling stockholders (the "Selling Stockholders")
named in Schedule II to the Underwriting Agreement, dated __________, 1997 (the
"Underwriting Agreement"), among the Company, the Selling Stockholders and the
several underwriters (the "Underwriters") named in Schedule I thereto, in
connection with the sale this date by the Selling Stockholders to the
Underwriters of an aggregate of __________ shares of the Company's Common Stock,
$.05 par value (the "Common Stock"). We are furnishing this opinion to you, at
the request of the Company and the Selling Stockholders, pursuant to Section
7(b) of the Underwriting Agreement. Capitalized terms used but not otherwise
defined herein shall have the respective meanings set forth in the Underwriting
Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of [specify documents
examined]. We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and the Selling
Stockholders and such agreements, certificates of public officials, certificates
of officers or other representatives of the Company and others, and such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
<PAGE>
authenticity of the originals of such copies. In making our examination of
documents executed by parties other than the Company and the Selling
Stockholders, we have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to any facts material to the opinions expressed
herein that we did not independently establish or verify, we have relied upon
oral or written statements and representations of officers and other
representatives of the Company and others.
Members of our firm are admitted to practice in the States of
____________________________, and we do not express any opinion as to the laws
of any other jurisdiction other than the federal laws of the United States of
America to the extent specifically referred to herein.
Based upon and subject to the limitations, qualifications and assumptions
set forth herein, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New Jersey and
has full corporate power and authority to own, lease, license and operate
its properties and conduct its business as described in the Prospectus. The
opinion set forth in this paragraph 1 as to the valid existence and good
standing of the Company is based solely upon our review of a certificate
from the Secretary of State of New Jersey.
2. [To the effect that] The Company is duly qualified and in good
standing to do business as a foreign corporation in each of Connecticut,
Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Missouri,
New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas and
Virginia.
3. The authorized capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization." All of the outstanding
shares of Common Stock, including the Shares, have been duly authorized and
are validly issued, fully paid and nonassessable and were not issued in
violation of or subject to any preemptive rights. Except as disclosed in
the Registration Statement and the Prospectus, to our knowledge there are
no outstanding options, warrants or other securities or rights calling for
the issuance of, and no commitments, obligations, plans or arrangements of
or on the part of the Company to issue any shares of its capital stock or
any securities convertible into, exchangeable for or evidencing the right
to purchase shares of such capital stock.
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<PAGE>
4. The Common Stock conforms in all material respects to the
description thereof contained in the Prospectus under the caption
"Description of Capital Stock."
5. The Company has the corporate power and authority to execute and
deliver, and to perform its obligations under, the Underwriting Agreement.
The execution and delivery of the Underwriting Agreement by the Company and
the performance by the Company of its obligations thereunder, have been
duly authorized by all necessary corporate action on the part of the
Company. The Underwriting Agreement has been duly and validly authorized,
executed and delivered by the Company.
6. The Company's execution and delivery of the Underwriting Agreement
do not, and its performance of its obligations thereunder, when such
performance is required by the terms thereof, will not, (i) constitute a
violation or default (or an event that, with notice or lapse of time or
both, would constitute a default) under, or result in the creation or
imposition of any security interest in or lien upon any property of the
Company pursuant to the terms, conditions or provisions of, any agreement
to which the Company is a party or by which it is bound of which we are
aware and have determined to be material to the business or financial
condition of the Company (which agreements are identified as Schedule ___
annexed hereto) or (ii) conflict with any of the provisions of the
certificate of incorporation or by-laws of the Company or (iii) contravene
any New York, New Jersey or United States federal laws or regulations
(other than federal or state securities laws or federal or state anti-fraud
laws relating to disclosure, as to which we express no opinion in this
paragraph) that, in our experience, are normally applicable to transactions
of the type contemplated by the Underwriting Agreement or (iv) violate or
conflict with any judgment, writ, injunction, decree, order or ruling of
any court or governmental authority binding on the Company that has been
identified to us by the Company.
7. The Foundation has been duly incorporated and is validly existing
and in good standing as a non-profit corporation under the laws of the
State of New Jersey. The Foundation has the corporate power and authority
to own those of the Shares as are owned by it and to execute and deliver,
and to perform its obligations under, the Underwriting Agreement,
including, but not limited to, the sale and delivery to the Underwriters of
those of the Shares as are to be sold by the Foundation pursuant to the
Underwriting Agreement. The execution and delivery by the Foundation of the
Underwriting Agreement and the performance by the Foundation of its
obligations thereunder have been duly authorized by all requisite corporate
action on the part of the Foundation. The Underwriting Agreement has been
duly and validly authorized, executed and delivered by the Foundation.
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<PAGE>
8. The Trust is a validly formed and existing revocable living trust
under the laws of the State of New York. Sy Syms is the sole incumbent
Trustee of the Trust and, under the terms of the Trust Indenture, in his
capacity as Trustee, has full right, power and authority, in the name and
on behalf of the Trust, to execute and deliver the Underwriting Agreement
and to perform the obligations to be performed by and on behalf of the
Trust pursuant to the terms of the Underwriting Agreement, including, but
not limited to, the sale and delivery to the Underwriters of those of the
Shares as are to be so sold and delivered by the Trust. The Underwriting
Agreement has been duly and validly executed and delivered (i) on behalf of
the Trust by Sy Syms, as Trustee, and (ii) on behalf of each of Marcy Syms
and Stephen A. Merns by Sy Syms, as Attorney-in-Fact pursuant to the
Deposit Agreement.
9. No consent, approval, waiver, license, permit, authorization or
other action by, or filing with, any New Jersey, New York or United States
federal governmental authority is required in connection with the execution
and delivery of the Underwriting Agreement by the Company or any of the
Selling Stockholders, the execution and delivery of the Deposit Agreement
by any of the Selling Stockholders or the performance by the Company or any
of the Selling Stockholders of its, his or her respective obligations under
and the consummation of the transactions contemplated by the Underwriting
Agreement and, in the case of the Selling Stockholders, the Deposit
Agreement except for (i) such as may be required under state securities or
"blue sky" laws (as to which we express no opinion) and (ii) such as have
been made or obtained under the Act, the Exchange Act or the rules of the
New York Stock Exchange.
10. Upon delivery by each Selling Stockholder (either directly or by
his or her Attorney-in-Fact) to the Representatives, on behalf of the
Underwriters, of a certificate evidencing those of the Shares as are to be
so sold to the Underwriters by such Selling Stockholder, registered in the
name of such Selling Stockholder and duly endorsed in blank or accompanied
by a stock power for such Shares duly endorsed in blank, against receipt of
the aggregate Purchase Price therefor, as provided in the Underwriting
Agreement, the Underwriters will acquire such certificate and the Shares
evidenced thereby free and clear of any adverse claim, as defined in
Section 8-102(a)(1) of the Uniform Commercial Code as adopted in the State
of New York (the "Code") (assuming such Underwriters acquire such
certificates without notice of an adverse claim, as such phrase is used in
Section 8-105 of the Code).
11. To the best or our knowledge, no person or entity has the right,
by contract or otherwise, to require registration under the Act of shares
of capital stock or other securities of the Company or any subsidiary
thereof solely because of the filing or effectiveness of the Registration
Statement or the
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<PAGE>
consummation of the transactions contemplated by the Underwriting
Agreement.
12. The Shares are listed for trading on the New York Stock Exchange.
13. The Registration Statement and the Prospectus (except for the
financial statements and the notes thereto, the financial statement
schedules and the other financial and accounting data included therein, as
to which we express no opinion) comply as to form in all material respects
with the requirements of the Act and the Regulations. The Incorporated
Documents (other than the financial statements and the notes thereto, the
financial statement schedules and the other financial and accounting data
included therein, as to which we express no opinion), appear on their face
to have complied as to form in all material respects with the Exchange Act
and the rules and regulations of the Commission thereunder at the time such
Incorporated Documents were filed with the Commission under the Exchange
Act.
14. To the best of our knowledge, there is no litigation, arbitration
or governmental or other action, suit, proceeding or investigation before
any court or before or by any public, regulatory or governmental agency or
body pending or threatened against, or involving the properties or business
of, the Company or any subsidiary, that, if resolved against the Company or
such subsidiary, individually or, to the extent involving related claims or
issues, in the aggregate, is of a character required to be disclosed in the
Registration Statement and the Prospectus and that has not been properly
disclosed therein; and to the best of our knowledge, there is no contract
or document concerning the Company or any subsidiary of a character
required to be described in the Registration Statement and the Prospectus
or to be filed as an exhibit to the Registration Statement, that is not so
described or filed.
15. The statements in the Prospectus under the heading "Shares
Eligible for Future Sale," insofar as such statements purport to summarize
the provisions of laws or regulations, are correct in all material respects
and are a fair summary of the matters referred to therein.
16. The Company is not subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended.
We have been orally advised by the Commission that the Registration
Statement was declared effective under the Securities Act at ________ on
______________________, 1997. We have been orally advised by the Commission that
no stop order suspending the effectiveness of the Registration Statement has
been issued and, to the best of our knowledge, no proceedings for
5
<PAGE>
that purpose have been instituted or are pending or threatened by the
Commission.
In addition, we have participated in conferences with officers and other
representatives of the Company, certain of the Selling Stockholders,
representatives of the independent accountants of the Company and
representatives of and counsel for the Underwriters at which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although we are not passing upon, and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus and have made no independent check or
verification thereof, except to the extent set forth in paragraphs 3, 4 and 15
above, on the basis of the foregoing, no facts have come to our attention that
have led us to believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as of the date thereof
or as of the date hereof, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, except that we express no view with respect to the
Incorporated Documents or the financial statements, schedules and other
financial and statistical data included therein or excluded therefrom or the
exhibits to the Registration Statement.
This opinion is furnished to you solely for your benefit and the benefit of
the Underwriters in connection with the closing under the Underwriting Agreement
occurring today and is not to be used, circulated, quoted or otherwise referred
to or relied upon for any other purpose without our prior express written
permission.
Very truly yours,
6
[SASM&F LLP Newark Letterhead]
November ___, 1997
Syms Corp
Syms Way
Secaucus, New Jersey 07094
Re: Syms Corp Registration Statement
on Form S-3
--------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Syms Corp, a New Jersey corporation
(the "Company") and certain stockholders of the Company (the "Selling
Stockholders"), in connection with the public offering by certain of the Selling
Stockholders (the "Firm Share Sellers") of 3,500,000 shares (the "Firm Shares")
of the Company's Common Stock, par value $.05 per share (the "Common Stock") and
the sale by one of the Firm Share Holders and the remaining Selling Stockholders
(collectively, the "Option Share Sellers") of up to 525,000 shares (the "Option
Shares" and, together with the Firm Shares, the "Shares") of Common Stock to
cover over-allotments in connection with the sale of the Firm Shares.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Company's
Registration Statement on Form S-3 (Registration No. 333-38711) as filed with
the Securities and Exchange Commission (the "Commission") on October 24, 1997
under the Act (the "Registration Statement"); (ii) the form of Underwriting
Agreement (the "Underwriting Agreement") proposed to be
<PAGE>
entered into among the Company, the Selling Stockholders, and Bear, Stearns &
Co. Inc., Salomon Brothers Inc and their affiliates, as representatives of the
underwriters named therein (the "Underwriters"), which was filed as an exhibit
to the Registration Statement; (iii) a specimen certificate evidencing the
Common Stock; (iv) the Certificate of Incorporation of the Company, as presently
in effect; (v) the By-Laws of the Company, as presently in effect; and (vi)
certain resolutions of the Board of Directors of the Company. We have also
examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Company and others, and such other documents, certificates and records as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power, corporate
or other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives of the
Company and others.
Members of our firm are admitted to the bar in the State of New Jersey, and
we do not express any opinion as to the laws of any other jurisdiction.
<PAGE>
Based upon and subject to the foregoing, we are of the opinion that:
The Shares have been duly authorized and validly issued and are fully paid
and nonassessable.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. We also consent to the reference to our
firm under the caption "Legal Matters" in the Registration Statement. In giving
this consent, we do not thereby admit that we are included in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP
-----------------------------------------------
