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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 26, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 COMMISSION FILE NUMBER 1-8546
SYMS CORP
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(Exact name of registrant as specified in its charter)
NEW JERSEY NO. 22-2465228
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
SYMS WAY, SECAUCUS, NEW JERSEY 07094
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 902-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Title of each class which registered
------------------------------ -------------------------
Common Stock, $.05 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock of the registrant held by
non-affiliates on May 8, 2000 was $31,815,672 based upon the closing price of
such stock on that date.
As of May 8, 2000 15,959,790 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's Proxy Statement for the 2000 annual meeting of
stockholders to be filed pursuant to Regulation 14A are incorporated in Part III
hereof by reference.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Syms Corp operates a chain of 48 "off-price" retail stores located
throughout the Northeastern and Middle Atlantic regions and in the Midwest,
Southeast and Southwest. Each Syms store offers a broad range of first quality,
in-season merchandise bearing nationally recognized designer or brand-name
labels at prices substantially lower than those generally found in department
and specialty stores. Syms directs its merchandising efforts at predominantly
middle-income, fashion-minded and price conscious customers.
Since the first Syms store opened in New York City in 1959, the Company has
expanded to 48 stores and the aggregate amount of selling space in the Syms
stores increased from approximately 2,000 square feet to approximately 1,844,000
square feet. In March 1987, the Company relocated to an approximately 277,000
square foot distribution center and executive headquarters.
The Company maintains its executive offices at Syms Way, Secaucus, New
Jersey 07094, telephone (201) 902-9600. Unless otherwise noted, references to
the "Company" or to "Syms" relate to Syms Corp, its subsidiaries and their
predecessors.
DESCRIPTION OF BUSINESS
The Syms chain of 48 apparel stores offers a broad range of "off-price"
first quality, in-season merchandise consisting primarily of men's tailored
clothing and haberdashery, women's dresses, suits and separates, children's
apparel and men's, women's and children's shoes. Syms stores emphasize better
quality, nationally recognized designer and brand name merchandise at prices
substantially below those generally charged by department and specialty stores.
Syms carries a wide selection of sizes and styles of men's, women's and
children's wear.
Syms operates in a single industry segment and has no foreign operations.
No material part of the Company's consolidated revenues is received from a
single customer or group of customers.
MERCHANDISE
For the year ended February 26, 2000 net sales were generated by the
following categories:
Men's tailored clothes and haberdashery.................... 54%
Women's dresses, suits, separates and accessories.......... 30%
Shoes...................................................... 7%
Children's wear............................................ 7%
Luggage, domestics and fragrances.......................... 2%
---
100%
===
Most of the items sold by the Company consist of nationally recognized
fashion name merchandise. Merchandise is displayed by type and size on
conveniently arranged racks or counters. No emphasis is placed on any particular
"label". The stores generally offer minor alterations for an additional charge.
PURCHASING
The Company purchases first-quality, in-season, brand-name merchandise
directly from manufacturers on terms more favorable than those generally
obtained by department and specialty stores. Syms estimates that approximately
200 brand-name manufacturers of apparel are represented in its stores. The
Company does not maintain large out-of-season inventories. However, Syms
occasionally buys certain basic clothing which does not change in style from
year to year at attractive prices for storage until the following season.
Purchasing is performed by a buying staff in conjunction with their General
Merchandise Manager and several other key divisional merchandise managers.
DISTRIBUTION
The Company owns a distribution center, located at Syms Way, 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
store space. The facility is located on an 18.6 acre parcel of land for which
the Company holds a ground lease for a remaining term of 276 years. Most
merchandise is received from manufacturers at the distribution center where it
is inspected, ticketed and allocated to particular stores.
1
<PAGE>
MARKETING
The Company's pricing policy is to affix a ticket to each item displaying
Syms' selling price as well as the price the Company regards as the traditional
full retail price of that item at department or specialty stores. All garments
are sold with the brand-name as affixed by the manufacturer. Because women's
dresses are vulnerable to considerable style fluctuation, Syms has long utilized
a ten-day automatic markdown pricing policy to promote movement of merchandise.
The date of placement on the selling floor of each women's dress is stamped on
the back of the price ticket. The front of each ticket contains what the Company
believes to be the nationally advertised price, the initial Syms price and three
reduced prices. Each reduced price becomes effective after the passage of ten
selling days. Women's dresses represent approximately 4.5% of net sales. The
Company also offers "dividend " prices consisting of additional price reductions
on various types of merchandise.
Syms has as its tag line "An Educated Consumer is Our Best Customer"(R),
one of the best known in retail advertising. The Company historically has
advertised principally on television and radio. In the Fall of 1994, the Company
revised its strategy and began to enhance its advertising by including print
media as well as direct mail to its Syms credit card customer base.
The Company sells its merchandise for cash, checks, national credit cards,
and its own Syms credit card. Syms sells its own credit card receivables on a
non-recourse basis to a third party for a fee. Merchandise purchased from the
Company may be returned within a reasonable amount of time, within season. The
Company does not offer cash refunds for purchases, but issues credits toward the
Syms charge card and other major credit cards or store merchandise credits which
may be used toward the purchase of other merchandise.
TRADEMARKS
"Syms", "An Educated Consumer is Our Best Customer "(R), "Names You Must
Know"(R), and "The More You Know About Clothing, the Better it is for Syms"(R)
have been registered with the United States Patent and Trademark Office.
COMPETITION
The retail apparel business is highly competitive, and the Company accounts
for only a small fraction of the total market for men's, women's and children's
apparel. The Company's stores compete with discount stores, apparel specialty
stores, department stores, manufacturer-owned factory outlet stores and others.
Many of the stores with which the Company competes are units of large national
or regional chains that have substantially greater resources than the Company.
Retailers having substantially greater resources than the Company have indicated
their intention to enter the "off-price" apparel business, and the "off-price"
apparel business itself has become increasingly competitive, especially with
respect to the increased use by manufacturers of their own factory outlets. At
various times of the year, department store chains and specialty shops offer
brand-name merchandise at substantial markdowns.
OPERATIONS AND CONTROL SYSTEMS
The Company has implemented a merchandise control system which tracks
product from its purchase to its ultimate sale in the Company's stores. The
system tracks the product by store in approximately 750 categories. All the
information regarding the product is transmitted daily through telephone lines
to the Company's database at its executive headquarters. Each week the Company's
executives receive detail reports regarding sales and inventory levels in units
and retail dollars on a store by store basis.
Management of the Company visit stores on a regular basis to coordinate
with the store managers, among other things, in the training of employees in
loss prevention methods. Each store has on premises security personnel during
normal hours and a security system after hours.
EMPLOYEES
At February 26, 2000, the Company had 2,565 employees of whom approximately
620 work part time. The Company has collective bargaining agreements with the
Retail, Wholesale and Department Store Union and the United Food and Commercial
Workers Union which expire in the year 2000 and cover 1,823 sales and tailor
employees. The Company believes its relationships with the Unions are good.
Approximately 30 to 100 persons, consisting mostly of sales personnel, are
employed at each Syms store.
2
<PAGE>
ITEM 2. PROPERTIES
THE STORES
Location
At February 26, 2000 the Company had 48 stores, 25 of which are located in
leased facilities. The following table indicates the locations of the stores and
the approximate selling space of each location. In addition to the selling space
indicated, each store contains between approximately 2,000 to 12,000 square feet
for inspection and ticketing of merchandise and administrative functions.
<TABLE>
<CAPTION>
LEASED/ SELLING LEASED/ SELLING
STATE LOCATION OWNED SPACE STATE LOCATION OWNED SPACE
----- -------- ----- ----- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
CONNECTICUT NEW YORK/NEW JERSEY
Fairfield Owned 32,000 Park Avenue Leased 45,000
Hartford Leased 31,000 Trinity Owned 40,000
Westbury Owned 72,000
Commack Owned 36,000
FLORIDA Westchester Leased 50,000
Fort Lauderdale Owned 44,000 Rochester Owned 32,000
Miami Owned 45,000 Buffalo Owned 39,000
West Palm Beach Leased 36,000 Paramus Owned 56,000
Tampa Owned 38,000 Woodbridge Leased 32,000
Kendall Leased 32,000 Secaucus (2) Owned 29,000
GEORGIA Cherry Hill Owned 40,000
Norcross Owned 51,000 Lawrenceville Leased 54,000
Marietta Owned 39,000 NORTH CAROLINA
ILLINOIS Charlotte Leased 30,000
Addison Owned 47,000
Niles Leased 32,000 OHIO
Gurnee Mills Mall Leased 33,000 Highland Heights Leased 36,000
Chicago Leased 39,000 Sharonville Leased 31,000
MARYLAND
Baltimore Leased 43,000 PENNSYLVANIA
Rockville Owned 61,000 King of Prussia Owned 41,000
Towson Leased 41,000 Franklin Mills Mall Leased 22,000
MASSACHUSETTS Monroeville Owned 31,000
Norwood Leased 36,000 Pittsburgh Leased 40,000
Peabody Leased 39,000
Boston Leased 40,000 RHODE ISLAND
N. Cranston Leased 27,000
MICHIGAN
Southfield Owned 46,000 TEXAS
Troy Leased 37,000 Dallas Owned 42,000
MISSOURI Houston Owned 34,000
St. Louis Leased 33,000 Hurst Owned 38,000
VIRGINIA
Falls Church Leased 39,000
Potomac Mills Mall Leased 33,000
</TABLE>
3
<PAGE>
Syms stores are either "free standing" or located in shopping centers or
indoor malls, and all are surrounded by adequate parking areas, except for the
two New York City stores and the one downtown Boston store. Syms stores are
usually located near a major highway or thoroughfare in suburban areas populated
by at least 1,000,000 people and are readily accessible to customers by
automobile. In certain areas where the population is in excess of 2,000,000
people, Syms has opened more than one store in the same general vicinity.
Lease Terms
Twenty-four of the Company's 48 stores are currently leased from unrelated
parties, and the Elmsford, New York store is leased from Sy Syms, the Chairman
of Syms Corp. The following table summarizes lease expirations and any renewal
options:
Number of Number of
Calendar Leases Leases with Range in Years of
Periods Expiring (1) Renewal Options Option Periods (2)
- ------- ------------ --------------- -------------------
2000 0 0 0
2001 3 0 0
2002 2 1 4
2003 0 0 0
2004 1 1 10
2005 and thereafter 18 12 2.5-5
-- -- -----
24 14
- -------------
(1) Westchester - month to month basis.
(2) Depending on the applicable option, the minimum rent due during the renewal
option periods may be based upon a formula contained in the existing lease
or negotiations between the parties.
Store leases provide for a base rental of between approximately $4.30 and $37.66
per square foot. In addition, under the "net" terms of all of the leases, the
Company must also pay maintenance expenses, real estate taxes and other charges.
Four of the Company's stores have a percentage of sales rental as well as a
fixed minimum rent. Rental payments for Syms' leased stores aggregated
$11,043,000 for the year ended February 26, 2000, of which $600,000 was paid to
Sy Syms as fixed rent.
Store Openings/Closings
Three new stores opened this year. The Lawrenceville, NJ store opened April
29, 1999 (54,000 square feet of selling space), the Chicago, IL store opened
August 26, 1999 (39,000 square feet of selling space), and the Towson, MD store
opened September 16, 1999 (41,000 square feet of selling space).
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business.
Management of the Company believes, based upon its assessment of the actions and
claims outstanding against the Company, and after discussion with counsel, that
there are no legal proceedings that will have a material adverse effect on the
financial condition or results of operations of the Company. Some of the
lawsuits to which the Company is a party are covered by insurance and are being
defended by the Company's insurance carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report.
4
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The following table sets forth for the period indicated the high and low
sales prices for the Company's common stock as reported by the New York Stock
Exchange using the trading symbol SYM.
HIGH LOW
---- ---
1999 Quarter ended February 26, 2000 $6 - 3/16 $4 - 5/16
Quarter ended November 27, 1999 8 - 7/8 5 - 1/8
Quarter ended August 28, 1999 8 - 3/16 7 - 7/16
Quarter ended May 29, 1999 8 - 3/8 7 - 3/8
1998 Quarter ended February 27, 1999 $9 - 3/4 $7 - 1/2
Quarter ended November 28, 1998 13 - 11/16 9 - 3/8
Quarter ended August 29, 1998 14 - 13/16 12 - 1/4
Quarter ended May 30, 1998 15 - 7/8 13 - 5/8
HOLDERS
As of May 1, 2000 there were 148 record holders of the Company's Common
Stock. The Company believes that there were in excess of 1,693 beneficial owners
of the Company's Common Stock as of that date.
DIVIDENDS
The Board of Directors of the Company did not declare dividends, in the
fiscal years ended February 26, 2000 and February 27, 1999. 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 (see Note 4 to notes to consolidated financial
statements regarding covenants in the Company's revolving credit agreement). The
Company intends generally to retain earnings, if any, to fund development and
growth of its business. The Company does not plan on paying dividends in the
near term. The Company had announced that its Board of Directors had authorized
the repurchase of up to 15% of its outstanding shares of Common Stock at
prevailing market prices during the current fiscal year ended February 26, 2000.
This repurchase program expired on February 26, 2000.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the
Company's audited Consolidated Financial Statements for the fiscal years ended
February 26, 2000, February 27, 1999, February 28, 1998, March 1, 1997 and March
2, 1996. The selected financial data presented below should be read in
conjunction with such Financial Statements and notes thereto.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------
FEBRUARY 26, FEBRUARY 27, FEBRUARY 28, MARCH 1, MARCH 2,
2000 1999 1998 1997 1996
------------ ------------ ----------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $ 341,570 $343,858 $ 352,959 $346,792 $334,750
========= ======== ========= ======== ========
Net income ............... $ 2,224 $ 17,449 $ 23,036 $ 19,065 $ 10,411
========= ======== ========= ======== ========
Net income per share -
basic .................. $ 0.14 $ 1.00 $ 1.30 $ 1.08 $ 0.59
========= ======== ========= ======== ========
Net income per share -
diluted ................ $ 0.14 $ 1.00 $ 1.29 $ 1.08 $ 0.59
========= ======== ========= ======== ========
Cash dividends per share . $ -- $ -- $ -- $ -- $ --
========= ======== ========= ======== ========
BALANCE SHEET DATA:
Working capital............ $ 87,812 $101,592 $ 99,728 $ 78,228 $ 75,521
Total assets............... 300,314 298,742 294,192 284,018 260,144
Capitalized leases......... -- -- 419 900 1,304
Other long term
liabilities.............. 2,436 1,567 964 633 237
Shareholders' equity....... $ 253,428 $258,760 $ 250,870 $226,434 $207,369
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report includes forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) and information
relating to the Company that are based on the beliefs of the management of the
Company as well as assumptions made by and information currently available to
the management of the Company. When used in this Annual Report, the words
"anticipate," "believe," "estimate," "expect," "intend," "plan," and similar
expressions, as they relate to the Company or the management of the Company,
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events, the outcome of which is subject to
certain risks, including among others general economic and market conditions,
decreased consumer demand for the Company's products, possible disruptions in
the Company's computer or telephone systems, increased or unanticipated costs or
effects associated with year 2000 compliance by the Company or its service or
supply providers, possible work stoppages, or increases in labor costs, effects
of competition, possible disruptions or delays in the opening of new stores or
inability to obtain suitable sites for new stores, higher than anticipated store
closings or relocation costs, higher interest rates, unanticipated increases in
merchandise or occupancy costs and other factors which may be outside the
Company's control. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results or
outcomes may vary materially from those described therein as anticipated,
believed, estimated, expected, intended or planned. Subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the cautionary statements in
this paragraph.
6
<PAGE>
RESULTS OF OPERATIONS
The following discussion compares the fiscal years ended February 26, 2000,
February 27, 1999 and February 28, 1998. The fiscal years ended February 26,
2000, February 27, 1999 and February 28, 1998 were each comprised of 52 weeks.
Fiscal Year Ended February 26, 2000 Compared to Fiscal Year Ended February
27, 1999
Net sales for the fiscal year ended February 26, 2000, were $341,570,000 a
decrease of $2,288,000 (or .7%) as compared to net sales of $343,858,000 for the
fiscal year ended February 27, 1999. Comparable store sales for the fiscal year
ended February 26, 2000 declined 5.9%. This sales decline continues to be
impacted by increased price competition and increased promotional activity from
other retailers.
Gross profit for the fiscal year ended February 26, 2000 was $128,725,000,
a decrease of $7,175,000 (37.7 % as a percentage of net sales) as compared to
$135,900,000 (39.5% as a percentage of net sales) for the fiscal year ended
February 27, 1999. This decrease is largely due to the decline in sales and
higher markdowns which was partially offset by an improved shrinkage
performance.
Selling, general and administrative (SG&A) expense was $83,592,000 (24.5%
as a percentage of net sales) for the fiscal year ended February 26, 2000 as
compared to $73,886,000 (21.5% as a percentage of net sales) for the fiscal year
ended February 27, 1999. This increase in SG&A expenses of approximately
$9,706,000 is largely attributable to the opening of new stores. The SG&A
expenses of these new stores amounted to $6,303,000 for the fiscal year ended
February 26, 2000.
Advertising expense for the fiscal year ended February 26, 2000 was
$10,210,000 (3.0% as a percentage of net sales) as compared to $7,581,000 (2.2%
as a percentage of net sales) for the fiscal year ended February 27, 1999. The
increase of $2,629,000 resulted from increased TV advertising in the first half
of this year and increased number of direct mail customers in fiscal 1999 as
compared to fiscal 1998 resulting from a management decision to spend more
advertising dollars in an effort to improve sales performance.
Occupancy costs were $20,688,000 (6.1% as a percentage of net sales) for
the fiscal year ended February 26, 2000 as compared to $16,717,000 (4.9% as a
percentage of net sales) for the fiscal year ended February 27, 1999. This
increase is largely attributable to the expense of new stores for the fiscal
year ended February 26, 2000.
Depreciation and amortization amounted to $10,580,000 (3.1% as a percentage
of net sales) for the fiscal year ended February 26, 2000 as compared to
$8,541,000 (2.5% as a percentage of net sales) for the fiscal year ended
February 27, 1999. This increase is attributable to the addition of new stores
and the acquisition of new MIS systems and equipment.
Income before income taxes was $3,645,000 (a decrease of $25,437,000, or
87.5%) for the fiscal year ended February 26, 2000, as compared to $29,082,000
for the fiscal year ended February 27, 1999. This decrease resulted mostly from
the decline in sales, gross margin and higher SG&A expenses largely attributable
to the opening of three new stores.
For the fiscal year ended February 26, 2000 the effective income tax rate
was 39.0% as compared to 40.0% for the fiscal year ended February 27, 1999. In
the fiscal year ended February 27, 1999, the effective tax rate was affected by
the addition of tax reserves pertaining to certain states.
Fiscal Year Ended February 27, 1999 Compared to February 28, 1998
Net sales for the fiscal year ended February 27, 1999, were $343,858,000, a
decrease of $9,101,000 (or 2.6%) as compared to net sales of $352,959,000 for
the fiscal year ended February 28, 1998. Comparable store sales for the fiscal
year ended February 27, 1999 declined 6.3%. This sales decline can be largely
attributable to increased promotional activity and price competition from other
retailers.
Gross profit for the fiscal year ended February 27, 1999 was $135,900,000,
a decrease of $6,438,000 (39.5% as a percentage of net sales) as compared to
$142,338,000 (40.3% as a percentage of net sales) for the fiscal year ended
February 28, 1998. This decrease is largely due to the decline in sales and
higher markdowns which was partially offset by an improved shrinkage
performance.
Selling, general and administrative (SG&A) expense was $73,886,000 (21.5%
as a percentage of net sales) for the fiscal year ended February 27, 1999 as
compared to $71,020,000 (20.1% as a percentage of net sales) for the fiscal year
ended February 28, 1998. This increase in SG&A expenses of approximately
$2,866,000 resulted from the opening of three new stores (Kendall, FL, Troy, MI
and Boston, MA). The SG&A expenses of these new stores amounted to $4,012,000
for the fiscal year ended February 27, 1999.
7
<PAGE>
Advertising expense for the fiscal year ended February 27, 1999 was
$7,581,000 (2.2% as a percentage of net sales) as compared to $8,097,000 (2.3%
as a percentage of net sales) for the fiscal year ended February 28, 1998. This
decrease of $516,000 in advertising expense resulted from expense savings
achieved through opportunistic media buying as well as other cost controls.
Occupancy costs were $16,717,000 (4.9% as a percentage of net sales) for
the fiscal year ended February 27,1999 as compared to $15,300,000 (4.3% as a
percentage of net sales) for the fiscal year ended February 28, 1998. This
increase is largely attributable to the addition of three new stores for the
fiscal year ended February 27, 1999.
Depreciation and amortization amounted to $8,541,000 (2.5% as a percentage
of net sales) for the fiscal year ended February 27, 1999 as compared to
$8,627,000 (2.4% as a percentage of net sales) for the fiscal year ended
February 28, 1998. This decrease resulted mainly from certain assets becoming
fully depreciated and was somewhat offset by the addition of three new stores.
Income before income taxes was $29,082,000 (a decrease of $9,964,000, or
25.5%) for the fiscal year ended February 27, 1999, as compared to $39,046,000
for the fiscal year ended February 28, 1998. This decrease resulted mostly from
the decline in sales and higher SG&A expenses attributable to the opening of
three new stores.
For the fiscal year ended February 27, 1999 the effective income tax rate
was 40.0% as compared to 41.0% for the fiscal year ended February 28, 1998. In
the fiscal year ended February 28, 1998, the effective tax rate was affected by
the addition of tax reserves pertaining to certain states.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 26, 2000 was $87,812,000, a decrease of
$13,780,000 from February 27, 1999 and the ratio of current assets to current
liabilities decreased to 2.98 to 1 as compared to 3.67 to 1 at February 27,
1999.
Net cash provided by operating activities totaled $36,132,000 for the
fiscal year ended February 26, 2000 and increased by $14,170,000 as compared to
$21,962,000 for the fiscal year ended February 27, 1999. The major reasons for
the increase in cash provided by operating activities was attributed to lower
inventory level versus last year and an increase in operating liabilities.
Net cash provided by operating activities totaled $21,962,000 for the
fiscal year ended February 27, 1999 and increased by $5,301,000 as compared to
$16,661,000 for the fiscal year ended February 28, 1998. The major reasons for
the increase in cash provided by operating activities was attributed to lower
decreases in operating liabilities versus last year and lower increases in
inventory levels compared to a year ago offset by lower net income.
Net cash used in investing activities was $19,051,000 for the fiscal year
ended February 26, 2000 as compared to $15,186,000 for the fiscal year ended
February 27, 1999 and $12,210,000 for the fiscal year ended February 28, 1998.
Purchases of property and equipment totaled $19,203,000, $16,250,000 and
$12,273,000 for the fiscal years ended February 26, 2000, February 27, 1999 and
February 28, 1998, respectively.
Net cash used in financing activities was $10,325,000 for the fiscal year
ended February 26, 2000 as compared to $7,690,000 for the fiscal year ended
February 27, 1999 and $3,955,000 for the fiscal year ended February 28, 1998.
The Company has a revolving credit agreement with a bank for a line of
credit not to exceed $40,000,000 through December 1, 2000. At December 1, 2000,
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,
2004. Except for funds provided from this revolving credit agreement, the
Company has satisfied its operating and capital expenditure requirements,
including those for the operation and expansion of stores, from internally
generated funds. For the fiscal year ended February 26, 2000, under the
revolving credit agreement, the borrowings peaked at $7,450,000 and the average
amount of borrowings was $887,775 with a weighted average interest rate of
6.33%. For the fiscal year ended February 27, 1999, the average amount of
borrowings under the revolving credit agreement was $6,768,000 with a weighted
average interest rate of 6.10%. For the fiscal year ended February 28, 1998, the
average amount of borrowing under the revolving credit agreement was $4,982,000
with a weighted average interest rate of 6.22%.
In addition, the Company has a separate $20,000,000 credit facility with
another bank available for the issuance of letters of credit for the purchase of
merchandise and short-term borrowings. This agreement may be canceled at any
time by either party. At February 26, 2000 and at February 27, 1999, the Company
had $3,264,965 and $3,352,000, respectively, in outstanding letters of credit.
There were no borrowings for the fiscal year ended February 26, 2000 compared to
$2,350,000 for the fiscal year ended February 27, 1999.
8
<PAGE>
The Company has planned capital expenditures of approximately $5,000,000
for the fiscal year ending March 3, 2001. The Company's Board of Directors had
authorized the repurchase of up to 15% of its outstanding shares of common stock
at prevailing market prices through the fiscal year ended February 26, 2000. As
of February 26, 2000, the Company has purchased 1,927,900 shares which
represented 10.8% of its outstanding shares at a total cost of $17,670,624. This
Repurchase Program expired on February 26, 2000.
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 3, 2001.
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe inflation has had a material
effect on sales or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are filed together with
this Annual Report. See index to Consolidated Financial Statements in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
9
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows :
NAME AGE TITLE
- ---- --- -----
Sy Syms (1) (2)................... 74 Chairman of the Board and
Director of the Company
Marcy Syms (1) (2)................ 49 Chief Executive Officer/President
and Director of the Company
Antone F. Moreira ............... 63 Vice President, Treasurer and Chief
Financial Officer and Director of
the Company
Harvey A. Weinberg (3) (4) ....... 62 Director of the Company
David A. Messer (3) (4).......... 38 Director of the Company
Ronald Zindman.................... 50 Executive Vice President - General
Merchandise Manager
Allen Brailsford.................. 56 Vice President - Operations
Myra Butensky..................... 41 Vice President - Divisional
Merchandise Manager Men's
Tailored Clothing
Douglas C. Meyer.................. 47 Vice President - Marketing,
Advertising and Sales
Promotion
Isabelle Regan.................... 45 Vice President - Divisional
Merchandise Manager Women's
John Tyzbir....................... 46 Vice President - Human Resources
- -----------
(1) Member of the Executive Committee of the Company.
(2) Sy Syms is the father of Marcy Syms.
(3) Member of the Stock Option - Compensation Committee of the Company.
(4) Member of the Audit Committee of the Company.
The members of the Company's Board of Directors hold office until the next
annual meeting of shareholders and until their successors are duly elected and
qualified. Executive officers are elected annually by the Board of Directors of
the Company and serve at the pleasure of the Board. Marcy Syms is the daughter
of Sy Syms. There are no other family relationships between any directors or
executive officers of the Company. None of the organizations with which these
persons were previously associated is a parent, subsidiary or other affiliate of
the Company except as otherwise set forth.
10
<PAGE>
SY SYMS has been Chairman of the Board, Chief Executive Officer and a
Director of the Company and/or its predecessors since 1959. Mr. Syms was Chief
Operating Officer of the Company from 1983 to 1984. Mr. Syms has been a Director
of Israel Discount Bank of New York since December 1991. On January 22, 1998, Sy
Syms relinquished his position as Chief Executive Officer to Marcy Syms. Since
that date Mr. Syms has been Chairman of the Board.
MARCY SYMS has been President and a Director of the Company since 1983 and
Chief Operating Officer of the Company since 1984. On January 22, 1998, Marcy
Syms was named Chief Executive Officer / President.
ANTONE F. MOREIRA has been Vice President, Chief Financial Officer and
Treasurer of Syms Corp since May 1997. From 1996 to May 1997, Mr. Moreira was a
financial consultant with Equitable Assurance Society, a financial services
organization. From 1990 to 1995, Mr. Moreira was Executive Vice President and
Chief Financial Officer of Stuarts Department Stores, Inc., a regional discount
department store chain operating in New England. Mr. Moreira has been a Director
of the Company since May 1997.
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, he 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.
DAVID A. MESSER has been President of Sempra Energy Trading, a subsidiary
of American International Group, Inc. (NYSE: AIG), since January 1994. Prior to
January 1994, Mr. Messer was a Senior Vice President of AIG Trading Corporation,
(now known as Sempra Energy Trading), where he has been employed since March
1990. He has been a Director of the Company since July 1996.
RONALD ZINDMAN has been Executive Vice President - General Merchandise
Manager since March 1997. He was Vice President, General Merchandise Manager,
Ladies, Mens and Haberdashery from July 1994 to March 1997. Previously, Mr.
Zindman was Vice President - General Merchandise Manager Ladies from March 1993
to July 1994 and a buyer of men's and women's merchandise from March 1990 to
March 1993.
ALLEN BRAILSFORD has been Vice President - Operations since January 1993.
From March 1992 to January 1993, Mr. Brailsford was Director of Operations, and
from March 1985 to March 1992, he was Director of Distribution.
MYRA BUTENSKY has been Vice President - Divisional Merchandise Manager,
Men's Tailored Clothing since January 1999. From May 1998 to January 1999, Ms.
Butensky was Divisional Merchandise Manager, Ladies. Prior to joining the
Company in 1991, Ms. Butensky was a buyer with Popular Trading Club, Inc, and
also spent 10 years with Macy's in a number of buying positions.
DOUGLAS C. MEYER has been Vice President - Marketing, Advertising and Sales
Promotion since July 1994. Mr. Meyer was Vice President, Marketing and Creative
Services for Loehmann's, Inc. from 1987 to 1994.
ISABELLE REGAN has been Vice President - Divisional Merchandise Manager,
Ladies since March 1993. She has held various positions at the Company since
1972, including buyer of women's apparel.
JOHN TYZBIR has been Vice President - Human Resources since April 1999.
From January 1995 to October 1997, Mr. Tyzbir was Director of Human Resources of
Zallie Supermarkets Corp. From June 1991 to January 1995, Mr. Tyzbir was
Director of Human Resources and Planning of Carson Pirie Scott Inc.
11
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 11 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after February 26, 2000, the end of
the fiscal year covered by this Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3) of the General Instructions to
Form 10-K, the information called for by Item 12 is omitted from this Annual
Report and is incorporated by reference to the definitive Proxy Statement to be
filed by the Company pursuant to Regulation 14A of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, which the
Company will file not later than 120 days after February 26, 2000, the end of
the fiscal year covered by this Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3) of the General Instructions to Form
10-K, the information called for by Item 13 is omitted from this Annual Report
and is incorporated by reference to the definitive Proxy Statement to be filed
by the Company pursuant to Regulation 14A of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, which the Company will
file not later than 120 days after February 26, 2000, the end of the fiscal year
covered by this Annual Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE
NUMBER
------
(a) (1) Financial Statements:
Report of Independent Public Accountants............. F-1
Consolidated Balance Sheets ......................... F-2
Consolidated Statements of Income ................... F-3
Consolidated Statements of Shareholders' Equity ..... F-4
Consolidated Statements of Cash Flow ................ F-5
Notes to Consolidated Financial Statements .......... F-6 - F-17
All schedules are omitted because they are not applicable, or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.
(a) (3) List of Exhibits:
The following exhibits which are marked with an asterisk are filed as part
of this Annual Report and the other exhibits set forth below are incorporated by
reference (utilizing the same exhibit numbers, except as stated otherwise below)
from (i) the Company's Registration Statement on Form S-1 under the Securities
Act of 1933 (Registration No. 2-85554) filed August 2, 1983 and declared
effective September 23, 1983 or (ii) where indicated, the Company's reports on
Form 8-K, Form 10-Q or Form 10-K or the Company's Proxy Statement (Commission
File No. 1-8564). Management contracts or compensatory plans or arrangements
required to be filed as exhibits are identified by a (+).
3.1 Certificate of Incorporation of Syms Corp, as amended
3.2 By-laws of Syms Corp
4.1 Specimen Certificate of Common stock
4.3 $5,600,000 New Jersey Economic Development Authority Revenue Bond Agreement
dated December 1, 1981
12
<PAGE>
4.4 Amendments to the New Jersey Economic Development Authority Revenue Bond
Agreement
4.4a First Amendment dated April 14, 1982
4.4b Second Amendment dated May 17, 1982
4.4c Third Amendment dated June 27, 1983
4.4d Fourth Amendment dated July 14, 1983
4.5 Mortgage & Note dated December 11, 1981 between Syms Inc. and New Jersey
Economic Development Authority
10.3 Elmsford (White Plains), New York Leased Premises
10.3a Lease, June 21, 1977
10.3b Lease Modification, December 28, 1978
10.3c Lease Modification, July 26, 1983
10.3d Consent, July 29, 1983
10.3e Parking Area Lease No. 1, July 29, 1969
10.3f Parking Area Sublease No.1, November 29, 1974
10.3g Parking Area Lease No. 2, June 23, 1969
10.3h Parking Area Sublease No. 2, November 29, 1974
10.3i Assignment and Assumption, July 29, 1983
10.4 Ground Lease at One Emerson Lane, Township of Secaucus, Hudson County,
New Jersey Assignment and Assumption of Ground Lease, dated May 8, 1986,
to Registrant (exhibit 28.1 to 8-K Report dated May 1986)
10.21+ Syms Corp 1983 Incentive Stock Option and Appreciation Plan as Amended
and Restated (Exhibit A to Company's Proxy Statement for the 1993 Annual
Meeting of Shareholders)
10.29 Credit Card Program Agreement dated as of March 12, 1987 and as amended
as of March 16, 1987 between General Electric Credit Card Corporation and
Registrant (10-K Report for fiscal year ended December 31, 1987)
10.32 Revolving Credit Agreement dated as of December 1, 1993 between Syms Corp
and Summit Bank (successor to United Jersey Bank) (8-K Report dated
December 7, 1993)
10.33 Form of Indemnification Agreement between Registrant and Directors and
Executive Officers of the Registrant (10-K Report for fiscal year ended
March 2, 1996)
10.34 Credit Plan Agreement dated December 11, 1995 between Citicorp Retail
Services, Inc. and Registrant (10-K Report for fiscal year ended March 2,
1996)
10.35+ Employment Agreement dated November 1, 1996 between Syms Corp and Ronald
Zindman (10-K Report for fiscal year ended March 1, 1997)
10.36+ Stock Option Certificate for Ronald Zindman (10-K Report for fiscal year
ended March 1, 1997)
10.37 Promissory note and mortgage from Syms Corp to Marcy Syms (10-K Report
for fiscal year ended March 1, 1997)
10.38 First Amendment to Revolving Credit Agreement, dated as of November 24,
1997, between Syms Corp and Summit Bank. (10K report for fiscal year
ended February 28, 1998)
10.39* Credit Program Agreement, dated January 27, 2000 between Syms Corp and
Conseco Finance Corp.
21* List of Subsidiaries of the Company
23* Consent of Deloitte & Touche LLP
27* Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended February 26, 2000 no reports on Form 8-K were
filed.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SYMS CORP
By _______________________________
Marcy Syms
Chief Executive Officer / President
Date:
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
___________________________ Chairman of the Board May , 2000
Sy Syms and Director
___________________________ Chief Executive Officer/ May , 2000
Marcy Syms President and Director
(Principal executive officer)
___________________________ Vice President, Treasurer and May , 2000
Antone F. Moreira Chief Financial Officer and
Director (Principal financial
and accounting officer)
___________________________ Director May , 2000
Harvey A. Weinberg
___________________________ Director May , 2000
David A. Messer
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Syms Corp.
Secaucus, New Jersey
We have audited the accompanying consolidated balance sheets of Syms Corp and
subsidiaries as of February 26, 2000 and February 27, 1999, and the related
consolidated statement of income, shareholders' equity, and cash flows for each
of the three years ended February 26, 2000. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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
February 26, 2000, and February 27, 1999 and the results of their operations and
their cash flows for each of the three years in the period ended February 26,
2000, in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 10, 2000
F-1
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FEBRUARY 26, FEBRUARY 27,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,682 $ 2,926
Merchandise inventories 116,357 129,438
Deferred income taxes 3,221 3,462
Prepaid expenses and other current assets 3,002 3,753
--------- ---------
Total current assets 132,262 139,579
PROPERTY AND EQUIPMENT - NET 162,447 153,810
Deferred Income Taxes 916 --
--------- ---------
OTHER ASSETS 4,689 5,353
--------- ---------
TOTAL ASSETS $ 300,314 $ 298,742
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 27,374 $ 19,268
Accrued expenses 7,500 7,719
Accrued insurance 2,774 2,550
Obligations to customers 2,733 3,451
Income taxes payable 4,069 2,230
Short term borrowings -- 2,350
Current portion of obligations
under capital lease -- 419
--------- ---------
Total current liabilities 44,450 37,987
DEFERRED INCOME TAXES -- 428
OTHER LONG TERM LIABILITIES 2,436 1,567
COMMITMENTS (Note 7) -- --
SHAREHOLDERS' 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; 15,960 shares outstanding as of February 26, 2000
(net of 1,928 treasury shares) and 17,024 shares outstanding
as of February 27, 1999 (net of 864 treasury shares) 798 851
Additional paid-in capital 13,752 13,752
Treasury Stock (17,671) (10,168)
Retained earnings 256,549 254,325
--------- ---------
Total shareholders' equity 253,428 258,760
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 300,314 $ 298,742
========= =========
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------
FEBRUARY 26, FEBRUARY 27, FEBRUARY 28,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $341,570 $343,858 $352,959
Cost of goods sold 212,845 207,958 210,621
-------- -------- --------
Gross profit 128,725 135,900 142,338
EXPENSES
Selling, general and administrative 83,592 73,886 71,020
Advertising 10,210 7,581 8,097
Occupancy 20,688 16,717 15,300
Depreciation and amortization 10,580 8,541 8,627
-------- -------- --------
Income from operations 3,655 29,175 39,294
Interest expense (income) - net 10 93 248
-------- -------- --------
Income before income taxes 3,645 29,082 39,046
Provision for income taxes 1,421 11,633 16,010
-------- -------- --------
NET INCOME $ 2,224 $ 17,449 $ 23,036
======== ======== ========
Net Income Per Share - basic $ 0.14 $ 1.00 $ 1.30
======== ======== ========
Weighted Average Shares Outstanding - basic 16,351 17,474 17,770
======== ======== ========
Net Income Per Share - diluted $ 0.14 $ 1.00 $ 1.29
======== ======== ========
Weighted Average Shares Outstanding - diluted 16,362 17,536 17,841
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Preferred Stock, Common Stock,
1,000 Shares; 30,000 Shares;
$100 Par Value $0.05 Par Value Additional
----------------- ----------------- Paid-in Treasury Retained
Shares Amount Shares Amount Capital Stock Earnings Total
------ ------ -------- ------ ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS OF MARCH 1, 1997 -- $ -- $ 17,694 $ 885 $ 11,709 $ -- $ 213,840 $ 226,434
Exercise of stock options -- -- 155 7 1,393 -- -- 1,400
Net income -- -- -- -- -- -- 23,036 23,036
----- ------ -------- ----- -------- --------- --------- ---------
BALANCE AS OF FEBRUARY 28, 1998 -- -- 17,849 892 13,102 -- 236,876 250,870
Exercise of stock options -- -- 39 2 650 -- -- 652
Stock buyback -- -- (864) (43) -- (10,168) -- (10,211)
Net Income -- -- -- -- -- -- 17,449 17,449
----- ------ -------- ----- -------- --------- --------- ---------
BALANCE AS OF FEBRUARY 27, 1999 -- -- 17,024 851 13,752 (10,168) 254,325 258,760
Stock buyback -- -- (1,064) (53) -- (7,503) -- (7,556)
Net Income -- -- -- -- -- -- 2,224 2,224
----- ------ -------- ----- -------- --------- --------- ---------
BALANCE AS OF FEBRUARY 26, 2000 -- $ -- $ 15,960 $ 798 $ 13,752 $ (17,671) $ 256,549 $ 253,428
===== ====== ======== ===== ======== ========= ========= =========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
SYMS CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,224 $ 17,449 $ 23,036
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,580 8,541 8,627
Deferred income taxes (1,103) 2,016 1,786
Gain on sale of property and equipment (152) (748) (58)
Loss on disposal of assets 13 -- 50
(Increase) decrease in operating assets:
Merchandising inventories 13,081 (2,410) (4,488)
Prepaid expenses and other current assets 751 868 (2,865)
Other assets 637 1,319 44
Increase (decrease) in operating liabilities:
Accounts payable 8,106 (2,718) (6,737)
Accrued expenses 5 (1,456) 670
Obligations to customers (718) (1,057) (577)
Other long term liabilities 869 603 331
Income taxes 1,839 (445) (3,158)
-------- -------- --------
Net cash provided by operating activities 36,132 21,962 16,661
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (19,203) (16,250) (12,273)
Proceeds from sale of property and equipment 152 1,064 63
-------- -------- --------
Net cash used in investing activities (19,051) (15,186) (12,210)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of obligations under capital lease (419) (481) (405)
Revolving line of credit (repayments) borrowings (2,350) 2,350 (4,950)
Purchase of treasury shares (7,556) (10,168) --
Exercise of options -- 609 1,400
-------- -------- --------
Net cash used in financing activities (10,325) (7,690) (3,955)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,756 (914) 496
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,926 3,840 3,344
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,682 $ 2,926 $ 3,840
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 191 $ 389 $ 397
======== ======== ========
Income taxes paid (refunds received) - net $ 694 $ 7,507 $ 19,364
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
SYMS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED FEBRUARY 26, 2000, FEBRUARY 27, 1999 AND FEBRUARY 28, 1998
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principal Business - Syms Corp and subsidiaries (the "Company") operates a
chain of 48 "off-price" retail stores located throughout the Northeastern
and Middle Atlantic regions and in the Midwest, Southeast and Southwest.
Each Syms store offers a broad range of first quality, in-season
merchandise bearing nationally recognized designer or brand-name labels for
men, women and children.
b. Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
c. Accounting Period - The fiscal years ended February 26, 2000, February 27,
1999 and February 28, 1998 were comprised of 52 weeks.
d. Cash and Cash Equivalents- Syms Corp considers credit card receivables and
all short-term investments with an original maturity of three months or
less as cash equivalents.
e. 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.
f. Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are principally determined by the
straight-line method over the following estimated useful lives:
Buildings and improvements 15 - 39 years
Machinery and equipment 4 - 7 years
Furniture and fixtures 7 - 10 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.
g. 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.
h. Obligation to Customers - Obligations to customers represent credits issued
for returned merchandise as well as gift certificates.
i. 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.
j. 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-6
<PAGE>
k. Revenue Recognition - The Company recognizes revenue at the "point of
sale". Allowance for sales returned is recorded as a component of net sales
in the period in which the related sales are recorded.
l. Comprehensive Income - In March 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS No. 130). "Reporting
Comprehensive," which is required for years beginning December 15, 1997.
Comprehensive income is equivalent to the Company's net income for fiscal
years 1999, 1998 and 1997.
m. Employee Benefit Plans - SFAS No. 132, "Employers' Disclosures about
Pensions and other Postretirement Benefits," which is an amendment of SFAS
No. 87, No. 88 and No. 106. SFAS No. 132 that revises employers'
disclosures related to pension and other postretirement plans by requiring,
among other things, standardization of disclosures among such plans as well
as additional information on the changes in benefit obligations and fair
values of plan assets. It also eliminates certain other disclosures no
longer deemed useful.
n. Segment Reporting - SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" establishes standards for reporting
information about a company's operating segments. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. The Company operates in a single operating
segment - the operation of retail off-price stores. Revenues from external
customers are derived from merchandise sales. The Company's merchandise
sales mix by product category for the last three fiscal years was as
follows:
<TABLE>
<CAPTION>
Fiscal Year
-------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Men's tailored clothes and haberdashery 54% 53% 54%
Women's dresses, suits, separates and accessories 30% 31% 31%
Shoes 7% 8% 8%
Children's wear 7% 6% 5%
Luggage, domestics and fragrances 2% 2% 2%
--- --- ---
100% 100% 100%
</TABLE>
The Company does not rely on any major customers as a source of revenue.
o. Computer Software Costs - In March 1998, the American Institute of
Certified Public Accountants issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 requires capitalization of costs of software
developed or purchased for internal use. The Company adoption of the SOP
for 1999 which resulted in the capitalization of software development costs
of approximately $4,428,000. The after tax effect on net income in 1999 was
approximately $2,399,000 or $.15 per diluted share.
F-7
<PAGE>
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of:
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
Land $ 40,628 $ 40,628
Buildings and building improvements 115,205 114,668
Leasehold and leasehold improvements 51,318 40,782
Machinery and equipment 28,193 20,793
Furniture and fixtures 20,487 17,560
Capital lease 3,763 3,763
Construction in progress 392 2,747
-------- --------
259,986 240,941
Less accumulated depreciation and amortization 97,539 87,131
-------- --------
$162,447 $153,810
======== ========
NOTE 3 - INCOME TAXES
The provision for income taxes is as follows:
Fiscal Year Ended
------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
Current:
Federal $ 2,366 $ 8,009 $ 12,343
State 158 1,608 1,881
------- -------- --------
2,524 9,617 14,224
------- -------- --------
Deferred:
Federal (190) 1,622 1,490
State (913) 394 296
------- -------- --------
1,103 2,016 1,786
------- -------- --------
$ 1,421 $ 11,633 $ 16,010
======= ======== ========
F-8
<PAGE>
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
--------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
<S> <C> <C> <C>
Statutory Federal income tax rate 35.0% 35.0% 35.0%
State taxes, net of Federal income
tax benefits (10.3) 4.4 5.8
Officers' life insurance 14.3 0.6 0.2
----- ---- ----
Effective income tax rate 39.0% 40.0% 41.0%
===== ==== ====
</TABLE>
The composition of the Company's deferred tax assets and liabilities is as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Capitalization of inventory costs $ 1,414 $ 1,629
Accounts receivable 81 87
Net operating losses 583
Other 3,041 2,822
------- -------
Total deferred tax assets 5,119 4,538
Deferred tax liability:
Depreciation method and different estimated lives (915) (1,446)
Other (67) (58)
------- -------
Total deferred tax liabilities (982) (1,504)
------- -------
Net $ 4,137 $ 3,034
======= =======
Classified in balance sheet as follows:
Current deferred tax asset $ 3,221 $ 3,462
Long term deferred tax asset (net of non-current
deferred tax liability) 916 --
Long term deferred tax liabiltiy (net of non-current
deferred tax asset) -- (428)
------- -------
Net $ 4,137 $ 3,034
======= =======
</TABLE>
At February 26, 2000 the Company had net operating losses of approximately
$840,000 for state income tax purposes which expire beginning in 2007 through
2020.
F-9
<PAGE>
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, 2000. 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. There were
no outstanding borrowings against this agreement for the fiscal years ended
February 26, 2000 and February 27, 1999.
The agreement contains financial covenants, with respect to consolidated
tangible net worth, as defined, working capital and maximum capital
expenditures, including dividends (defined to include cash repurchases of
capital stock), as well as other financial ratios.
Total interest charges incurred for the years ended February 26, 2000, February
27, 1999 and February 28, 1998, including amounts related to capital leases,
were $577,000, $607,000, and $617,000, respectively, of which $40,000, $147,000,
and $160,000 were capitalized in fiscal 1999, 1998 and 1997, respectively, in
connection with the construction of new facilities.
In addition, the Company has a separate $20,000,000 credit facility with another
bank available for the issuance of letters of credit for the purchase of
merchandise and short-term borrowings. This agreement may be canceled at any
time by either party. At February 26, 2000 and at February 27, 1999, the Company
had $3,264,965 and $3,352,000, respectively, in outstanding letters of credit.
There were no borrowings for the fiscal year ended February 26, 2000 compared to
$2,350,000 for the fiscal year ended February 27, 1999.
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 judgment 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 February 26,
2000 and February 27, 1999 due to the short-term maturities of these
instruments.
F-10
<PAGE>
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 information on the Company's pension plan is provided:
<TABLE>
<CAPTION>
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year $ 5,586 $ 4,890
Service cost 437 477
Interest cost 356 334
Actuarial (gain) loss (879) 162
Gross benefits paid (305) (277)
------- -------
Net benefit obligation at end of year $ 5,195 $ 5,586
======= =======
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year $ 5,137 $ 4,655
Employer contributions 249 203
Gross benefits paid (305) (277)
Actual return on plan assets 603 556
------- -------
Fair value of plan assets at end of year $ 5,684 $ 5,137
======= =======
Funded status at end of year $ 489 $ (449)
Unrecognized net actuarial (gain) loss (860) 170
Unrecognized transition amount (51) (76)
------- -------
Accrued benefit costs $ (422) $ (355)
======= =======
</TABLE>
F-11
<PAGE>
Pension expenses includes the following components:
Fiscal Year Ended
---------------------------
February 26, February 27,
2000 1999
------------ ------------
(In thousands)
COMPONENTS OF NET
PERIODIC BENEFIT COST:
Service cost $ 437 $ 477
Interest cost 356 334
Return on Assets (603) (556)
Amortization of actuarial loss 125 132
----- -----
Net periodic benefit cost $ 315 $ 387
===== =====
WEIGHTED-AVERAGE
ASSUMPTIONS USED:
Discount rate 7.75% 6.75%
Rate of compensation increase 4.50% 4.50%
The expected long-term rate of return on plan assets was 8.5% during each
of the years ended February 26, 2000 and February 27, 1999.
b. Profit-Sharing and 401(k) Plan - The Company has a profit-sharing plan 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 $18,900 for year ended February 26, 2000, $180,000 for
the year ended February 27, 1999 and $222,000 for the year ended February
28, 1998.
F-12
<PAGE>
NOTE 7 - COMMITMENTS
a. Leases - The Company has various operating leases for its retail stores,
with terms expiring between 2001 and 2018. Under most lease agreements, the
Company pays real estate taxes, maintenance and other operating expenses.
Certain store leases also provide for additional contingent rentals based
upon a percentage of sales in excess of certain minimum amounts.
Future minimum lease payments at February 26, 2000 are as follows:
Operating
Leases
-----------
2000 11,035
2001 10,453
2002 10,235
2003 10,043
2004 9,970
2005 and thereafter 63,575
---------
Total minimum payments $ 115,311
=========
Payments were made under the real estate capital lease, which expired in
November 1999, to the Company's principal shareholders. Rental payments
were $600,000 during each of the years ended February 26, 2000, February
27, 1999, and February 28, 1998. The $600,000 paid for the year ended
February 26, 2000 included $450,000 in capital lease payments.
Rent expense for operating leases are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Minimum rentals due $ 10,477 $ 7,608 $ 7,011
Escalation rentals accrued 868 584 331
Contingent rentals 16 26 32
Sublease rentals (512) (875) (867)
-------- ------- -------
$ 10,849 $ 7,343 $ 6,507
======== ======= =======
</TABLE>
b. Employment Agreement - 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 condition or results
of operations of the Company. Some of the lawsuits to which the Company is
a party are covered by insurance and are being defended by the Company's
insurance carriers.
F-13
<PAGE>
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).
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 pro forma net income
and earnings per share would be as follows:
1999 1998 1997
------- -------- --------
Net Income (in thousands) $ 1,893 $ 17,320 $ 22,971
Net Income per share - basic $ 0.12 $ 1.00 $ 1.29
Net Income per share - diluted $ 0.12 $ 1.00 $ 1.29
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 1996.
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 1999 and 1998: risk-free interest rate of 6.47%
and 4.75%, expected life 5 and 10 years, expected volatility of 35.38% and
31.33%, and dividend yield 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.
F-14
<PAGE>
Stock option transactions are summarized below:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Fiscal Average Fiscal Average Fiscal Average
1999 Exercise 1998 Exercise 1997 Exercise
Shares Price Shares Price Shares Price
---------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
FIXED OPTIONS
Outstanding
beginning of year 493 $ 10.01 347 $ 9.75 490 $ 9.52
Granted 724 (1) 5.63 200 10.69 25 9.88
Exercised -- -- (38) 10.70 (155) 9.03
Cancelled (33) 9.98 (16) 11.07 (13) 9.96
Outstanding, end of period 1,184 $ 7.33 493 $ 10.01 347 $ 9.75
----- ------- --- ------- --- -------
Options exerciseable at year end 550 $ 9.02 430 $ 10.30 282 $ 10.15
----- ------- --- ------- --- -------
Weighted-average fair value of
options granted during the year $ 2.36 $ 3.74 $ 3.84
</TABLE>
(1) Such options were granted subject to shareholder approval of an amendment
to the Company's Stock Option Plan to increase the number of shares of
common stock for which options may be granted under the Plan.
The following table summarizes information about stock options outstanding at
February 26, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------ ---------------------------------------
Weighted-Average
Number Remaining Weighted- Number Weighted-
Range of Outstanding At Contractural Average Exercisable At Average
Exercise Prices February 26, 2000 Life (years) Exercise Price February 26, 2000 Exercise Price
- ------------------------------------------------------------------------ ---------------------------------------
<S> <C> <C> <C> <C> <C>
$5.625-$12.00 1,184,075(1) 8.2 $7.33 550,075 $9.02
</TABLE>
(1) 724,000 of such options were granted in fiscal year 1999 subject to
shareholder approval of an amendment to the Company's Stock Option Plan to
increase the number of shares of common stock for which options may be
granted under the Plan.
NOTE 10 - NET INCOME PER SHARE
In accordance with SFAS 128, basic net income per share has been computed based
upon the weighted average common shares outstanding. Diluted net income per
share gives effect to outstanding stock options.
Net income per share have been computed as follows:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
----------- ----------- -----------
<S> <C> <C> <C>
Basic net income per share:
Net Income $ 2,224 $ 17,449 $ 23,036
Average shares outstanding 16,351 17,474 17,770
Basic net income per share $ .14 $ 1.00 $ 1.30
Diluted net income per share:
Net Income $ 2,224 $ 17,449 $ 23,036
Average shares outstanding 16,351 17,474 17,770
Stock options 11 62 71
Total average equivalent shares 16,362 17,536 17,841
Diluted net income per share $ .14 $ 1.00 $ 1.29
</TABLE>
F-15
<PAGE>
Options to purchase 367,000, 396,000 and 0 shares of common stock at prices
ranging from $7.125 to $12.250 per share were outstanding in 1999, 1998 and
1997, respectively, but were not included in the computation of diluted net
income per share because the exercise price of the options exceed the average
market price and would have been antidilutive. Options to purchase 724,000
shares of common stock issued in 1999 were granted subject to shareholder
approval of an amendment to the Company's Stock Option Plan to increase the
number of shares of common stock for which options may be granted under the
Plan.
NOTE 11 - Related Party Transactions
Included in the Statements of Income are the following expenses relating to a
Capital Lease with an Officer (this lease expired November 30, 1999). This
agreement expired November 30, 1999.
February 26, February 27, February 28,
2000 1999 1998
------------ ------------ ------------
(in thousands)
Depreciation $ 100 $ 161 $ 156
Interest 31 119 195
The balance sheet includes the following items relating to this agreement:
February 26, 2000 February 27, 1999
----------------- -----------------
(In thousands)
Assets under Capital Lease $ 3,763 $ 3,763
Accumulated Depreciation (3,756) (3,656)
Capital Lease Obligation -- 419
F-16
<PAGE>
NOTE 12 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
Quarter
------------------------------------------------
First Second Third Fourth
--------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
YEAR ENDED FEBRUARY 26, 2000
Net sales $ 79,771 $ 72,794 $ 95,628 $ 93,377
Gross profit $ 31,846 $ 23,926 $ 36,776 $ 36,177
Net income $ 834 $ (3,525) $ 2,796 $ 2,119
Net income per share - basic $ 0.05 $ (0.21) $ 0.17 $ 0.13
Net income per share - diluted $ 0.05 $ (0.21) $ 0.17 $ 0.13
<CAPTION>
Quarter
------------------------------------------------
First Second Third Fourth
--------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
YEAR ENDED FEBRUARY 27, 1999
Net sales $ 83,612 $ 73,649 $ 95,533 $ 91,064
Gross profit $ 33,720 $ 27,870 $ 38,852 $ 35,458
Net income $ 5,309 $ 1,175 $ 6,323 $ 4,642
Net income per share - basic $ 0.30 $ 0.07 $ 0.36 $ 0.27
Net income per share - diluted $ 0.30 $ 0.07 $ 0.36 $ 0.27
</TABLE>
F-17
REVOLVING CREDIT PROGRAM AGREEMENT
This Program Agreement ("Agreement") is made as of the 27th day of January,
2000, by and between CONSECO FINANCE CORP., a Delaware corporation, its
successors and permitted assigns ("Conseco Finance"), with its executive offices
at 1100 Landmark Towers, 345 Saint Peter Street, St. Paul, Minnesota 55102, and
SYMS CORP., A New Jersey corporation, its successors and permitted assigns
("Syms"), with its executive offices at One Syms Way, Secaucus, New Jersey
07094.
WHEREAS, Syms conducts business through its retail locations and desires to
have Conseco Finance provide revolving credit financing to its qualified
customers, and
WHEREAS, Conseco Finance is willing to provide revolving credit financing
(including the issuance of Credit Cards) to qualified Syms customers as set
forth herein during the term of this Agreement,
NOW THEREFORE, in consideration of the terms and conditions stated herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Conseco Finance and Syms agree as follows:
SECTION 1. DEFINITIONS
- -----------------------
The following words shall have the following meanings when used in this
Agreement:
"Account" means all of the accounts, receivables and contract rights
created between an Accountholder and Conseco Finance pursuant to the Program
including Existing Accounts following the Conversion Date.
"Accountholder" means any person to whom Conseco Finance has extended
credit under the Program.
"Authorization" means permission from Conseco Finance to make a sale of
services, products, or goods to a cardholder pursuant to the agreement that is
charged to an Account.
"Chargeback" means the refusal of Conseco Finance to pay Syms for a sales
slip or the return to Syms and reimbursement to Conseco Finance of a sales slip
for which Syms was previously paid.
"Conversion Date" shall mean the date, anticipated to be in March 2000,
when Conseco Finance performs the conversion of Accounts from Syms current
program provider to Conseco Finance's system.
"Credit Agreement" means the open-end revolving credit agreement between
Conseco Finance and each Accountholder, together with any modifications or
amendments which may be made to such agreement.
1
<PAGE>
"Credit Card" means a plastic card issued and owned by Conseco Finance
under the Program that may be used exclusively for the purchase of Products from
Syms.
"Default" means any Event of Default or the occurrence of any event which
would be an Event of Default with the giving of notice or lapse of any
applicable grace period.
"Event of Default" has the meaning given in Section 7.01.
"Existing Accounts" means any open end credit card accounts dedicated to
Syms Purchases that exist at the commencement of the Program.
"Fraud Loss" means a Purchase as to which use of the Account was not
authorized by the Accountholder or the purported Accountholder, or as to which
the charges have been disavowed by the Accountholder or the purported
Accountholder.
"Merchandise Complaint" means any inquiry, complaint, dispute or conflict
between an Accountholder and Syms (but excluding any inquiry, complaint, dispute
or conflict of any third parties operating as described in Section 3.05) whether
communicated or addressed to Syms or to Conseco Finance which involves the
identity, quality, condition, performance or delivery of goods or services or
any representation or warranty or any recall or replacement program with respect
thereto.
"Net Credit Purchases" means, for any period of time, the total dollar
amount of all Purchases, as increased or decreased by the total dollar amount of
all credit adjustments transmitted to Conseco Finance by Syms.
"Operating Procedures" means all of the procedures, instructions, manuals'
forms, policies and practices now or hereafter in effect which govern the
operation of the Program, written copies of which have been or will be promptly
provided to Syms, including but not limited to:
(a) the manner in which customers may apply for and obtain an Account, and
enter into Credit Agreements;
(b) the manner in which Accountholders may make a Purchase on an Account;
(c) the manner in which Accountholders are issued credits for returns and
adjustments in response to Merchandise Complaints;
(d) the manner in which the Accounts are billed and collected, and related
inquiries and complaints from Accountholders are answered; or
(e) any other guidelines governing point-of-sale transactions as agreed to
by the parties and as may be amended from time to time.
"Outstanding Receivables" means for any particular day the amount of all
unpaid Accounts owned by Conseco Finance as of such day which have not been
written off.
"Presentment Warranty" means each of the warranties set forth in this
Agreement made
2
<PAGE>
by Syms each time a Purchase is presented to Conseco Finance for approval and
settlement.
"Products" means all products and services which may be purchased by an
Accountholder from Syms.
"Program" means the program established by Conseco Finance on the terms and
conditions outlined in this Agreement pursuant to which Conseco Finance will
offer to qualified Syms customers the revolving credit facility described in
Section 2.02 hereof. The term includes the extension of credit by Conseco
Finance, billings, collections, accounting between Conseco Finance and Syms, and
all aspects of the customized revolving Program contemplated herein.
"Program Year" means (i) in the case of the first Program Year, the full or
partial calendar month beginning with the date on which the Program commences
plus the next twelve consecutive calendar months, (ii) thereafter the twelve
consecutive calendar months following the expiration of the preceding Program
Year, except (iii) the last Program Year shall be that period of full and
partial calendar months ending on the date of termination of this Agreement
pursuant to Section 8 or otherwise.
"Program Documents" has the meaning given in Section 3.01.
"Purchase" means a purchase of Products from Syms for which Conseco Finance
has extended credit to an Accountholder.
"Standard Discount Fee" has the meaning given in Section 2.09.
"Store" means a retail store now or hereafter operated by Syms or any of
its subsidiaries.
"Termination Date" shall have the meaning set forth in Section 8.
SECTION 2. ESTABLISHMENT OF PROGRAM
- ------------------------------------
Section 2.01 Commencement of Program. On the Conversion Date, Conseco
Finance will assume responsibility for servicing, in accordance with Section 4
of this Agreement, the Accounts which are assigned to Conseco Finance pursuant
to this Section 2. Conseco Finance shall keep said list of Accounts confidential
and not disclose same or any part thereof to any third party without Syms'
written approval except as provided for in Sections 2.06 and 2.07.
Section 2.02 Revolving Credit Facility. Under the Program, Conseco Finance
agrees to offer qualified Syms customers an unsecured revolving line of credit
that will include (i) a Credit Card that may be used exclusively for Purchases,
and (ii) a convenience check cash advance feature that will enable
Accountholders to obtain cash advances from Conseco Finance by requesting a
specific cash advance utilizing personalized convenience checks furnished by
Conseco Finance. Any such cash advance feature shall be mutually agreed to by
Conseco Finance and Syms before its inception. Convenience check cash advances
are not assessed a Standard Discount Fee.
Section 2.03 Credit Terms. (i) Conseco Finance shall establish all of the
terms and conditions of the Credit Agreement and the terms and conditions under
which credit is extended to Accountholders, including without limitation the
interest rate and fees and charges applicable
3
<PAGE>
to Purchases. Conseco Finance shall establish a variable rate of interest for
Purchases equal to the Prime Rate plus 11.10%. The late fee shall be $20 and
Conseco Finance agrees that it shall not assess a late fee on Account balances
less than $50. Conseco Finance may from time to time in its sole discretion
modify such terms and conditions of the Credit Agreement to the extent it deems
necessary, provided that Conseco Finance agrees the late fee assessed to
Accountholders shall be reasonably competitive to the fees of other financial
institutions and changes to the variable rate of interest for current Accounts
will be with Syms's reasonable approval unless necessary to comply with law;
(ii) Conseco Finance agrees to offer special credit promotions on Purchases in
accordance with the terms and conditions as may be mutually agreed to by the
parties and (iii) the Accountholder payment factor (the minimum payment) will be
5.0% or $10.00, whichever is greater.
Section 2.04 Syms to Honor Credit Card. Syms hereby agrees to participate
in the Program and to honor the Credit Card for Purchases. Syms shall honor the
Credit Card only in accordance with the procedures outlined in Section 4 hereof,
as the same may be amended from time to time in accordance with the terms of
Section 4.01. Syms will maintain the availability of the Program at all Stores
and generally promote and publicize it at least to the same extent that it
promotes and publicizes the most favored other bank card credit card plans
accepted at the Stores. In any advertising or promotional mailing in which Syms
mentions or promotes any credit plan accepted by it (except an advertisement or
occasional promotional mailing paid for in whole or substantial part by the
operator of a credit plan), Syms will mention or, promote the Program with at
least substantially equal prominence. Wherever Syms displays the acceptance
decal, take-one boxes or other promotional material of any other credit plan,
Syms will display the comparable material of the Program with at least
substantially equal prominence. Syms shall take reasonable efforts to assure
that employees of Syms shall promote the Program. All references to Conseco
Finance or the Program which refer to the specific terms of the Program must be
approved by Conseco Finance. After the Conversion Date, Syms will not accept any
new charges under the current provider's program and will not permit any other
consumer program (with or without a credit card) to utilize any trademark or
trade name commonly utilized by Syms except to the extent such plan shall be
permitted otherwise in this Agreement.
Section 2.05 Conseco Finance to Extend Credit. Subject to (i) the terms of
this Agreement, (ii) the credit limits applicable to each Account, and (iii) the
terms and conditions in the Credit Agreement, Conseco Finance shall extend
credit to Accountholders in accordance with Section 4.
Section 2.06 Confidential Information. Conseco Finance shall keep
confidential, during and after the term of this Agreement, all information and
knowledge regarding the Program including, without limitation, all information
received from Syms and other data relating thereto, and the policies, plans and
operations of Syms, both with respect to the Program and to the business of Syms
generally (the "Confidential Information"), provided that Conseco Finance may
make such information available, (i) as necessary to carry out its obligations
hereunder, (ii) to comply with applicable law or regulations, (iii) to its
directors, officers, employees, agents or subcontractors, auditors, attorneys
and business consultants (who will be required to preserve the confidentiality
of such information), (iv) to any regulatory agency asserting jurisdiction over
it, or (v) otherwise as required by law. Conseco Finance will treat the
Confidential Information with the same degree of care that it treats its own
Confidential Information. This section shall not restrict the rights of Conseco
Finance to utilize the names, addresses, credit histories, etc. of
Accountholders pursuant to Section 2.07 or 3.05. This Section 2.06 shall survive
the termination
4
<PAGE>
of this Agreement. In connection with the performance of this Agreement, Conseco
Finance may also disclose to Syms, in writing or orally, confidential
information concerning its business, marketing techniques and methods of
operation including financial statements, if any are provided (the "Conseco
Finance Confidential Information"). Syms shall treat the Conseco Finance
Confidential Information with the same degree of care that it treats its own
Confidential Information and shall not disclose the same to any other person, or
use the same except in connection with the performance of this Agreement. Syms
agrees that it will limit access to the Conseco Finance Confidential Information
to those of its employees, agents or subcontractors who reasonably require the
same to carry out the purposes of this Agreement.
The obligations set out in this Section shall not apply to any Confidential
Information that the recipient can establish by documentary evidence that: (a)
was known to the recipient at the time it was disclosed to the recipient; (b)
was in the public domain at the time it was disclosed to the recipient; or (c)
had entered into the public domain subsequent to disclosure to the recipient
through no unlawful act of the recipient. Conseco Finance and Syms acknowledge
that the Confidential Information of the other constitutes a unique and valuable
asset of the other, and that any disclosure or use of the Confidential
Information except as specifically authorized herein would be wrongful and would
cause irreparable harm, and that it would be difficult to compensate fully with
damages for a violation of this Section. Accordingly, each agrees that the other
shall be entitled to temporary and permanent injunctive relief to enforce this
Section; this provision shall not however be deemed to diminish or supplant the
right of Conseco Finance and Syms to claim and recover money damages for any
breach hereof in addition to obtaining equitable relief therefor.
Section 2.07. Syms's Customer List. The names and addresses of Syms
customers who make application to become Accountholders, whether or not an
Account is then opened and including Existing Accounts, and credit and other
information relating to them does constitute "Confidential Information." Conseco
Finance agrees that, during the term of this Agreement, without the prior
written consent of Syms, it will not sell, loan, exchange, give or otherwise
provide the Accountholder list or the credit and other information relating to
those customers to any person (other than Conseco Inc., its subsidiaries and
affiliates, as permitted by law, which may use such information for any lawful
purpose not otherwise prohibited by this Section 2.07), for any purpose (except
to its agents or subcontractors who reasonably require the same to carry out the
purposes of this Agreement, or credit reporting agencies with whom Conseco
Finance has contracted (or will contract) to provide such information for credit
reporting purposes), or use the list and such information for any other purpose,
except to the extent that other disclosures and uses may be expressly authorized
by Section 3.05 hereof. Syms shall be entitled to receive Accountholder data
(including Accountholder lists) from Conseco Finance at no cost upon request and
to use such data for any promotion or marketing activity in connection with
sales of its Products. Conseco Finance may withhold specific types of
Accountholder data if, in its sole reasonable determination, disclosure of such
data to Syms would violate applicable laws, including but not limited to the
federal Fair Credit Reporting Act.
Section 2.08. Syms Commitment. Syms agrees that it will not enter into or
suffer to exist any other Syms owned or operated program in the Stores,
including a co-branded program, other than the Program. Syms also agrees to use
commercially reasonable efforts to generate a minimum of $50 million in Program
Purchase volume on a Program Year basis. If less than $20 million in Purchases
is generated in any Program Year under the Program, Conseco Finance may treat
such failure to meet the minimum Purchases as an event of Termination and may
terminate
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the Agreement pursuant to the Termination provisions in Section 8.
Section 2.09. Fees, Discounts and Charges
(A) STANDARD DISCOUNT FEE: The parties agree that the "Standard Discount
Fee" shall be 1% of the Net Credit Purchases.
If a minimum of $30 million in Purchases is not generated in any
Program Year under the Program, Conseco Finance will adjust the
Standard Discount Fee to 2.20% of the Net Credit Purchases.
(B) PROMOTIONAL DISCOUNT FEE: For promotional financing options offered
under the Program, Syms and Conseco Finance shall negotiate in written
form the discount fee at the time of the promotion.
(c) CONVENIENCE USAGE CHARGE: None.
(d) RETURNED MERCHANDISE CHARGE: None.
(e) PROGRAM DOCUMENTS: Conseco Finance will provide Syms at Conseco
Finance's expense with appropriate quantities of credit applications, Credit
Agreements, temporary cards and other forms necessary to carry out the Program.
Conseco Finance shall supply Credit Cards to all new Accountholders, shall
re-issue Credit Cards to eligible Existing Accounts if necessary, and shall
honor all requests by eligible Existing Accountholders for replacement or
additional cards, as well as providing all change-in-terms notifications.
Conseco Finance shall supply the card carrier forms, welcome letters, Credit
Agreements and envelopes along with such Credit Cards. Conseco Finance shall
also supply the billing statements, the remittance envelopes included with the
monthly bill, the collection letters mailed to delinquent Accounts and the
decline letters mailed to rejected applicants. Program Documents shall
prominently display, only upon mutual agreement, the Syms trademark or trade
name, and Syms shall be responsible for the distribution of such Program
Documents to its Stores. The form and content (other than as required by law, in
Conseco Finance's sole discretion) of all Program Documents shall be subject to
the mutual approval of Syms and Conseco Finance.
(f) CHARGEBACK FEE: None.
(g) SYMS INSERTS, LABELS AND MESSAGES: Conseco Finance will include in each
regular monthly mailing to Accountholders up to six inserts of promotional
materials which Syms shall deliver to Conseco Finance or its affiliate at least
30 days prior notice to such mailing. Conseco Finance will not charge Syms any
fees for up to six (6) different billing statement inserts requested and
provided by Syms, unless the insert increases the postage paid by Conseco
Finance for the billing statement. In such case, Syms shall pay Conseco Finance
the increased postage. Conseco Finance reserves the right twice per Program Year
to reduce the number of statement inserts available to Syms to allow Conseco
Finance to send any necessary change in terms notification required by law
without increasing the postage paid for by Conseco Finance provided that at the
request of Syms and approval of Conseco Finance, such number of statement
inserts shall not be reduced and Syms shall pay Conseco Finance any increased
postage as a result of such inclusion. Conseco Finance will, upon 30 days'
advance notice, provide Syms mailing labels addressed to all Accountholders at
cost or a computer tape containing the names and addresses of all Accountholders
for no charge. Conseco Finance will print on billing
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statements, messages with respect to Syms business and/or the Program as Syms
shall reasonably request, with 30 days prior notice. Any reference in such
messages to Conseco Finance or any of its affiliates or any term or condition of
credit shall be subject to the prior written approval of Conseco Finance, which
shall not be unreasonably withheld.
(h) Within three days following the Conversion Date of the Existing
Accounts, and subsequent payment equal to the total balances of the Existing
Accounts by Conseco Finance to Syms current program provider and provided that
Conseco Finance has balanced the conversion file to the amount paid for the
Existing Accounts, Conseco Finance will pay to Syms via wire transfer, a premium
amount equal to one and one-half percent (1.50%) ("Premium") of the total
balances of the Existing Accounts. If the purchase price paid by Conseco Finance
exceeds the total balances of the Existing Accounts, the excess portion paid
will be deducted from the Premium before paying Syms.
Section 2.10 Marketing Fund. Conseco Finance will form a jointly managed
marketing fund ("Fund"). The Fund will be jointly managed by Conseco Finance and
Syms. Conseco Finance will develop and execute only with Syms approval,
marketing programs to market the Program to consumers residing in the areas
served by the Stores. The details of each such marketing programs will be
presented to Syms in advance for its review, input and approval. Syms agrees
that it will promote the Program by offering a discount on all Syms Purchases
beginning with the commencement of this Program. If Syms decides to terminate
the discount program on all Syms Purchases, Syms agrees that it will continue to
offer a minimum discount of ten (10) percent on the initial Purchase to attract
applicants and Accountholders. Conseco Finance will allocate $100,000 to the
Fund as of the commencement of the Program. Conseco Finance will allocate an
additional $100,000 to the Fund on each subsequent Program anniversary if the
Program generates a minimum of $50 million in annual Purchases during the
previous twelve months. If the Program generates Purchases that are less than
$50 million, the $100,000 annual contribution to the Fund will be prorated
downward based on actual Purchases. Utilization of the Fund may include but is
not limited to (i) appropriate signage which Syms shall strategically place in
its Stores subject to the Program, and (ii) developing easy to understand
training materials on the operation of the Program and providing training
programs for sales and service personnel to encourage support of the Program.
Upon termination of the Program, any money remaining in the Fund will be
retained by Conseco Finance.
Section 2.11 Reporting. Conseco Finance will develop a customized reporting
package which will include analysis of the marketing promotions and various
monthly reports.
Section 2.12 Meetings. Conseco Finance and Syms agree to use their best
efforts to meet periodically to discuss the operations hereunder and to discuss
and share information, including, without limitation, (i) the location, type and
volume of total Purchases and Outstanding Receivables, and (ii) any promotional
programs or other activities designed to increase Net Purchases.
SECTION 3. ADMINISTRATION OF PROGRAM
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Section 3.01 Preparation of Documents. Conseco Finance and Syms shall
cooperate and assist each other in the preparation of all documents to be used
in connection with the Program. Conseco Finance shall provide Syms with the form
and content of credit applications, Credit Agreements, Credit Cards, temporary
cards and other forms used in connection with the Program
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(hereinafter referred to as "Program Documents"). All Program Documents shall
clearly disclose that Conseco Finance is the creditor. Syms shall not use any
Program Document unless Conseco Finance has expressly approved its form and
content and Syms shall not be obligated to use any Program Documents provided by
Conseco Finance unless Syms has reasonably approved its form and content,
subject to section 2.09(e) above. Syms shall not refer to Conseco Finance,
except in approved Program Documents.
Section 3.02 Credit Decisions. The credit standards which Conseco Finance,
in its sole discretion, shall apply to the processing of Program applications,
the setting of credit limits for Accountholders, the granting of authorizations,
and the solicitation of pre-approved customers through direct mail and telephone
solicitation programs shall be determined and may be changed from time to time
by Conseco Finance, according to its usual and applicable creditworthy
standards, which constitutes proprietary information of Conseco Finance. Conseco
Finance may suspend or terminate the credit privileges of any Accountholder at
any time provided that such suspension or termination does not violate any
applicable laws or regulations.
Conseco Finance shall maximize the number of qualified applicants that are
approved for credit under the Program and shall review periodically its credit
standards to facilitate the highest number of qualified applicants being
approved as possible. Syms has informed Conseco Finance that their approval rate
with their current program provider is between 70% and 75%. However, this
information is not a covenant, representation, warranty, or precondition to this
Agreement. Conseco Finance will also accept (but not be required to grant)
credit limit increase requests from Syms for Accountholders. Syms may
periodically request Conseco Finance to approve an application that has been
denied. If Conseco Finance then approves the Account at the request of Syms, the
Account will be flagged, as recourse to Syms ("Recourse Account") and any unpaid
portion of the Account will be charged back to Syms not later than the time at
which the account becomes 180 days delinquent, according to Conseco Finance's
accounting methods. Conseco Finance reserves the right to reasonably deny these
requests and if such an application is approved, Conseco Finance reserves the
right to determine the credit limit.
Section 3.03 Ownership of Accounts. Conseco Finance shall be the sole and
exclusive owner of all Accounts, Credit Cards, Credit Agreements, Accountholder
data (including Accountholder lists), sales slips, credit slips and receipts or
evidences of payment or Purchases by Accountholders and other Program Documents,
and shall be entitled to receive all payments made by Accountholders on
Accounts, and Syms acknowledges and agrees that it has no right, title or
interest in the Accounts, Credit Cards, Credit Agreements, Accountholder data,
sales slips, credit slips, receipts or evidence of payments or Purchases by
Accountholders and other Program Documents and has no right to any payments made
by Accountholder on Accounts. Conseco Finance shall be identified to
Accountholders as the creditor for all purposes. Notwithstanding the foregoing,
(a) Syms shall be entitled to receive Accountholder data (including
Accountholder lists) from Conseco Finance at no cost upon request and to use
such data for any promotion or marketing activity in connection with sales of
its Products and (b) Conseco Finance shall have no right, title or interest in
or to any Syms trademark, trade name or other proprietary right except a limited
right to use such proprietary rights on the Program Documents in connection with
the Program, which right shall not be assigned or otherwise transferred by
Conseco Finance without the prior written consent of Syms and which right shall
terminate on the Termination Date. Conseco Finance may withhold specific types
of Accountholder data if, in its sole determination, disclosure of such data to
Syms would violate applicable laws, including but not limited to the federal
Fair Credit Reporting Act. Conseco
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Finance shall not transfer ownership of the Accounts and related assets to any
third party, other than a permitted assignee of this Agreement pursuant to
Section 10.03, without the prior written consent of Syms.
Section 3.04 Periodic Statements. Conseco Finance shall be responsible for
mailing monthly periodic statements to Accountholders including amounts owed on
the Conversion Date under the existing provider's program and collecting all
amounts due on the Accounts upon such lawful terms and conditions as Conseco
Finance shall determine. The monthly statements will include provisions for
payment by mail in return window or preaddressed envelopes to Conseco Finance
and Conseco Finance will receive, process and promptly post such payments to the
Accounts. The monthly statement will instruct the Accountholder to make all
payments to Conseco Finance. Syms shall not have any responsibilities regarding
billing or collections on Accounts and, except as otherwise provided herein,
shall not be responsible for uncollectible Accounts. Conseco Finance shall have
the right to endorse the name of Syms on any and all checks made out to Syms or
other forms of payment received by Conseco Finance from Accountholders in the
performance of this Agreement. Syms authorizes and empowers Conseco Finance to
sign and endorse Syms's name on all checks, drafts, money orders, or other forms
of payment with regard to the Accounts. In the event that Conseco Finance sues
an Accountholder to collect a delinquent debt, Syms will cooperate reasonably
with Conseco Finance in its prosecution of the suit, at no material cost to
Syms. This Section shall survive and remain in effect for so long as Conseco
Finance owns any Outstanding Receivables.
Section 3.05 Enhancements. With the prior written consent of Syms, Conseco
Finance and its affiliates may from time to time make other products and
services available to Accountholders, that enhance the features of the Program
or the Accounts, provided that such products and services are not competitive
with the products and services offered by the Stores and the material clearly
identifies the offeror in a way that will not lead the Accountholder to believe
that Syms is the offeror. The products and services may include credit
insurance, a credit card protection plan, legal services, auto clubs and
extended warranties.
Section 3.06 Promotions. Syms and Conseco Finance may from time to time,
upon mutual agreement, develop marketing programs pursuant to which Conseco
Finance will offer revolving lines of credit to Syms customers. The mutually
agreed upon marketing programs will be reduced to written agreements which shall
be signed by Syms and Conseco Finance.
Section 3.07 Account Retention. Conseco Finance will not purge Syms
Accounts from the system until an Account has been inactive (no balance) for a
period of 24 months, "Inactive Purge". Conseco Finance may elect to store
inactive Accounts prior to 24 months of inactivity as long as the Account can be
accessed and moved to an active file upon receiving an Authorization request
from Syms. Conseco Finance will produce a file for Syms with the names and
addresses of the Accountholders being purged.
Section 3.08 Corporate Employee Discount Program. Syms currently invites
employees of corporations selected by Syms to apply for a Syms Account. Syms
offers a discount on each Purchase made by such employees. Conseco Finance
agrees to use its best efforts to support this program by:
(a) offering a phone-in application process for the employees;
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(b) indicating on the face of the Credit Card that it is a corporate
employee Account;
(c) systematically deducting the discount offered to corporate
employees by Syms, before billing the Accountholder.
SECTION 4. OPERATING PROCEDURES
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Section 4.01 General. During the term of this Agreement, Conseco Finance
will operate, maintain and promote the Program for all Stores subject hereto in
a professional manner in all material respects in accordance with applicable
laws and regulations' and substantially in accordance with the Operating
Procedures, (including, without limitation, complying with all Consumer Credit
Laws). However, Conseco Finance may make changes therein with the reasonable
approval of Syms, from time to time, effective only upon 30 days prior written
notice if such change relates to providing settlement of Accounts, unless such
change would have an insignificant impact on Syms, in which case Conseco Finance
shall notify Syms of such change as soon as practical thereafter. Conseco
Finance will provide to Syms the services hereinafter described, provided that
Conseco Finance will not make a change which will impose a material additional
cost or unreasonable burden on Syms or which is contrary to any specific
provision of this Agreement unless such change is required by law. Conseco
Finance will consider and discuss with Syms any requests by Syms to change any
of the Operating Procedures or other aspects of the Program, but will not be
obligated to agree to any request if it would adversely affect Conseco Finance
duties, responsibilities, costs of operations or the revenue therefrom in
Conseco Finance's sole opinion. Conseco Finance will not unreasonably withhold
consent. Syms will cooperate with Conseco Finance in the operation of the
Program and in developing and implementing procedures necessary for the
operation of the Program by Conseco Finance. Conseco Finance will operate the
Program with respect to each Store opened by Syms.
Section 4.02 Solicitation of Accounts. The following procedures shall be
followed for the solicitation of Accounts and the processing of credit
applications:
(a) In connection with the sale of Products, Syms may take credit
applications on behalf of Conseco Finance using the credit application and
disclosure forms provided by Conseco Finance. Approved applicants will be able
to Purchase immediately utilizing a temporary card Account.
(b) Syms shall forward promptly to Conseco Finance, by mail, telephone,
facsimile transmission, or electronically, credit applications completed by
customers.
(c) All credit applications will be reviewed by Conseco Finance for
approval and establishment of the applicable credit limit. Conseco Finance will
communicate in-store credit approvals and denials to both the customer and Syms.
Section 4.03 New Account Fulfillment. Conseco Finance shall be solely
responsible for Account fulfillment, including the mailing of Accountholder
welcome letters, Credit Cards, Credit Agreements and convenience checks.
Section 4.04 Procedures for Purchases and Credits.
(a) Syms shall complete a sales slip for each Purchase and imprint or write
the
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Accountholder's name and Account number on the sales slip. Syms shall deliver
copies of the sales slip to Conseco Finance, if requested by Conseco Finance,
within ten (10) business days of Conseco Finance request.
(b) Syms shall obtain the Accountholder's signature on the sales slip once
all of the Purchase information is complete. If a Credit Card is used, the card
must appear to be valid on its face and show no signs of having been altered,
defaced or tampered with and the last name of the name signed on the Credit Card
is the same as the last name of the name embossed or otherwise placed on the
Credit Card by the issuer, and the signature of the customer signed on the sales
slip must compare favorably with the signature on the signature panel of the
Credit Card. If the Accountholder does not have his/her Credit Card, the
signature on the sales slip must be reasonably similar to the signature on one
form of identification, one with a photograph, provided by the Accountholder. A
valid driver's license, military or state identification is required as
identification. Syms will make reasonable efforts to confirm the identity of the
Accountholder in all cases. Conseco Finance will assume responsibility for Fraud
Losses occurring on Accounts opened in a Syms Stores up to and including 40
basis points of the average Outstanding Receivables on a Program Year basis.
Syms will be responsible for Fraud Losses on Accounts opened in a Syms Stores in
excess of 40 basis points of the average Outstanding Receivables on a Program
Year basis. Such Fraud Losses shall be calculated by Conseco Finance at the end
of each Program Year, and any payments hereunder shall be made within 15 days of
calculation; provided, however, that in the event Syms delivers written notice
to Conseco Finance within such 15 day period specifying its written objection to
such mathematical calculation, then such parties will act in good faith to
resolve such dispute as promptly as practicable and Syms shall promptly
thereafter pay any monies due Conseco Finance pursuant hereto. Conseco Finance
will provide a report to Syms on a monthly basis detailing in-Stores Account
Fraud Losses.
(c) Syms shall obtain prior authorization for all Purchases and record the
authorization code on the sales slip. Authorizations may be obtained
electronically or by contacting Conseco Finance at a designated telephone number
established for the purpose of issuing authorizations under the Program, during
the hours set forth in Section 4.07 (e) of the Operating Procedures. On at least
2 week's notice from Syms, Conseco Finance will reasonably extend the times for
such authorization services. Syms shall configure all POS registers in each
Store so as to have access to such electronic authorization services for
Purchases in accordance with mutually acceptable protocols. Such services will
be provided through the communications network selected by Conseco Finance. If
Syms elects to use any other means of communication, Syms will give Conseco
Finance at least 3 months prior notice of any such proposed change and Syms will
absorb all costs of such proposed change. At the time of each Purchase, Syms
will prepare a sales slip, and at the time Syms gives an Accountholder a credit
for the return of merchandise, or an adjustment of the price of the merchandise
or for any other reason, with respect to a Purchase, Syms will issue a credit
sales slip. No Purchase shall be made to an Account pursuant to the Program
except in accordance with this Section 4.04 (c) regarding Purchase authorization
procedures. Each day Syms will capture all of the information on all Purchases
and transmit such information by electronic data transmission to Conseco
Finance, all in accordance with the Operating Procedures.
Section 4.05 Settlement Procedures.
(a) All sales data will be transmitted from Syms by electronic data
transmission to
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Conseco Finance. The sales data shall include the following: (i) the account
number, authorization number, amount and date of each Purchase, (ii) the account
number, amount and date for each credit slip issued with respect to the
Accounts, and (iii) such other information that Conseco Finance may reasonably
request.
(b) The receipt of the customer's original credit application (required for
initial Purchase only) within ten (10) days of the electronic transmission of
sales data, shall also be a requirement. Purchases where Conseco Finance has not
received the original application are subject to Chargeback under Section 5.
Conseco Finance will supply postage-paid envelopes to Syms Stores for the
purpose of mailing original credit applications to Conseco Finance.
(c) Conseco Finance shall pay to Syms the amount of each Purchase for which
all of the proper data has been provided as described in Section 4.05 (a) above,
less any applicable standard and promotional discounts. Conseco Finance shall be
entitled to set off against amounts due to Syms for Purchases the amount of any
credit slips issued for Purchases and any Chargebacks pursuant to Section 5
hereof. Funds due to Syms for Purchases hereunder shall be forwarded to Syms via
the Automated Clearing House System on the business day following the day on
which the sales data is received before 4:00 PM Eastern Time or if received
later, the second business day, by crediting funds to an account in the name of
Syms or otherwise as directed by Syms, no later than the next business day.
Conseco Finance will use all reasonable efforts to pay Syms by 2:00 PM Eastern
Time on the next business day.
(d) Conseco Finance and Syms shall cooperate in resolving any disputes
regarding amounts set forth in the sales data, as described in Section 4.05 (a).
Conseco Finance shall be entitled to withhold payment for the disputed portion
of any sales data. In the event that amounts due from Syms to Conseco Finance
under this Agreement on any day shall exceed amounts payable by Conseco Finance
to Syms, Syms shall pay such excess to Conseco Finance by crediting funds to the
account of Conseco Finance on the same time schedule as stated above in this
Section. Information regarding Purchases, payments received by Syms and other
credits issued to be applied to Accounts by Conseco Finance, shall be
transmitted electronically from Syms to Conseco Finance computers in a
reasonable format prescribed by Conseco Finance AND shall include the
information described in Section 4.05 (a).
(e) The parties intend that Accountholders shall be required to make all
payments by mail. Syms will not actively solicit or encourage any Accountholder
to make a payment in any Store and will not permit such payments.
Section 4.06 Dispute Resolution Procedures. Syms shall cooperate with
Conseco Finance to promptly resolve any Accountholder Product related dispute.
Conseco Finance will notify Syms via fax upon receipt of the Accountholder
dispute. Syms will have twenty calendar days to settle or resolve the dispute.
Failure to resolve or settle the dispute will result in a Chargeback pursuant to
Section 5 hereof.
Section 4.07. Customer Service. (a) Conseco Finance and Syms agree to
cooperate in rendering good customer service including, but not limited to,
maintaining Syms current practice of answering the phones, responding to written
and telephone inquiries and complaints concerning Purchases; returns,
adjustments, credits, bills, payments, collections and other matters
(collectively "Inquiries and Complaints"). Conseco Finance shall provide a toll
free
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telephone number for use by the Accountholders. Conseco Finance, on average,
shall answer its customer service calls from Accountholders within 25 seconds.
This operating standard is advisory only and does not, in and of itself,
represent a warranty or covenant of Conseco Finance. Failure to meet this
operating standard shall not be a condition of default under this Agreement, nor
is it a condition precedent to payment of any sums due from Syms to Conseco
Finance hereunder. Conseco Finance agrees to make all necessary adjustments to
Accounts to correct errors and as required by law and good business practice.
(b) Syms agrees to promptly forward to Conseco Finance all written
Inquiries and Complaints directed to it, and to provide Conseco Finance with any
information relating to each such Inquiry or Complaint as Conseco Finance may
request.
(c) Conseco Finance will promptly forward to Syms all Inquiries and
Complaints which it receives. Syms shall respond to and resolve all Inquiries
and Complaints promptly in accordance with the Operating Procedures and within
the time period required by law. Syms will notify Conseco Finance of action
taken with respect to Inquiries and Complaints received by Conseco Finance.
(d) Conseco Finance will exercise all reasonable efforts to mail a new
Credit Card to each Accountholder in good standing within 5 days of notice from
such Accountholder who reports a lost or stolen card, provided the loss was not
caused by the negligence of the Accountholder.
(e) Conseco Finance will provide service to Accountholders at the following
times: Monday-Sunday (other than Holidays) 8:00 A.M. - 1:00 A.M. ET. The
automated voice response unit is available 24 hours a day for customer
inquiries, excepting a seven hour period during the early morning hours.
SECTION 5. CHARGEBACK
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Section 5.01 Chargeback Rights. Conseco Finance shall have the right, at
its option, to Chargeback to Syms the amount of any Purchase plus all accrued
and unpaid finance charges and other amounts owing to Conseco Finance if:
(a) Any Presentment Warranty made by Syms pursuant to Section 6.01 proves
to be false or inaccurate in any material respect, after a reasonable
investigation by Conseco Finance;
(b) The Accountholder asserts any claim or defense against Conseco Finance
as a result of any act or omission of Syms that violates any applicable law,
statute, ordinance, rule or regulation, after a reasonable investigation by
Conseco Finance;
(c) The Accountholder disputes the amount or existence of such Account or
the Accountholder refuses to pay (including by exercise of its right under the
Fair Credit Billing Act or other similar law to require Conseco Finance to
credit its Account), alleging dissatisfaction with the Products received, a
breach of any warranty or representation in connection with the transaction, or
an offset or counterclaim against Conseco Finance based on an act or omission of
Syms, after a reasonable investigation by Conseco Finance; or
(d) Syms did not comply in any material respect with the operating
procedures outlined
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in Section 4 herein.
Section 5.02 Limitation of Chargeback Rights. In its reasonable discretion
Conseco Finance may compromise and settle any claim made by any Accountholder if
such claim may give Conseco Finance a right to Chargeback up to the face amount
of any sales slip. In the event of any such compromise or settlement, Conseco
Finance shall adjust the Accountholder's Account and Conseco Finance right to
Chargeback shall be limited to the actual amount so compromised.
Section 5.03 Exercise of Chargeback. If Conseco Finance exercises its right
of Chargeback, Conseco Finance shall have the right to off set the amount of the
Chargeback against any amounts due Syms under this Agreement or, if Chargebacks
exceed sums due Syms, Conseco Finance may demand immediate payment from Syms for
the full amount of such excess. If any Purchase is charged back, Conseco Finance
shall assign, without recourse, all right to payment for such Purchase to Syms
upon the request of Syms. Conseco Finance shall promptly notify Syms in writing
of any Chargebacks and any compromises or settlements of any claims by
Accountholders.
SECTION 6. WARRANTIES AND COVENANTS
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Section 6.01 Presentment Warranties. Syms represents and warrants to
Conseco Finance with respect to each Account (the following shall be deemed
restated, renewed and reaffirmed with respect to each Purchase presented to
Conseco Finance for approval and settlement):
(a) that the sales slip represents a bona fide sale and was actually
executed by the person named therein as Accountholder;
(b) that the signature on the sales slip appears reasonably similar to the
signature of the Accountholder on Credit Card or the signature on other valid
identification examined by Syms;
(c) that the sales slip has not been materially altered;
(d) that the Accountholder is of legal age per the identification and
appeared competent to open an Account;
(e) that the Products are accurately described on the sales slip and any
Products described therein have been delivered into the possession of the
Accountholder; and do not violate any warranty, expressed or implied;
(f) that the transaction, including prior authorization, was conducted by
Syms in accordance with the operating procedures set forth in Section 4 above
(as same may be revised from time to time);
(g) that the account number, name of Accountholder and authorization number
have been printed on each sales slip;
(h) that Syms has not received, directly or indirectly, and will refuse to
accept, any reimbursement, payment or trade-in for the charges listed on such
sales slip (other than from
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Conseco Finance) and has not and will not, either directly or indirectly, take
or grant any right or security interest in any sales slip or credit slip (other
than to Conseco Finance) which is the subject of the transaction;
(i) that the transaction was conducted by Syms in accordance with all
applicable laws and regulations that pertain to the sale of Products by Syms;
(j) there is no fact nor any claim or defense of any Accountholder that
would impair the validity, enforceability, or collectability of the obligation
of the Accountholder evidenced by the sales slip;
(k) that Syms has full and complete title to the Products subject only to
the rights of the Accountholder which exist by virtue of the Account;
(l) that there have been no representations or warranties made to the
Accountholder which are not contained in the sales slip other than Syms's
standard warranties; and in the event Syms breaches a standard warranty, Syms
will cure the breach within twenty (20) calendar days of notice of the breach;
(m) Syms owns the sales slip free from any claims, liens, security interest
or other encumbrances.
Section 6.02 Program Covenants of Syms. Syms covenants to do the following
during the term of this Agreement with respect to the operation of the Program:
(a) Syms shall cooperate with Conseco Finance promptly to resolve all
disputes with Accountholders.
(b) Syms shall maintain a fair and equitable policy for the exchange and
return of Products and shall promptly deliver a credit slip to the Accountholder
and include credit for each return in the data transmitted to Conseco Finance
pursuant to Section 4.05 (a) hereof.
(c) Syms shall not seek or obtain any special agreement or condition from,
nor discriminate in any way against, any Accountholder with respect to the terms
of any transaction.
(d) Syms shall use its best efforts within three (3) business days of its
receipt, but no later than seven (7) business days of its receipts, to provide
Conseco Finance with a copy of any written complaint from any customer relating
to any sales slip;
Section 6.03 General Representations and Warranties of Syms. Syms makes the
following representations and warranties to Conseco Finance, each and all of
which shall survive the execution and delivery of this Agreement, and each and
all of which shall be deemed to be restated and remade on each day on which any
Account is opened, any Purchase is presented for settlement pursuant to Section
4.05, or any action is taken by Syms with respect to the Program:
(a) Corporate Existence. Syms (i) is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New Jersey; (ii)
is duly qualified as a corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification except where such failure would not
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have a material adverse effect on the business, assets, operations or condition
of Syms or the operation of the Program; (iii) has the requisite corporate power
and authority and the legal right to own, pledge, mortgage, and operate its
properties, to lease the properties it operates under lease, and to conduct its
business as now conducted and hereafter contemplated to be conducted; (iv) has
all necessary licenses, permits, consents, or approvals required for the conduct
of its business except where such failure would not have a material adverse
effect on the business, assets, operations or condition of Syms or the operation
of the Program; and (v) is in compliance with its certificate of incorporation
and bylaws.
(b) Corporate Power, Authorization; Enforceable Obligation. The execution,
delivery, and performance of this Agreement and all instruments and documents to
be delivered by Syms hereunder: (i) are within Syms's corporate power; (ii) have
been duly authorized by all necessary or proper corporate action, including the
consent of shareholders where required; (iii) do not and will not contravene any
provisions of Syms's certificate of incorporation or bylaws; (iv) will not
violate any law or regulation or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result in the breach
of, or constitute a default under any indenture, mortgage, deed of trust, lease,
agreement, or other instrument to which Syms is a party or by which Syms or any
of its assets or property are bound except where such failure would not have a
material adverse effect on the business, assets, operations or condition of Syms
or the operation of the Program; and (vi) do not require any filing or
registration with, or the consent or approval of, any governmental body, agency,
authority, or any other person which has not been made or obtained previously,
copies of which have been provided to Conseco Finance. This Agreement has been
duly executed and delivered by Syms and constitutes a legal, valid, and binding
obligation of Syms enforceable against Syms in accordance with it terms.
Section 6.04 Program Covenants of Conseco Finance. Conseco Finance
covenants to provide and maintain the computer software required for the
Program. Conseco Finance hereby agrees that Syms shall not be deemed to be in
breach of any term of this Agreement if and to the extent that such breach is a
result of Conseco Finance's breach of its obligations under this Section 6.04.
Section 6.05 Representations and Warranties of Conseco Finance. Conseco
Finance makes the following representations and warranties to Syms, each and all
of which shall survive the execution and delivery of this Agreement, and each
and all of which shall be deemed to be made on each day on which any Account is
opened, Purchase documentation is received for settlement pursuant to Section
4.05, or any action is taken with respect to the Program on or after the
Conversion Date:
(a) Corporate Existence. Conseco Finance (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (ii) is duly qualified as a corporation and in good standing under the
laws of each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification except where such failure
would not have a material adverse effect on the business, assets, operations or
condition of Conseco Finance or the Program; (iii) has the requisite corporate
power and authority and the legal right to own, pledge, mortgage, and operate
its properties, to lease the properties it operates under lease, and to conduct
its business as now conducted and hereafter contemplated to be conducted; (iv)
has all necessary licenses, permits, consents, or approvals required for the
conduct of its business except where such failure would not have a material
adverse effect on the business, assets, operations or condition of Conseco
Finance or the Program; and and (iv) is in
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compliance with its articles of incorporation and bylaws.
(b) Corporate Power, Authorization; Enforceable Obligation. The execution,
delivery, and performance of this Agreement and all instruments and documents to
be delivered by Conseco Finance hereunder; (i) are within Conseco Finance
corporate power; (ii) have been duly authorized by all necessary or proper
corporate action, including the consent of shareholders where required; (iii) do
not and will not contravene any provision of Conseco Finance certificate of
incorporation or bylaws; (iv) will not violate any law or regulation or an order
or decree of any court or governmental instrumentality; (v) will not conflict
with or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which Conseco
Finance is a party or by which Conseco Finance or any of its property is bound
except where such failure would not have a material adverse effect on the
business, assets, operations or condition of Syms or the operation of the
Program; and (vi) do not require any filing or registration with or the consent
or approval of any governmental body, agency, authority, or any other person
which has not been made or obtained previously. This Agreement has been duly
executed and delivered by Conseco Finance, and constitutes the legal, valid, and
binding obligation of Conseco Finance, enforceable against Conseco Finance in
accordance with its terms.
Section 6.06 Acquisitions. (a) Whenever Syms proposes (whether directly or
indirectly through a subsidiary, through a merger or consolidation with a third
party in which Syms is the surviving entity in such merger or consolidation,
through the acquisition of a chain of stores or individual stores, or through
the opening of new stores) to operate stores not then served by the Program,
Syms will, to the extent practicable or feasible or not otherwise prohibited by
applicable law, keep Conseco Finance fully informed as to its plans for such
change in order to allow Conseco Finance to make preparations (i) to service
such additional stores, customers or business under the existing Program, or
(ii) to establish a new Program for such additional stores, customers or
business, or (iii) to the extent permitted under the applicable agreements, to
take over and service as a Program hereunder any existing private label credit
program serving such stores, customers or business if such program is acquired
by Syms, each to the extent provided in clause (b) below.
(b) If at the time of acquisition such stores do not have a credit card
program which is utilized primarily in such stores, and (i) if such stores are
stores selling merchandise generally similar to that currently sold by Syms,
Conseco Finance and Syms will as soon as reasonably practicable, make the
Program available in such stores to those customers who become Accountholders in
accordance with the terms of this Agreement, but (ii) if such stores are not
stores selling merchandise generally similar to that currently sold by Syms,
Conseco Finance shall have the option, by notice to Syms within 30 days after
all of the relevant information concerning such stores is provided to Conseco
Finance, to decline the Program for such stores.
SECTION 7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
- -------------------------------------------------
Section 7.01 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) Either Syms or Conseco Finance shall fail to make any payment of any
amount due pursuant to this Agreement when due and payable, and the same shall
remain unpaid for a period of ten (10) days after written notice thereof;
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(b) Either Syms or Conseco Finance shall fail or neglect to perform, keep,
or observe any other material term, provision, condition, or covenant contained
in this Agreement that is required to be performed, kept, or observed by either
party, and the same shall remain uncured for a period of thirty (30) days after
the other party shall have given written notice thereof;
(c) Any representation or warranty made or delivered by either Syms or
Conseco Finance or any of its respective officers, employees, agents, or
representatives shall not be true and correct in any material respect as of the
date when made or reaffirmed and has not been cured for a period of 30 days
after notice from the other;
(d) Either Syms or Conseco Finance shall (i) make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
Syms or any of its subsidiaries or Conseco Finance or any of its parent
corporations or subsidiaries seeking to adjudicate it a bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or appointment of a receiver, trustee-, or other
similar official for it or for any substantial part of its property; (ii)
consent to the institution of proceedings pursuant thereto or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, or sequestrate (or similar official) of
either party of any substantial part of its properties; (iii) generally not pay
its debts as such debts become due unless either party has a serious good faith
dispute with such debts, or shall admit in writing its inability to pay its
debts generally; or (iv) take corporate action in furtherance of any such
action;
(e) Syms closes 10 or more Stores (excluding Store relocations) in any 12
month period.
Section 7.02 Remedies. If any Event of Default shall have occurred and be
continuing the non-defaulting party shall have the right to terminate this
Agreement at any time by notice to the other and cause this Agreement to be
terminated in the manner specified in Section 8 hereof. Upon any such
termination, the terminating party shall have, in addition to all other rights
and remedies under this Agreement or otherwise, all other rights and remedies
provided under other applicable laws, which shall be cumulative.
SECTION 8. TERM/TERMINATION
- --------------------------
Section 8.01 Term. This Agreement shall remain in effect until the
effective date (the "Termination Date") on which this Agreement is terminated by
one of the parties hereto pursuant to this Section 8.01, Section 8.02 or Section
8.03. Either party may terminate this Agreement effective on the last day of the
fifth Program Year or thereafter at the end of each subsequent Program Year, by
giving written notice to the other party not less than ninety (90) days prior to
such Termination Date. In addition and subject to Section 8.03, at any time
after November 30, 2000, Syms may terminate this Agreement upon not less than 90
days prior written notice in the event that it sells all or substantially all of
its assets to or merges or otherwise consolidates with an unaffiliated third
party (and Syms is not the surviving entity in such merger or consolidation) and
only if such third party has a revolving credit program in effect, which program
will be used in the Stores following termination of this Agreement pursuant
hereto.
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Section 8.02 Termination for Cause. If an Event of Default under (i)
Section 7.01 (a), (b), (c) or (d) shall occur, the non-defaulting party shall
have the right immediately to terminate this Agreement effective upon written
notice and (ii) Section 7.01 (e) shall occur, Conseco Finance shall have the
right to terminate this Agreement on 120 days prior written notice..
Section 8.03 Merger; Sale of Assets. (a) In the event Syms shall merge or
consolidate with any other third party entity and Syms or its subsidiary shall
not be the surviving entity in such transaction or Syms shall sell or transfer
substantially all of its assets to any entity, Syms shall provide to Conseco
Finance as far in advance as reasonably possible satisfactory financial
information concerning the surviving entity including the intentions of the
parties with respect to the continued operation of the Program and, if the other
party is in the retail business, at other stores to be operated by the surviving
party, and such other information as would be appropriate to enable Conseco
Finance to plan for the continued operation of the Program. If in the reasonable
judgment of Conseco Finance, such transaction will have a materially adverse
effect on Syms financial condition or the financial condition and operations of
the business as it had been conducted by Syms, Conseco Finance may at its option
terminate this Agreement on 90 days prior written notice to Syms which notice
shall be given within 30 days after final and complete information is provided,
effective only upon a consummation of the merger, consolidation or sale. In the
event Conseco Finance does not elect to terminate, unless Syms shall elect to
terminate this Agreement pursuant to the last sentence of Section 8.01, this
Agreement shall survive any such merger or consolidation and in the case of a
sale of all or substantially all of Syms assets, Syms shall require the
acquiring or resulting entity to assume in writing this Agreement and all of
Syms obligations and duties hereunder and enter into a supplementary agreement
with Conseco Finance, reasonably satisfactory to Conseco Finance, which (if
mutually agreed on by Conseco Finance and the surviving party) will specify the
extent to which this Agreement will apply to any additional stores to be
operated by the surviving party in accordance with Section 6.06 and will be
substantially similar to this Agreement. Notwithstanding the foregoing, this
Section 8.03 shall not apply to the sale or transfer of substantially all of
Syms' assets to an affiliate of Syms as long as such affiliate becomes a party
to this Agreement.
(b) If Conseco Finance elects to terminate this Agreement pursuant to
Section 8.03 (a), or in the event that Syms elects to terminate this Agreement
pursuant to the last sentence of Section 8.01, then Syms or such third party
shall purchase or cause to be purchased from Conseco Finance on the Termination
Date or such other date as the parties may agree upon (the "Purchase Date") all
Outstanding Receivables for a purchase price payable in cash in an amount equal
to the unpaid principal balance plus all accrued and unpaid finance charges and
other amounts owing to Conseco Finance on the day prior to the Purchase Date
(the "Final Receivables"). In the case of a termination by Syms pursuant to the
last sentence of Section 8.01, Syms will also pay a "Termination Fee", as
follows, based on the effective date of the termination.
Termination at any Time % of the average Outstanding
- ---------------------------------------- Receivables for such period to be
paid by Syms
during the 12-month period following the 10 %
12th month after the Conversion Date...
during the 12-month period following the 7.5 %
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24th month after the Conversion Date...
during the 12-month period following the 5 %
36th month after the Conversion Date...
during the 12-month period following the 2.5 %
48th month after the Conversion Date...
In the event of a termination by Conseco Finance or Syms pursuant to this
Section 8.03, the provisions of Section 8.04 (c) and (d) shall apply to the
purchase and sale of the Outstanding Receivables.
Section 8.04 Effect of Termination. (a) In the event of termination by
either party that is effective on the last day of the fifth Program Year or
thereafter at the end of each subsequent Program Year or if termination is by
Syms pursuant to Section 8.02 (i), Syms shall have the option to purchase or to
cause another entity to purchase from Conseco Finance, on the Purchase Date the
Final Receivables. Syms shall do this by giving irrevocable written notice of
exercise of this option to Conseco Finance or its affiliate, (i) not less than
ninety days prior to the last day of the fifth Program Year or thereafter at the
end of each subsequent Program Year (except that Syms shall have an additional
10 days if Conseco Finance is the one terminating), or (ii) together with any
notice of termination given by Syms under Section 8.02 (i). Upon the giving of
such notice of exercise, Conseco Finance shall be obligated to sell and Syms
shall be obligated to cause the designated entity to purchase in accordance with
the terms of this Section. The purchase price shall be equal to the amount of
the Final Receivables as of the close of business on the day prior to the
Purchase Date.
(b) In the event of termination by Conseco Finance pursuant to Section
8.02, Syms shall be required to purchase or cause another entity to purchase on
the Purchase Date from Conseco Finance the Final Receivables. The purchase price
shall be equal to the amount of the Final Receivables as of the close of
business on the day prior to the Purchase Date.
(c) The purchase price, including any Termination Fees, shall be payable in
full on the Purchase Date in same day funds by wire transfer to an account of
Conseco Finance against delivery by Conseco Finance of an assignment of all of
its right, title and interest in and to the Accounts, Outstanding Receivables,
Credit Agreements and Credit Cards and all records and other data obtained in
connection with the operation of the Program or otherwise pursuant to this
Agreement, without recourse and without warranty of any kind except that the
amounts of the Final Receivables and all other information with respect to the
Accounts, Credit Agreements and Credit Cards and such other records and other
data are correct, and that the assets so conveyed are the property of Conseco
Finance free and clear of any lien, claim or encumbrance of any kind whatsoever
arising out of any act or omission of Conseco Finance. In the event Syms
purchases or causes another entity to purchase the Final Receivables, the names,
addresses and payment histories of the Accountholders shall be included among
the assets conveyed to such purchaser and shall be the exclusive property of the
purchaser after the Purchase Date. The purchaser shall not be entitled to set
off against the purchase price any disputed claim it or Syms may have against
Conseco Finance for damages, and Conseco Finance shall not be entitled to
withhold delivery of the assignment on account of any disputed claim it may have
against Syms for damages.
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(d) Conseco Finance shall cooperate in good faith with the purchaser in
transferring the Final Receivables sold to the purchaser and the operation of
the Program to the purchaser and shall make available to the purchaser in
advance the master file tape or extracts therefrom and other records necessary
to assist the purchaser in analyzing such Outstanding Receivables and in
establishing its own records for operations after the Termination Date. On the
Purchase Date, Conseco Finance will deliver one or more computer tapes
containing all of the information normally maintained by Conseco Finance with
respect to the assets being conveyed for purposes of billing, credit review,
dunning and collection, and a description of the format in which such
information is recorded on tape, and all of the written records and documents
maintained by Conseco Finance with respect to the foregoing, and all unused
supplies for the Program which do not include the name of Conseco Finance.
Conseco Finance shall be entitled to retain copies of any of the foregoing only
to the extent required by law (after which such copies shall be destroyed), and
Conseco Finance shall preserve the confidentiality of and shall not permit the
use of or disclose any documents or information so conveyed, whether for
commercial gain or any other purpose. Conseco Finance shall provide such
additional cooperation and information as the purchaser shall reasonably
request. Without limitation to the foregoing, Conseco Finance shall use good
faith efforts to assist any successor provider to understand the record layout
and file structure of the database and to analyze pertinent account information
and portfolio characteristics and shall provide all access, information,
assistance and documentation that Conseco Finance has required or requested of
Syms and Syms current program provider in connection with the conversion
hereunder.
(e) In the event that Syms does not elect to purchase or cause an entity to
purchase the Outstanding Receivables, or having so elected the designated entity
does not purchase the Outstanding Receivables pursuant to Section 8.04 (a), Syms
shall (unless this Agreement was terminated by Syms under Section 8.02 (i)):
(A) compensate Conseco Finance to collect-out- the Outstanding Receivables,
upon billing in an amount equal to: (i) Conseco Finance Net Credit Losses after
the Termination Date, plus (ii) 110 % of Conseco Finance programming,
processing, administrative and collection agency expenses, plus or minus the net
of (iii) the actual costs for Conseco Finance to fund the Outstanding
Receivables over the total amount of finance charges Conseco Finance assesses to
Accountholder's each month. If the costs of funds exceeds the finance charges,
the net amount will be added to the above subsection (i) and (ii). If the
finance charges exceed the costs of funds, the net amount will reduce the total
of subsections (i) and (ii).
(B) not take any action which might materially adversely affect Conseco
Finance's ability to collect the Outstanding Receivables in full (including but
not limited to honoring or otherwise extending credit, utilize Conseco Finance's
numbering system for credit accounts, or issue new cards or open new accounts as
replacements for Conseco Finance Credit Cards or Accounts), but this shall not
prevent Syrns from introducing a new program for its customers if each customer
is required to apply for a new account and credit card and provides the usual
credit information to Syms.
Section 8.05 Post-Termination Matters.
(a) If Syms does not purchase or have the entity purchase the Outstanding
Receivables and Conseco Finance must collect out the Outstanding Receivables
Syms may implement a credit program for its customers, provided (A) such program
will not unreasonably confuse Accountholders or interfere with or jeopardize the
collectibility of the Outstanding Receivables,
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(B) Syms will not send without Conseco Finance's prior written consent (which
consent shall not be unreasonably withheld), any communication to Accountholders
which refers to the Program or the new credit program which communication might
materially adversely affect Conseco Finance's ability to collect the Outstanding
Receivables, and (C) Syms will not knowingly solicit any active Accountholders
for new accounts (provided Syms may accept unsolicited applications from such
customers) or use the names, addresses or any other information regarding such
customers in any way without the prior written consent of Conseco Finance.
(b) If Syms purchases or causes an entity to purchase the Outstanding
Receivables, it will or will cause such purchaser to assume all of the duties
which Conseco Finance may have to the Accountholders under their Credit
Agreements and all laws and regulations applicable thereto arising after the
Purchase Date and it will or will cause the purchaser to perform them in full
compliance with law and good business practice.
(c) On the Termination Date (regardless of the reason for termination) all
obligations of Conseco Finance to Syms to honor Purchases for Accountholders or
render services of any kind to Syms, and all obligations of Syms to honor the
Program or its cards or to render services of any kind to Conseco Finance, shall
terminate. Upon termination, all of the rights and obligation of the respective
parties hereto shall cease; provided, however, that the following shall survive
the termination of this Agreement: (i) Syms's obligation to reimburse Conseco
Finance for amounts due to Conseco Finance in connection with the offering of
special credit promotions and a grace period on Purchases pursuant to Section
2.03; (ii) Conseco Finance's Chargeback rights pursuant to Section 5; (iii) the
obligations of the parties related to indemnification under Section 9 and (iv)
each party's respective obligations pursuant to Section 2.06.
SECTION 9. INDEMNIFICATION
- --------------------------
Section 9.01 Indemnification. Syms will indemnify and hold Conseco Finance
and its affiliates and their directors, officers, employees and agents harmless
from and against any and all Losses (as defined below) which may arise by reason
of (i) any act or omission by Syms or any of its directors, officers, employees,
or agents which constitutes a failure by Syms to comply or causes Conseco
Finance to fail to comply with any law or regulation governing the transactions
or operations contemplated hereby or which violates the personal or property
rights of any third party, or (ii) any sale of goods or services allegedly
financed under the Program (including any alleged defect therein or
misrepresentation by Syms or its agents), or (iii) any failure by Syms' current
program provider or Syms to comply fully with all federal, state and local laws
and regulations governing the relationship between merchant and consumer or
between creditor and debtor, including Laws relating to Truth-In-Lending, credit
opportunity, credit reporting, billing, the correction of billing errors, usury
and finance charges) (collectively, "Consumer Credit Laws") prior to the
Conversion Date, except that this indemnity shall not apply to any failure to
perform any duty or function which Conseco Finance has agreed to perform under
this Agreement. Conseco Finance will indemnify and hold Syms and its affiliates
and their directors, officers, employees and agents harmless from and against
any and all Losses (as defined below) which may arise by reason of (1) any act
or omission by Conseco Finance or any of its directors, officers, employees, or
agents which constitutes a failure by Conseco Finance to comply or causes Syms
to fail to comply with any law or regulation governing the transactions or
operations contemplated hereby (including, without limitation, applicable
Consumer Credit Laws) or which violates the personal or property rights of any
third party,
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(2) any sale made by a third party pursuant to Section 3.05, or (3) any
advertisements or promotions that Conseco Finance approved or utilized relating
to the Program, except that this indemnity shall not apply to any failure to
perform any duty or function which Syms has agreed to perform under this
Agreement.
Section 9.02 General. Syms and Conseco Finance shall promptly notify the
other of any claim, demand, suit or threat of suit of which it becomes aware
(except with respect to a threat of suit either party might institute against
the other) which may give rise to a right of indemnification pursuant to this
Agreement. The indemnifying party will be entitled to participate in the
settlement or defense thereof and, if the indemnifying party elects, to take
over and control the settlement or defense thereof with counsel satisfactory to
the indemnified party. In any case, the indemnifying party and the indemnified
party shall cooperate (at no cost to the indemnified party) in the settlement or
defense of any such claim, demand, suit or proceeding. No settlement of any
indemnified matter may be agreed to by the indemnifying party unless it contains
a full and complete release of the indemnified party. An indemnitee's right to
indemnification hereunder shall not be subject to set off for any claims by the
indemnitor against any indemnitee. For purposes of this Section 9, the term
"Losses" shall mean any losses, damages, costs and expenses, liabilities,
settlements, including, without limitation, any attorneys' fees and
disbursements and court costs reasonably incurred by Conseco Finance or Syms, as
the case may be.
Section 9.03. Waiver of Jury Trial. Notwithstanding anything stated herein,
if either party brings any action against the other party, whether at law or
equity regarding such offer party's performance under this Agreement or brings
any action connected in any way with this Agreement, the parties hereby waive
any right they may now or hereafter possess to a trial by jury.
SECTION 10. MISCELLANEOUS
- -------------------------
Section 10.01 Independent Contractors. It is expressly understood and
agreed between the parties that each party is an independent contractor and that
nothing herein shall be construed as creating a partnership, joint venture, or
agency relationship between the parties hereto and that neither of the parties
shall have the power or authority to bind or obligate the other party.
Section 10.02 Financial Statements. As soon as available and in any event
within 120 days after the end of each fiscal year of Syms, Syms shall provide
Conseco Finance with a copy of the financial statements included in Syms Annual
Report on Form 10-K filed with the Securities and Exchange Commission. Syms
understands and agrees that Conseco Finance may verify any financial information
provided by Syms and may, from time to time, seek credit and other information
concerning Syms from others subject, in each case, to Section 2.06.
(a) In addition to the other rights set forth in this Agreement, Syms
shall, subject to the confidentiality provisions set forth in this Agreement,
permit Conseco Finance and its designees, and their respective officers,
employees, attorneys, and/or accountants during normal business hours with
reasonable advance notice, in such a manner as to minimize interference with
Syms normal business operations, to examine, inspect, and make copies of all of
the data, records, files, and books of account under the control of Syms
relating to Accounts, Accountholders, Outstanding Receivables and all aspects of
the Program and the transactions contemplated by this Agreement. Syms shall use
reasonable efforts to deliver any document or instrument
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necessary for Conseco Finance to obtain such information from any person
maintaining records for Syms. Except as otherwise specifically provided in this
Agreement, the cost and expense of any such examinations shall be borne solely
by Conseco Finance.
(b) In addition to the other rights set forth in this Agreement, Conseco
Finance shall permit Syms and its designees, and their respective officers,
employees, attorneys, accountants and/or other representatives, during normal
business hours with reasonable advance notice, in such a manner as to minimize
interference with Conseco Finance or its affiliate's normal business operations,
to examine, inspect, all of the data, records, files and books of account under
the control of Conseco Finance or its affiliate relating to Accounts,
Accountholders, Outstanding Receivables and all aspects of the Program and the
transactions contemplated by this Agreement. Conseco Finance shall use
reasonable efforts to deliver any document or instrument necessary for Syms to
obtain such information. from any person-maintaining records for Conseco
Finance. Except as otherwise specifically provided in this Agreement, the cost
and expense of all such examination shall be borne solely by Syms.
Section 10.03 Assignment; Delegation of Duties. This Agreement incorporates
the entire understanding of the parties with respect to the subject matter
hereof and no representation, warranty or agreement not set forth herein shall
be binding on either party. This Agreement shall be binding upon and inure to
the benefit of Syms and Conseco Finance and their respective successors and
permitted assigns, except without the express written consent of the other
party, neither Syms nor Conseco Finance may assign this Agreement or delegate
any of its duties hereunder except that (a) either Syms or Conseco Finance may
delegate such duties to any party which is then a wholly owned subsidiary of the
delegating party or a corporation or other entity under common control with the
delegating party provided that notwithstanding such delegation, such delegating
party shall remain primarily liable hereunder, (b) Conseco Finance may assign
this Agreement to a wholly owned subsidiary provided that notwithstanding such
assignment, Conseco Finance shall remain primarily liable hereunder, and (c)
subject to Syms right to accept or deny such assignment as provided below,
Conseco Finance may contract with an unaffiliated bank or other financial
institution in structuring the Program and in connection with such contract may
assign this Agreement or delegate duties to such financial institution to the
extent Conseco Finance deems necessary or desirable. Upon written notification
to Syms of the assignment of this Agreement pursuant to clause (c) above, (which
shall include a proposed date for the system conversion to the assigned bank or
other financial institution selected by Conseco Finance and financial and other
information with respect to such proposed assignee to enable Syms to exercise
its rights hereunder, such date for the system conversion not to be sooner than
120 days from the date of the notification from Conseco Finance), Syms will have
thirty (30) days to accept or deny the assignment. If Syms does not want to
convert to the bank or other financial institution selected by Conseco Finance,
Syms must provide Conseco Finance with the name of the bank or other financial
institution selected by Syms and Syms must require that bank or other financial
institution to purchase the Accounts at a price equal to the amount of the Final
Receivables as of the close of business on the day prior to the Purchase Date
and convert the Syms Program from Conseco Finance on or before the date that
Conseco Finance is scheduled to systematically convert its remaining programs.
Failure by Syms to convert the Syms Program on or before the date that Conseco
Finance is scheduled to convert its remaining programs, shall be deemed as
acceptance of the assignment of this Agreement by Syms to the bank or other
financial institution selected by Conseco Finance and Conseco Finance will
convert the Syms Program to the bank or other financial institution selected by
Conseco Finance.
24
<PAGE>
Section 10.04 Amendment. Subject to the right of Conseco Finance to amend
and supplement the Operating Procedures pursuant to Section 4.01 hereof, no
amendment or waiver of any provision of this Agreement or consent to any
departure by either party therefrom, shall in any event be effective unless the
same shall be in writing and signed by the party or parties to be bound thereby.
Section 10.05 Non-Waiver. No failure on the part of any party to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 10.06 Severability. If any provision of this Agreement is held to
be invalid, void or unenforceable, all other provisions shall remain valid and
be enforced and construed as if such invalid provision were never a part of this
Agreement.
Section 10.07 Governing Law. This Agreement and all rights and obligations
hereunder shall be governed by and construed in accordance with the substantive
laws of the State of Minnesota.
Section 10.08 Entire Agreement. This Agreement, including any addenda or
exhibits hereto, constitutes the entire Agreement between Conseco Finance and
Syms with respect to the Program and any matters relating thereto and the
subject matter of this Agreement, and all prior agreements, negotiations and
communications on such subject are hereby superseded.
Section 10.09 Captions. Captions used in this Agreement are for convenient
reference only and shall not be construed as limiting or defining the
substantial content of this Agreement.
Section 10.10 Use of Syms Name and Mark and Public Announcements. Syms
hereby expressly gives Conseco Finance permission to use its name, logo,
registered trademarks and service marks (if any) solely in connection with the
promotion of the Program based on the Syms Corporate Trademark Guidelines
Handbook provided to Conseco Finance, provided that any such use shall be
subject to the prior written consent of Syms in each instance. Conseco Finance
must obtain prior approval for any use of Syms' name, logo, registered
trademarks and service marks (if any) in connection with the promotion of the
Program. Neither party will make any public announcement of the Program or
provide any information concerning the Program to any representative of any
news, trade or other media, or respond to any inquiry from any public or
governmental authority concerning the Program without prior consultation and
coordination with the other party.
Section 10.11 Marketing. Syms shall not use Conseco Finance name or logo or
any trademark or trade owned by Conseco Finance, or refer to Conseco Finance
directly or indirectly, in any advertisement, marketing materials, news release,
or release to any professional or trade publication without the prior written
approval of Conseco Finance. In the event that Conseco Finance grants such
written consent, Syms shall follow all terms and conditions set out by Conseco
Finance.
Section 10.12 Recoupment. All financial dealings between the parties
pursuant to this Agreement shall be considered as a single continuing
transaction, and subject to the doctrines of setoff and recoupment.
25
<PAGE>
Section 10.13 Notices. Except as otherwise provided in this Agreement, all
notices, demands and other communications hereunder shall be in writing and
shall be delivered personally or sent by facsimile, other electronic means or
nationally recognized overnight courier service addressed to the party to whom
such notice or other communication is to be given or made at such party's
address as set forth below, or to such other address as such party may designate
in writing to the other party from time to time in accordance with the
provisions hereof, and shall be deemed given when personally delivered, when
sent electronically or one (1) business day after being sent by overnight
courier.
To Conseco Finance:
Conseco Finance Finance Corp.
332 Minnesota Street, Suite 600
St. Paul, Minnesota 55101
Attention: Mark Shepherd
Facsimile: 800.488.6862
with copies to:
Conseco Finance Finance Corp.
1100 Landmark Towers
345 Saint Peter Street
St. Paul, Minnesota 55102
Attention: Brian Corey, Esq.
Facsimile: 612.293.5746
To Syms:
Syms Corp.
Syms Way
Secaucus, New Jersey 07094
Attention: Antone Moreira
Facsimile: 201-902-9874
26
<PAGE>
Section 10.14 Multiple Counterparts. This Agreement may be executed in any
number of multiple counterparts, all of which shall constitute but one and the
same original.
IN WITNESS WHEREOF, Conseco Finance and Syms have hereunto set their hands
as of the date first written above.
CONSECO FINANCE CORP. SYMS CORP.
By: /s/ Mark A. Shepherd By: /s/ Antone F. Moreira
- ------------------------------- ------------------------------
Its: Executive Vice President Its: Vice President & CFO
-------------------------- -------------------------
27
INDEPENDENT AUDITOR'S CONSENT
- -----------------------------
We consent to the incorporation by reference in Registration Statement No.
2-85554 on Form S-8 of our report dated April 10, 2000, appearing in this Annual
Report on Form 10-K of Syms Corp and subsidiaries for the fiscal year ended
February 26, 2000.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
May 15, 2000
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-26-2000
<PERIOD-END> FEB-26-2000
<CASH> 9,682
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 116,357
<CURRENT-ASSETS> 132,262
<PP&E> 259,986
<DEPRECIATION> 97,539
<TOTAL-ASSETS> 300,314
<CURRENT-LIABILITIES> 44,450
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0
0
<COMMON> 798
<OTHER-SE> 252,630
<TOTAL-LIABILITY-AND-EQUITY> 300,314
<SALES> 341,570
<TOTAL-REVENUES> 341,570
<CGS> 212,845
<TOTAL-COSTS> 212,845
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 3,645
<INCOME-TAX> 1,421
<INCOME-CONTINUING> 2,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 2,224
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