-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RTUtZ9aiuL8y72kKYIvjc8e4MsZcNOoi1VE22sEqw9B4+fRiSarWvzZ64Zh8Q43S JSsoDH4dTfCTJUF68r8Oiw== 0000950110-02-000410.txt : 20020523 0000950110-02-000410.hdr.sgml : 20020523 20020523155920 ACCESSION NUMBER: 0000950110-02-000410 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020302 FILED AS OF DATE: 20020523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMS CORP CENTRAL INDEX KEY: 0000724742 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 222465228 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0301 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08546 FILM NUMBER: 02661109 BUSINESS ADDRESS: STREET 1: SYMS WAY CITY: SECAUCUS STATE: NJ ZIP: 07094 BUSINESS PHONE: 2019029600 MAIL ADDRESS: STREET 1: SYMS WAY CITY: SECAUCUS STATE: NJ ZIP: 07094 10-K 1 e88864_10-k.txt ANNUAL REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-K ---------- (Mark one) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL YEAR ENDED MARCH 2, 2002 or { ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 COMMISSION FILE NUMBER 1-8546 SYMS CORP ------------------------------------------------------ (Exact name of registrant as specified in its charter) NEW JERSEY NO. 22-2465228 - ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) SYMS WAY, SECAUCUS, NEW JERSEY 07094 - --------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (201) 902-9600 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of Each Exchange on Title of Each class Which Registered - ----------------------------- ------------------------ Common Stock, $ .05 Par Value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock of the registrant held by non-affiliates on May 6, 2002 was $45,144,640 based upon the closing price of such stock on that date. As of May 2, 2002, 15,782,278 shares of Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy Statement for the 2002 annual meeting of stockholders to be filed pursuant to Regulation 14A are incorporated in Part III hereof by reference. ================================================================================ PART I ITEM 1. BUSINESS GENERAL Syms Corp operates a chain of 42 "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 42 stores and the aggregate amount of selling space in Syms stores increased from approximately 2,000 square feet to approximately 1,685,000 square feet. The Company maintains a 277,000 square foot distribution center and executive headquarters in Secaucus, New Jersey. 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 42 apparel stores offers a broad range of "off-price" first quality, in-season merchandise consisting primarily of men's tailored clothing and haberdashery, women's dresses, suits and separates, children's apparel and men's, women's and children's shoes. Syms stores emphasize better quality, nationally recognized designer and brand name merchandise at prices substantially below those generally charged by department and specialty stores. Syms carries a wide selection of sizes and styles of men's, women's and children's wear. Syms operates in a single industry segment and has no foreign operations. No material part of the Company's consolidated revenues is received from a single customer or group of customers. MERCHANDISE For the year ended March 2, 2002, net sales were generated by the following categories: Men's tailored clothes and haberdashery ........... 51% Women's dresses, suits, separates and accessories.. 31% Shoes ............................................. 7% Children's wear ................................... 8% Luggage, domestics and fragrances ................. 3% --- 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. 2 PURCHASING The Company purchases first-quality, in-season, brand-name merchandise directly from manufacturers on terms more favorable than those generally obtained by department and specialty stores. Syms estimates that approximately 200 brand-name manufacturers of apparel are represented in its stores. The Company does not maintain large out-of-season inventories. However, Syms occasionally buys certain basic clothing which does not change in style from year to year at attractive prices for storage until the following season. Purchasing is performed by a buying staff in conjunction with the General Merchandise Manager and several other key divisional merchandise managers. 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 274 years. Most merchandise is received from manufacturers at the distribution center where it is inspected, ticketed and allocated to particular stores. MARKETING The Company's pricing policy is to affix a ticket to each item displaying Syms' selling price as well as the price the Company regards as the traditional full retail price of that item at department or specialty stores. All garments are sold with the brand-name as affixed by the manufacturer. Because women's dresses are vulnerable to considerable style fluctuation, Syms has long utilized a ten-day automatic markdown pricing policy to promote movement of merchandise. The date of placement on the selling floor of each women's dress is stamped on the back of the price ticket. The front of each ticket contains what the Company believes to be the nationally 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 4.6 % 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 advertises principally on television, radio and, more recently, has enhanced its advertising by including print media as well as direct mail to its 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. 3 OPERATIONS AND CONTROL SYSTEMS The Company has implemented a merchandise control system which tracks a 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 March 2, 2002, the Company had 2,168 employees of whom approximately 722 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 2003 and cover 1,616 sales and tailor employees. The Company believes its relationships with the unions are good. Approximately 30 to 100 persons, consisting mostly of sales personnel, are employed at each Syms store. ITEM 2. PROPERTIES THE STORES Location At March 2, 2002, the Company had 42 stores, 19 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. LEASED/ SELLING STATE LOCATION OWNED SPACE ----- -------- ----- ----- CONNECTICUT Fairfield Owned 32,000 Hartford Leased 31,000 FLORIDA Fort Lauderdale Owned 44,000 Miami Owned 45,000 West Palm Beach Owned 36,000 Tampa Owned 38,000 Kendall Leased 32,000 GEORGIA Norcross Owned 51,000 Marietta Owned 39,000 ILLINOIS Addison Owned 47,000 Niles Leased 32,000 Chicago Leased 39,000 MARYLAND Baltimore Leased 43,000 Rockville Owned 61,000 Towson Leased 41,000 MASSACHUSETTS Norwood Leased 36,000 Peabody Leased 39,000 MICHIGAN Southfield Owned 46,000 Troy Leased 37,000 MISSOURI St. Louis Leased 33,000 4 LEASED/ SELLING STATE LOCATION OWNED SPACE ----- -------- ----- ----- NEW YORK/NEW JERSEY Park Avenue Leased 45,000 Trinity Owned 40,000 Westbury Owned 72,000 Commack Owned 36,000 Westchester Leased 50,000 Rochester Owned 32,000 Buffalo Owned 39,000 Paramus Owned 56,000 Woodbridge Leased 32,000 Secaucus Owned 29,000 Cherry Hill Owned 40,000 Lawrenceville Leased 54,000 NORTH CAROLINA Charlotte Leased 30,000 OHIO Highland Heights Leased 36,000 PENNSYLVANIA King of Prussia Owned 41,000 Monroeville Owned 31,000 Pittsburgh Leased 40,000 RHODE ISLAND N. Cranston Leased 27,000 TEXAS Dallas Owned 42,000 Houston Owned 34,000 Hurst Owned 38,000 VIRGINIA Falls Church Leased 39,000 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 Chicago 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. Syms also owns land in central New Jersey in a commercial zoned area where it does not intend to build, and land and buildings and Northern Ohio at the site of a closed store. Lease Terms Nineteen of the Company's 42 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) - -------- ------------ --------------- ------------------ 2002 ..................... 1 0 0 2003 ..................... 1 0 0 2004 ..................... 1 1 1 - 10 years 2005 ..................... 4 4 5 2006 ..................... 1 1 3 - 5 years 2007 and thereafter ...... 11 7 2.5 - 5 years
- ---------- (1) The Elmsford, New York store is occupied on a 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. 5 Store leases provide for a base rental of between approximately $4.00 and $18.23 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. Minimum rental payments for Syms' leased stores aggregated $9,341,297 for the year ended March 2, 2002, of which $600,000 was paid to Sy Syms as fixed rent. Store Openings/Closings No new stores were opened this year. Three stores were closed this fiscal year. These stores were located in Sharonville, OH, Franklin Mills, PA and Potomac, VA. 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. 6 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The common stock of the Company (the "Common Stock") is listed for trading on the New York Stock Exchange under the symbol "SYM". The following table sets forth the high and low sales prices for the Company's Common Stock as reported by the New York Stock Exchange within the two most recent fiscal years of the Company. HIGH LOW ---- --- Quarter ended March 2, 2002 ............. $ 6.40 $ 5.00 Quarter ended December 1, 2001 .......... 5.80 4.85 Quarter ended September 1, 2001 ......... 6.95 5.43 Quarter ended June 2, 2001 .............. 8.00 5.72 Quarter ended March 3, 2001 ............. $ 5.85 $4.437 Quarter ended November 25, 2000 ......... 6.125 3.687 Quarter ended August 26, 2000 ........... 4.625 3.375 Quarter ended May 27, 2000 .............. 4.375 3.312 HOLDERS As of May 2, 2002 there were 130 record holders of the Company's Common Stock. The Company believes that there were in excess of 1,416 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 March 2, 2002 and March 3, 2001. 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. 7 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 March 2, 2002, March 3, 2001, February 26, 2000, February 27, 1999 and February 28, 1998. The selected financial data presented below should be read in conjunction with such Financial Statements and notes thereto.
FISCAL YEAR ENDED -------------------------------------------------------------------------------- MARCH 2, MARCH 3, FEBRUARY 26, FEBRUARY 27, FEBRUARY 28, 2002 2001 2000 1999 1998 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Net sales .............................. $ 287,744 $ 342,316 $ 341,570 $ 343,858 $ 352,959 Net income (loss) ..................... (2,319) (8,333) 2,224 17,449 23,036 Net income (loss) per share - basic .... (0.15) (0.52) 0.14 1.00 1.30 Net income (loss) per share - diluted.. (0.15) (0.52) 0.14 1.00 1.29 BALANCE SHEET DATA: Working capital ........................ $ 85,961 $ 86,638 $ 87,812 $ 101,592 $ 99,728 Total assets ........................... 276,494 276,867 300,314 298,742 294,192 Capitalized leases ..................... -- -- -- -- 419 Other long term liabilities ............ 2,118 2,409 2,436 1,567 964 Shareholders' equity ................... 241,457 243,935 253,428 258,760 250,870
8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report (including but not limited to factors discussed below, in the "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as those discussed elsewhere in this Annual Report on Form 10-K) 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, 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 herein 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 and elsewhere described in this Annual Report and other reports filed with the Securities and Exchange Commission. CRITICAL ACCOUNTING POLICIES AND ESTIMATE The preparation of financial statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in the financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the consolidated financial statements. The Company believes application of accounting policies, and the estimates inherently required by the policies, are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, the Company has found the application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates. The Company's accounting policies are more fully described in Note 1 to the Consolidated Financial Statements, located in this Annual Report. The Company has identified certain critical accounting policies that are described below. MERCHANDISE INVENTORY - Inventories are valued at lower of cost or market using the retail first-in, first-out ("FIFO") inventory method. Under the retail inventory method ("RIM"), the valuation of inventories at cost and the resulting gross margins are calculated by applying a calculated cost to retail ratio to the retail value of inventories. RIM is an averaging method that has been widely used in the retail industry due to its practicality. Additionally, it is recognized that the use of RIM will result in valuing inventories at the lower of cost or market if markdowns are currently taken as a reduction of the retail value of inventories. Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markon, markups, and markdowns, which significantly impact the ending inventory valuation at cost as well as resulting gross margins. Management believes that the Company's RIM and application of FIFO provides an inventory valuation which reasonably approximates cost using a first-in, first-out assumption and results in carrying value at the lower of cost or market. If actual market conditions are less favorable than those projected by management, additional markdowns may be required. 9 LONG-LIVED ASSET - In evaluation of the fair value and future benefits of long-lived assets, the Company performs an analyses of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the Company reduces the carrying value to its fair value, which is generally calculated using discounted cash flows. Various factors including future sales growth and profit margins are included in this analysis. To the extent these future projections or our strategies change, the conclusion regarding impairment may differ from the Company's current estimates. DEFERRED TAX VALUATION ALLOWANCE - The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, if the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. RESULTS OF OPERATIONS The following discussion compares the fiscal years ended March 2, 2002, March 3, 2001 and February 26, 2000. The fiscal years ended March 2, 2002 and February 26, 2000 were each comprised of 52 weeks. The fiscal year ended March 3, 2001 was comprised of 53 weeks. Fiscal Year Ended March 2, 2002 (Fiscal 2001) Compared to Fiscal Year Ended March 3, 2001 (Fiscal 2000) Net sales for the fiscal year ended March 2, 2002, were $287,744,000, a decrease of $54,572,000 (15.9%) as compared to net sales of $342,316,000 for the fiscal year ended March 3, 2001. The decline in sales for fiscal 2001 as compared to fiscal 2000 can be largely attributable to (1) a 13.2% decline in comparable store sales due to the difficult economic environment, (2) the extra week in fiscal 2000 which amounted to approximately $4,013,000, (3) the closing of three stores located in Boston, MA, Gurnee, IL and Sharonville, OH, which sales in fiscal 2000 amounted to approximately $9,200,000 and (4) the closing of the Trinity store located near the World Trade Center site for a period of 18 days following September 11, 2001, which store suffered a sales decline in fiscal 2001 of approximately $4,500,000. Gross profit for the fiscal year ended March 2, 2002 was $108,581,000, a decrease of $18,306,000 (37.7% as a percentage of net sales) as compared to $126,887,000 (37.1% as a percentage of net sales) for the fiscal year ended March 31, 2001. Although the gross profit percentage improved in fiscal 2001, the decline in sales, as noted above, accounts for the shortfall in gross profit dollars. Selling, general and administrative (SG&A) expense was $78,261,000 (27.2% as a percentage of net sales) for the fiscal year ended March 2, 2002 as compared to $84,810,000 (24.8% as a percentage of net sales) for the fiscal year ended March 3, 2001. The expenses of the closed stores (Gurnee, IL, Boston, MA, Sharonville, OH, Franklin Mills, PA and Potomac, VA) amounted to approximately $3,900,000, and the remainder of the decline results from greater expense efficiencies in the existing stores. The increase as a percentage of sales is due principally to a lack of sales leverage in relation to our fixed costs. Advertising expense for the fiscal year ended March 2, 2002 was $8,936,000 (3.1% as a percentage of net sales) as compared to $10,122,000 (3.0% as a percentage of net sales) for the fiscal year ended March 3, 2001. The decrease is primarily due to reduced advertising in certain markets. 10 Occupancy costs were $18,807,000 (6.5% as a percentage of net sales) for the fiscal year ended March 2, 2002 as compared to $21,366,000 (6.2% as a percentage of net sales) for the fiscal year ended March 3, 2001. Total occupancy costs declined by approximately $2,559,000 compared to a year ago. Of this decline, $2,400,000 is attributable to the five closed stores (Gurnee, IL, Boston, MA, Sharonville, OH, Franklin Mills, PA and Potomac, VA). Depreciation and amortization amounted to $11,520,000 (4.0% as a percentage of net sales) for the fiscal year ended March 2, 2002 as compared to $11,468,000 (3.4% as a percentage of net sales) for the fiscal year ended March 3, 2001. Other income was recorded by the Company amounting to $6,289,000 as follows: Insurance recovery from employee theft ............... $3,000,000 Restitution from the employee relating to the theft .. 1,811,000 Gain on stock due demutualization .................... 1,058,000 Reversal of closed store lease liability ............. 377,000 Other ................................................ 43,000 ---------- Total ........................................... $6,289,000 ========== During the third quarter of fiscal 2000, the Company recorded a store closing charge of $12.9 million relating to a plan to close five stores, including its store in Boston, Massachusetts, and an additional lease commitment associated with a previously closed store. The action was taken by the Company to enhance competitiveness, reduce expenses and to improve efficiencies. The net loss before income taxes was $2,559,000 for the fiscal year ended March 2, 2002 as compared to a net loss before income taxes of $13,661,000 for the fiscal year ended March 3, 2001. This variance is largely attributable to the recording of a store closing charge in the third quarter of fiscal 2000 for the closing of certain stores. For the fiscal year ended March 2, 2002, the effective income tax rate was 9.4% compared to 39% for the fiscal year ended March 3, 2001. The reduced income tax rate is due to the non-deductibility of officer's life insurance premiums. Fiscal Year Ended March 3, 2001 (Fiscal 2000) Compared to February 26, 2000 (Fiscal 1999) Net sales for the fiscal year ended March 3, 2001, were $342,316,000, an increase of $746,000 (.2%) as compared to net sales of $341,570,000 for the fiscal year ended February 26, 2000. Comparable store sales for the fiscal year ended March 3, 2001 declined .5%. The Company estimates that the extra week in the fiscal year ended March 3, 2001 added approximately $4,013,000 in net sales compared to the previous year. The closing of the Boston store on October 29, 2000 accounted for approximately a $2,000,000 decline in sales. Gross profit for the fiscal year ended March 3, 2001 was $126,887,000, a decrease of $1,838,000 (37.1% as a percentage of net sales) as compared to $128,725,000 (37.7% as a percentage of net sales) for the fiscal year ended February 26, 2000. This decrease is largely due to higher markdowns taken in the third quarter of approximately $2,600,000 to cover an increased amount of aged merchandise and inventory for closed stores, which was partially offset by an improved shrinkage performance. Selling, general and administrative (SG&A) expense was $84,810,000 (24.8% as a percentage of net sales) for the fiscal year ended March 3, 2001 as compared to $83,592,000 (24.5% as a percentage of net sales) for the fiscal year ended February 26, 2000. This increase in SG&A expenses of $1,218,000 is largely attributable to the opening of three new stores in fiscal 1999, which were not open for the entire fiscal year in 1999. Advertising expense for the fiscal year ended March 3, 2001 was $10,122,000 (3.0% as a percentage of net sales) as compared to $10,210,000 (3.0% as a percentage of net sales) for the fiscal year ended February 26, 2000. Occupancy costs were $21,366,000 (6.2% as a percentage of net sales) for the fiscal year ended March 3, 2001 as compared to $20,688,000 (6.1% as a percentage of net sales) for the fiscal year ended February 26, 2000. This increase is largely attributable to the expense of new stores opened in fiscal 1999 which were not opened for the entire fiscal year 1999. Depreciation and amortization amounted to $11,468,000 (3.4% as a percentage of net sales) for the fiscal year ended March 3, 2001, as compared to $10,580,000 (3.1% as a percentage of net sales) for the fiscal year ended February 26, 2000. This increase is attributable to the addition of new stores opened in fiscal 1999 and the acquisition of new MIS systems and equipment. 11 During the third quarter of fiscal 2000, the Company recorded a store closing charge of $12.9 million relating to a plan to close five stores, including its store in Boston, Massachusetts (which closed on October 29, 2000), and an additional lease commitment associated with a previously closed store. The action was taken by the Company to enhance competitiveness, reduce expenses and to improve efficiencies. The net loss before income taxes was $13,661,000 for the fiscal year ended March 3, 2001 as compared to a net profit before income taxes of $3,645,000 for the fiscal year ended February 26, 2000. This variance is largely attributable to the recording of a store closing charge in the third quarter 2000 for the closing of certain stores. For the fiscal year ended March 3, 2001, the effective income tax rate was 39.0% which was the same as the fiscal year ended February 26, 2000. LIQUIDITY AND CAPITAL RESOURCES Working capital at March 2, 2002 was $85,961,000 a decrease of $677,000 from March 3, 2001, and the ratio of current assets to current liabilities was 3.61 to 1 as compared to 3.84 to 1 at March 3, 2001. Net cash provided by operating activities totaled $20,145,000 for fiscal 2002 as compared to $4,654,000 for fiscal 2001. The major reasons for the increase in cash provided by operating activities can be attributed to lower inventory levels and lower net loss compared to a year ago. Net cash used in investing activities was $7,985,000 for fiscal 2002 as compared to $5,691,000 for fiscal 2001. Purchases of property and equipment totaled $7,990,000 and $6,073,000 for fiscal years 2002 and 2001, respectively. The Company purchased a shopping center in West Palm Beach, FL for approximately $5,700,000 in July 2001. The Company's West Palm Beach store is located in this shopping center. Net cash used in financing activities was $160,000 for the fiscal year ended March 2, 2002 as compared to $1,160,000 for fiscal 2001. The Company has a revolving credit agreement with a bank for a line of credit not to exceed $20,000,000 through May 3, 2003. 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. 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 March 2, 2002, under the revolving credit agreement, the borrowings peaked at $1,250,000 compared to $3,425,000 for the period ended March 3, 2001. For the fiscal year ended March 3, 2001, the average amount of borrowings under the revolving credit agreement was $488,000 with a weighted average interest rate of 8.0%. In addition, the Company has a separate $10,000,000 credit facility with another bank available for the issuance of letters of credit for the purchase of merchandise. This agreement may be canceled at any time by either party. At March 2, 2002 and at March 3, 2001, the Company had $4,564,076 and $2,592,704, respectively, in outstanding letters of credit. The Company has planned capital expenditures of approximately $5,000,000 for the fiscal year ending March 1, 2003. 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 October 12, 2001. During the year ended March 2, 2002, the Company has purchased 23,700 shares which represented 0.2% of its outstanding shares at a total cost of $167,048. Management believes that existing cash, internally generated funds, trade credit and funds available from the revolving credit agreement will be sufficient for working capital and capital expenditure requirements for the fiscal year ending March 1, 2003. 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. 12 CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS To facilitate an understanding of our contractual obligations and commercial commitments, the following data is provided:
Payments Due by Period ---------------------------------------------------------------------------------------- (in thousands of dollars) Within After 5 Total 1 year 2-3 years 4-5 years years ---------------------------------------------------------------------------------------- Contractual Obligations - ----------------------- Employment Agreements ................ $ 2,900,000 $ 350,000 $ 800,000 $ 850,000 $ 900,000 ---------------------------------------------------------------------------------------- Acquisition .......................... 2,155,000 2,155,000 -- -- -- ---------------------------------------------------------------------------------------- Operating Leases ..................... 67,817,277 9,173,123 15,425,533 13,929,837 29,288,784 ---------------------------------------------------------------------------------------- Total Contractual Cash Obligations ... $72,872,277 $11,678,123 $16,225,533 $14,779,837 $30,188,784 ======================================================================================== Amount of Commitment Expiration Per Period ---------------------------------------------------------------------------------------- (in thousands of dollars) Total Amounts Within After 5 Committed 1 year 2-3 years 4-5 years years ---------------------------------------------------------------------------------------- Other Commercial Commitments - ---------------------------- Lines of Credit, nothing outstanding.. $ -- $ -- -- -- -- Letters of Credit .................... 4,564,076 4,564,076 ---------------------------------------------------------------------------------------- Total Commercial Commitments ......... $ 4,564,076 $ 4,564,076 -- -- -- ========================================================================================
RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the FASB issued Statement of Financial Standards No. 141, "Business Combinations" and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001 and modifies the application of the purchase accounting method effective for transactions that are completed after June 30, 2001. SFAS 142 eliminates the requirement to amortize goodwill and intangible assets having indefinite useful lives but requires testing at least annually for impairment. Intangible assets that have finite lives will continue to be amortized over their useful lives. SFAS 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement's effective date of January 1, 2002. The adoption of SFQAS 141 did not have a material effect on the Company's financial position or operations in fiscal 2001, and SFAS 141 and the adoption of SFAS 142 are not anticipated to have any effect in fiscal 2002. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets. The Company also records a corresponding asset which is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management has not yet determined the impact that the adoption of SFAS No. 143 will have on the Company's financial position and operations. 13 In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and requires companies to separately report discontinued operations and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 will not have any impact on the Company's financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has exposure to interest rates under its unsecured revolving credit facility. Interest on individual advances is payable quarterly at 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 3/8 of 1% per annum. 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 14 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) .............. 76 Chairman of the Board and Director of the Company Marcy Syms(1)(2) ........... 51 Chief Executive Officer / President and Director of the Company Antone F. Moreira .......... 65 Vice President, Treasurer and Chief Financial Officer and Director of the Company Harvey A. Weinberg(3)(4) ... 64 Director of the Company David A. Messer(3)(4) ...... 40 Director of the Company Wilbur L. Ross, Jr(3)(4) ... 64 Director of the Company Ronald Zindman ............. 52 Executive Vice President--General Merchandise Manager Allen Brailsford ........... 58 Executive Vice President - Operations Myra Butensky .............. 43 Vice President--Divisional Merchandise Manager Men's Tailored Clothing James Donato ............... 46 Vice President - Operations Elyse Marks ................ 49 Vice President--Information Services John Tyzbir ................ 48 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. 15 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 Sempra Energy, Inc. (NYSE: SRE), since January 1998. Prior to January 1998, Mr. Messer was President of AIG Trading Corporation, where he had been employed since March 1990. He has been a Director of the Company since July 1996. WILBUR L. ROSS, JR. has been a principal of W L Ross & Company LLC since 2000. Prior to 2000, Mr. Ross was Managing Director of Rothchild, Inc. from 1976 to 1999. He was a Director of the Company from 1983 through March 1999 and was reappointed Director in October 2000. 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 Executive Vice President since April 2001. Mr. Brailsford was Vice President of Operations from March 1992 to March 2001, 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. From June 1991 to April 1998, Ms. Butensky was a ladies buyer. 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. JAMES DONATO has been Vice President of Operations since April 2001. From November 1997 to March 2001 he was Director of Store Planning. Prior to November 1997, Mr. Donato was in store management as a District Manager and Store Manager of the Company. ELYSE MARKS has been Vice President of MIS since April 2001. From November 1999 to March 2001 Ms. Marks was Director of MIS. Prior to November 1999, Ms. Marks was manager of MIS and store systems. From 1983 to 1987, she was also in store management for the Company. 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. 16 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 March 2, 2002, 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 March 2, 2002, 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 March 2, 2002, the end of the fiscal year covered by this Annual Report. 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K PAGE NUMBER ----------- (a)(1) Financial Statements: Independent Auditors' Report ........................ F-1 Consolidated Balance Sheets ......................... F-2 Consolidated Statements of Operations ............... F-3 Consolidated Statements of Shareholders' Equity ..... F-4 Consolidated Statements of Cash Flows ............... F-5 Notes to Consolidated Financial Statements .......... F-6 (a)(2) Financial Statement Schedules: 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 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 18 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. (10-K Report for fiscal year ended February 28, 1998) 10.39 Credit Program Agreement, dated January 27, 2000 between Syms Corp and Conseco Finance Corp (10K report for fiscal year ended February 26, 2000) 10.40 Second Amendment to Revolving Credit Agreement, dated as of May 27, 2000, between Syms Corp and Fleet National Bank (successor to Summit Bank) (10-Q Report for quarter ended May 27, 2000) 10.41+ Amendment to the Amended and Restated Incentive Stock Option and Appreciation (10-Q Report for quarter ended November 25, 2000) 10.42 Third Amendment to Revolving Credit Agreement, dated as November 24, 2000, between Syms Corp and Fleet National Bank (successor to Summit Bank) (10-K Report for fiscal year ended March 3, 2001) 10.43 Fourth Amendment to Revolving Credit Agreement, dated as of May 4, 2001, between Syms Corp and Fleet National Bank (10-K Report for fiscal year ended March 3, 2001) 10.44 Promissory note and mortgage from Marcy Syms to Syms Corp dated April 1, 2001 (10-K Report for fiscal year ended March 3, 2001) 10.45* Fifth Amendment to Revolving Credit Agreement dated as of May 3, 2002, between Syms Corp and Fleet National Bank 10.46* Agreement and Plan of Reorganization, dated as of May 1, 2002, between Stanley Blacker, Inc. and Syms Corp. 21 List of Subsidiaries of the Company 23* Consent of Deloitte & Touche LLP (b) Reports on Form 8-K: During the quarter ended March 2, 2002 no reports on Form 8-K were filed. 19 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: /s/ MARCY SYMS --------------------------------------------- Marcy Syms Chief Executive Officer / President Date: May __, 2002 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 - --------- ----- ---- /s/ SY SYMS Chairman of the Board May __, 2002 - ------------------------- and Director Sy Syms /s/ MARCY SYMS Chief Executive Officer/President May __, 2002 - ------------------------- and Director Marcy Syms (Principal executive officer) /s/ ANTONE F. MOREIRA Vice President, Treasurer and - ------------------------- Chief Financial Officer and Director Antone F. Moreira (Principal financial and accounting officer) May __, 2002 /s/ HARVEY A. WEINBERG Director May __, 2002 - ------------------------- Harvey A. Weinberg /s/ DAVID A. MESSER Director May __, 2002 - ------------------------- David A. Messer /s/ WILBUR L. ROSS, JR. Director May __, 2002 - ------------------------- Wilbur L. Ross, Jr.
20 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 March 2, 2002 and March 3, 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended March 2, 2002. 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 March 2, 2002 and March 1, 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 2, 2002, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP April 18, 2002 F-1 SYMS CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - --------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MARCH 2, MARCH 3, 2002 2001 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents ......................................... $ 19,485 $ 7,485 Merchandise inventories ........................................... 86,810 99,186 Deferred income taxes ............................................. 6,514 6,252 Prepaid expenses and other current assets ......................... 6,071 4,238 --------- --------- Total current assets .......................... 118,880 117,161 PROPERTY AND EQUIPMENT - NET ............................................ 147,186 150,587 DEFERRED INCOME TAXES ................................................... 2,309 2,924 OTHER ASSETS ............................................................ 8,119 6,195 --------- --------- TOTAL ASSETS ............................................................ $ 276,494 $ 276,867 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable .................................................. $ 17,867 $ 16,453 Accrued expenses .................................................. 8,845 8,347 Accrued insurance ................................................. 3,144 2,813 Obligation to customers ........................................... 3,063 2,910 --------- --------- Total current liabilities ..................... 32,919 30,523 OTHER LONG TERM LIABILITIES ............................................. 2,118 2,409 COMMITMENTS (Note 8) .................................................... -- -- 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; 15,737 shares outstanding as of March 2, 2002 (net 2,152 treasury shares) and 15,760 shares outstanding as of March 3, 2001 (net of 2,128 treasury shares) ............................................ 787 788 Additional paid-in capital ........................................ 13,760 13,752 Treasury stock .................................................... (18,987) (18,821) Retained earnings ................................................. 245,897 248,216 --------- --------- Total shareholders' equity ..................... 241,457 243,935 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............................. $ 276,494 $ 276,867 ========= ========= See notes to consolidated financial statements.
F-2 SYMS CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - ------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED ----------------------------------------------- MARCH 2, MARCH 3, FEBRUARY 26, 2002 2001 2000 --------- --------- -------- NET SALES ..................................... $ 287,744 $ 342,316 $341,570 Cost of goods sold ............................ 179,163 215,429 212,845 --------- --------- -------- Gross profit .................................. 108,581 126,887 128,725 EXPENSES Selling, general and administrative ........... 78,261 84,810 83,592 Advertising ................................... 8,936 10,122 10, 210 Occupancy ..................................... 18,807 21,366 20,688 Depreciation and amortization ................. 11,520 11,468 10,580 Other income .................................. (6,289) 0 0 Special charges ............................... 0 12,935 0 --------- --------- -------- Income (loss) from operations ................. (2,654) (13,814) 3,655 Interest expense (income) - net ............... (95) (153) 10 --------- --------- -------- Income (loss) before income taxes ............. (2,559) (13,661) 3,645 Provision (benefit) for income taxes .......... (240) (5,328) 1,421 --------- --------- -------- NET INCOME (LOSS) ............................. $ (2,319) $ (8,333) $ 2,224 ========= ========= ======== Net Income (loss) Per Share - basic ........... $ (0.15) $ (0.52) $ 0.14 ========= ========= ======== Weighted Average Shares Outstanding - basic ... 15,741 15,950 16,351 ========= ========= ======== Net Income (loss) Per Share - diluted ......... $ (0.15) $ (0.52) $ 0.14 ========= ========= ======== Weighted Average Shares Outstanding - diluted.. 15,741 15,950 16,362 ========= ========= ========
See notes to consolidated financial statements. F-3 SYMS CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - ----------------------------------------------- (IN THOUSANDS)
Preferred Stock Common Stock Additional --------------- ---------------- Paid Treasury Retained Shares Amount Shares Amount Capital Stock Earnings Total ------ ------ ------ ------ ---------- -------- --------- -------- 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 Stock buyback .............. -- -- (200) (10) -- (1,150) -- (1,160) Net loss/income ............ -- -- -- -- -- -- (8,333) (8,333) ------ ------ ------ ------ -------- -------- -------- -------- BALANCE AS OF MARCH 3, 2001 ......... -- -- 15,760 788 13,752 (18,821) 248,216 243,935 Exercise of stock options .. -- -- 1 -- 8 -- -- 8 Stock buyback .............. -- -- (24) (1) -- (166) -- (167) Net loss/income ............ -- -- -- -- -- -- (2,319) (2,319) ------ ------ ------ ------ -------- -------- -------- -------- BALANCE AS OF MARCH 2, 2002 ......... -- $ -- 15,737 $ 787 $ 13,760 $(18,987) $245,897 $241,457 ====== ====== ====== ====== ======== ======== ======== ========
See notes to consolidated financial statements. F-4 SYMS CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------- (IN THOUSANDS)
FISCAL YEAR ENDED --------------------------------------------- March 2, March 3, February 26, 2002 2001 2000 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ...................................... $ (2,319) $ (8,333) $ 2,224 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization .......................... 11,520 11,468 10,580 Deferred income taxes .................................. 353 (5,039) (1,103) Loss (gain) on sale of property and equipment .......... 253 (337) (139) Fixed asset allowance adjustment ....................... (386) -- -- Non cash impairment charge ............................. -- 6,473 -- (Increase) decrease in operating assets: Merchandising inventories ........................... 12,376 17,171 13,081 Prepaid expenses and other current assets ........... (1,833) (1,236) 751 Other assets ........................................ (1,924) (1,559) 637 Increase (decrease) in operating liabilities: Accounts payable ..................................... 1,414 (10,921) 8,106 Accrued expenses ..................................... 829 (3,183) 1,844 Obligations to customers ............................. 153 177 (718) Other long term liabilities .......................... (291) (27) 869 -------- -------- -------- Net cash provided by operating activities .... 20,145 4,654 36,132 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ..................... (7,990) (6,073) (19,203) Proceeds from sale of property and equipment ........... 5 382 152 -------- -------- -------- Net cash used in investing activities ........ (7,985) (5,691) (19,051) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury shares ............................ (167) (1,160) (7,556) Repayments of obligations under capital lease .......... -- -- (419) Revolving line of credit (repayments) borrowings ....... -- -- (2,350) Exercise of options .................................... 7 -- -- -------- -------- -------- Net cash used in financing activities ........ (160) (1,160) (10,325) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ... 12,000 (2,197) 6,756 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ......... 7,485 9,682 2,926 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD ............... $ 19,485 $ 7,485 $ 9,682 ======== ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) ................ $ 299 $ 311 $ 191 ======== ======== ======== Income taxes paid, net of refunds ................... $ 3,127 $ 1,827 $ 694 ======== ======== ========
See notes to consolidated financial statements. F-5 SYMS CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEARS ENDED MARCH 2, 2002, MARCH 3, 2001 AND FEBRUARY 26, 2000 - --------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. PRINCIPAL BUSINESS - Syms Corp and subsidiaries (the "Company") operate a chain of 42 "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 March 2, 2002 and February 26, 2000 were comprised of 52 weeks. The fiscal year ended March 3, 2001 was comprised of 53 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 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 accounting principles generally accepted in the United States of America 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. Significant estimates include inventory provision, sales return, self-insurance accruals and lives of long-lived assets. 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 k. REVENUE RECOGNITION - The Company recognizes revenue at the "point of sale". Allowance for sales returns is recorded as a component of net sales in the period in which the related sales are recorded. l. COMPREHENSIVE INCOME - Comprehensive income is equivalent to the Company's net income for fiscal years 2001, 2000 and 1999. m. SEGMENT REPORTING - Statement of Financial Accounting Standards (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:
Fiscal Year ---------------------------- 2001 2000 1999 ---- ---- ---- Men's tailored clothes and haberdashery ............. 51% 54% 54% Women's dresses, suits, separates and accessories ... 31% 31% 30% Shoes ............................................... 7% 6% 7% Children's wear ..................................... 8% 7% 7% Luggage, domestics and fragrances .................... 3% 2% 2% --- --- --- 100% 100% 100%
The Company does not rely on any major customers as a source of revenue. n. COMPUTER SOFTWARE COSTS - Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" requires capitalization of costs of software developed or purchased for internal use. The Company adopted 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. o. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - During the first quarter of 2001, the Company adopted SFAS No. 133 and 183, Accounting for Derivative Instruments and Hedging Activities. SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities requiring all companies to recognize derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 138 is an amendment to SFAS 133, which amended or modified certain issues discussed in SFAS 133. Implementation of SFAS 133 and SFAS 138 did not have a material impact on the Company's consolidated financial statements. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the FASB issued Statement of Financial Standards No. 141, "Business Combinations" and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001 and modifies the application of the purchase accounting method effective for transactions that are completed after June 30, 2001. SFAS 142 F-7 eliminates the requirement to amortize goodwill and intangible assets having indefinite useful lives but requires testing at least annually for impairment. Intangible assets that have finite lives will continue to be amortized over their useful lives. SFAS 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement's effective date of January 1, 2002. The adoption of SFAS 141 did not have a material effect on the Company's financial position or operations in fiscal 2001, and SFAS 141 and the adoption of SFAS 142 are not anticipated to have any effect in fiscal 2002. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets. The Company also records a corresponding asset which is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management does not believe that the adoption of SFAS No. 143 will have a significant impact on the Company's financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and requires companies to separately report discontinued operations and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 will not have any impact on the Company's financial statements. NOTE 2 - PROPERTY AND EQUIPMENT Property and equipment consists of: MARCH 2, MARCH 3, 2002 2001 -------- -------- (IN THOUSANDS) Land ............................................ $ 44,855 $ 40,584 Buildings and building improvements ............. 119,724 115,788 Leasehold and leasehold improvements ............ 39,713 44,793 Machinery and equipment ......................... 31,003 30,077 Furniture and fixtures .......................... 20,811 21,480 Construction in progress ........................ 2,372 1,248 -------- -------- 258,478 253,970 Less accumulated depreciation and amortization .. 111,292 103,383 -------- -------- $147,186 $150,587 ======== ======== Included in property and equipment is property held for sale with a net book value of approximately $1,474,249 and $1,577,828 at 2001 and 2000, respectively. F-8 The Company has entered into an agreement to sell its store (including the real property) located in Dallas, Texas to Wal-Mart Stores, Inc. The closing of this sale is subject to certain zoning changes. The Company is unable to determine at this time whether such approval will be granted. If such approvals are granted, the Company has selected a site where it will relocate its existing Dallas store. NOTE 3 - INCOME TAXES The provision (benefit) for income taxes is as follows: FISCAL YEAR ENDED ----------------------------------------- March 2, March 3, February 26, 2002 2001 2000 ------- ------- ------- (In thousands) Current: Federal ..... $ (593) $ -- $ 2,366 State ...... -- (289) 158 ------- ------- ------- (593) (289) 2,524 ------- ------- ------- Deferred: Federal .... 318 (4,047) (190) State ..... 35 (992) (913) ------- ------- ------- 353 (5,039) (1,103) ------- ------- ------- $ (240) $(5,328) $ 1,421 ======= ======= ======= The following is a reconciliation of income taxes computed at the U.S. Federal statutory rate to the provision for income taxes: FISCAL YEAR ENDED -------------------------------------- MARCH 2, MARCH 3, FEBRUARY 26, 2002 2001 2000 ------ ------ ------ Statutory Federal income tax rate .. (35.0%) (35.0%) 35.0% State taxes, net of Federal income tax benefits ..................... (0.1%) (8.1%) (10.3) Officers' life insurance ........... 26.2% 4.1% 14.3 Other .............................. (.5) 0 0 ===== ===== ==== Effective income tax rate .......... (9.4%) (39.0%) 39.0% ===== ===== ==== F-9 The composition of the Company's deferred tax assets and liabilities is as follows:
FISCAL YEAR ENDED ------------------------ MARCH 2, MARCH 3, 2002 2001 ------- ------- (In thousands) Deferred tax assets: Capitalization of inventory costs ...................................... $ 1,261 $ 1,266 Accounts receivable .................................................... 76 76 Reserves not currently deductible for tax purposes ..................... 3,384 714 Net operating losses ................................................... 1,918 4,559 Other .................................................................. 2,689 3,174 ------- ------- Total deferred tax assets .............................................. 9,328 9,789 Deferred tax liability: Depreciation method and different estimated lives ...................... (1) (536) Other .................................................................. (504) (77) ------- ------- Total deferred tax liabilities ......................................... (505) (613) ------- ------- Net .................................................................... $ 8,823 $ 9,176 ======= ======= Current deferred tax asset ............................................. $ 6,514 $ 6,252 Long term deferred tax asset (net of non-current deferred tax liability) 2,309 2,924 ------- ------- Net .................................................................... $ 8,823 $ 9,176 ======= =======
At March 2, 2002 the Company had state net operating loss carry forwards resulting in a deferred tax asset of $2,000,000. These net operating losses expire beginning 2006. NOTE 4 - BANK CREDIT FACILITIES The Company has an unsecured revolving credit agreement with a bank for a line of credit not to exceed $20,000,000 through May 3, 2003. Interest on individual advances is payable quarterly at 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 3/8 of 1% per annum. There were no outstanding borrowings against this agreement at the end of the fiscal years March 2, 2002 and March 3, 2001. F-10 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. The Company is in compliance with all covenants as of March 2, 2002. Total interest charges incurred for the years ended March 2, 2002, March 3, 2001 and February 26, 2000, including amounts related to capital leases, were $302,000, $319,000 and $577,000, respectively, of which $14,000 and $40,000 were capitalized in fiscal 2000 and 1999, respectively, in connection with the construction of new facilities. There was no capitalized interest for fiscal 2001. In addition, the Company has a separate $10,000,000 credit facility with another bank available for the issuance of letters of credit for the purchase of merchandise. This agreement may be canceled at any time by either party. At March 2, 2002 and at March 3, 2001 the Company had $4,564,076 and $2,592,704, respectively, in outstanding letters of credit. NOTE 5 - OTHER INCOME Other income was recorded by the Company amounting to $6,289,000 as outlined below: Insurance recovery from employee theft ................ $3,000,000 Restitution from the employee relating to the theft ... 1,811,000 Gain on stock due demutualization ..................... 1,058,000 Reversal of closed store lease liability .............. 377,000 Other ................................................. 43,000 ---------- Total ................................................. $6,289,000 ========== NOTE 6 - STORE CLOSING COSTS During the third quarter of fiscal 2000, the Company recorded a store closing cost of $12.9 million relating to a plan to close five stores, including its Boston, Massachusetts store (which closed October 29, 2000), and an additional lease commitment cost associated with a previously closed store. The action was taken by the Company to enhance competitiveness, reduce expenses and to improve efficiencies. The Company anticipates other stores will close in the next twelve months. The charges and related remaining accruals consist of the following (in thousands):
Amount remaining Amount remaining Charges At March 3, 2001 At March 2, 2002 ------- ---------------- ---------------- Store closing costs: Lease commitments ............. $ 6,033 $1,077 $600 Impairment of property & equipment (non cash) .......... 6,417 -- -- Severance and other employee benefits ...................... 160 14 -- Other ......................... 325 342 83 ------- ------ ---- Total ......................... $12,935 $1,433 $683 ======= ====== ====
Lease commitment costs, including a termination charge, were incurred for contractual obligations that existed on two stores. F-11 An impairment charge was recorded where management's estimates indicated that projected operations yielded cumulative operating losses before depreciation and amortization, on both an undiscounted and discounted basis. The Company did not believe it could improve the profitability and expected cash flows to continue to be negative. The amount of impairment was measured on the basis of projected discounted operating income using a discount rate indicative of the Company's average cost of funds, before the effects of depreciation and amortization. As a result of this evaluation, the Company determined that the fixed assets could not be recovered. The costs incurred included the write-off of leasehold improvements and furniture and fixtures to their net realizable value. NOTE 7 - 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 accounts payable approximates their carrying values at March 2, 2002 and March 3, 2001 due to the short-term maturities of these instruments. NOTE 8 - 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. F-12 The following information on the Company's pension plan is provided: MARCH 2, MARCH 3, 2002 2001 ------- ------- (In thousands) CHANGE IN BENEFIT OBLIGATION: Net benefit obligation at beginning of year ...... $ 6,029 $ 5,195 Service cost ..................................... 532 510 Interest cost .................................... 424 385 Actuarial loss ................................... 85 183 Gross benefits paid .............................. (278) (244) ------- ------- Net benefit obligation at end of year ............ $ 6,792 $ 6,029 ======= ======= CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year ... $ 5,814 $ 5,684 Employer contributions ........................... 357 345 Gross benefits paid .............................. (278) (244) Actual return on plan assets ..................... (338) 29 ------- ------- Fair value of plan assets at end of year ......... $ 5,555 $ 5,814 ======= ======= Funded status at end of year ..................... $(1,237) $ (214) Unrecognized net actuarial loss (gain) ........... 737 (199) Unrecognized transition amount ................... -- (25) ------- ------- Accrued benefit costs ............................ $ (500) $ (438) ======= ======= Pension expenses includes the following components:
FISCAL YEAR ENDED ---------------------------------------- MARCH 2, MARCH 3, FEBRUARY 26, 2002 2001 2000 -------- -------- ------------ (IN THOUSANDS) COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost .................................. $ 532 $ 510 $ 437 Interest cost ................................. 424 385 356 Return on assets .............................. 338 (29) (603) Amortization of (gain) loss ................... (877) (504) 125 ----- ----- ----- Net periodic benefit cost ..................... $ 417 $ 362 $ 315 ===== ===== ===== WEIGHTED-AVERAGE ASSUMPTIONS USED: Discount rate ................................. 7.0% 7.25% 7.75% Rate of compensation increase ................. 4.5% 4.50% 4.50%
The expected long-term rate of return on plan assets was 8.5% for all years. F-13 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 during the fiscal years ended March 2, 2002 and March 3, 2001. However, profit-sharing contributions were made in the amounts of $18,900 for year ended February 26, 2000. NOTE 9 - COMMITMENTS a. LEASES - The Company has various operating leases for its retail stores, with terms expiring between 2002 and 2011. Under most lease agreements, the Company pays real estate taxes, maintenance and other operating expenses. Certain store leases also provide for additional contingent rentals based upon a percentage of sales in excess of certain minimum amounts. Future minimum lease payments at March 2, 2002 are as follows: OPERATING LEASES ------------ 2002 .................................................. $ 9,173,123 2003 .................................................. 7,901,100 2004 .................................................. 7,524,433 2005 .................................................. 7,527,975 2006 .................................................. 6,401,862 2007 and thereafter ................................... 29,288,784 ------------ Total minimum payments ................................ $ 67,817,277 ============ Rent expense for operating leases are as follows: FISCAL YEAR ENDED -------------------------------------------- MARCH 2, MARCH 3, FEBRUARY 26, 2002 2001 2000 -------- -------- -------- (IN THOUSANDS) Minimum rentals due ........... $ 9,341 $ 11,131 $ 10,477 Escalation rentals accrued .... 324 516 868 Contingent rentals ............ (20) 15 16 Sublease rentals .............. (360) (528) (512) -------- -------- -------- $ 9,285 $ 11,134 $ 10,849 ======== ======== ======== F-14 b. EMPLOYMENT AGREEMENT - The Company has an employment agreement with its General Merchandising Manager, expiring 2009, pursuant to which annual compensation of approximately $350,000 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. NOTE 10 - 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 11 - 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 1,500,000 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 Operations 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 (loss) and earnings per share would be as follows: 2001 2000 1999 ------- ------- ------ Net Income (loss) (in thousands) ......... ($2,507) ($8,892) $1,893 Net Income (loss) per share - basic ...... ($ .16) ($ .56) $ 0.12 Net Income (loss) per share - diluted .... ($ .16) ($ .56) $ 0.12 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 fiscal 1996. F-15 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 fiscal 1999: risk-free interest rate of 6.47 expected life 5 and 10 years, expected volatility of 35.38% and dividend yield 0%. There were no stock options granted in fiscal 2001 and 2000. 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. Stock option transactions are summarized below:
FISCAL YEAR ENDED ------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ------------------------------------------------------------------------------- MARCH 2, 2002 MARCH 3, 2001 FEBRUARY 26, 2000 ---------------------- ---------------------- ----------------------- WEIGHTED WEIGHTED WEIGHTED FISCAL AVERAGE FISCAL AVERAGE FISCAL AVERAGE 2001 EXERCISE 2000 EXERCISE 1999 EXERCISE FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE ------ -------- ------ -------- ------ --------- Outstanding beginning of year .............. 1,106 $ 7.24 1,184 $ 7.33 493 $ 10.01 Granted ........................ -- -- -- -- 724 5.63 Exercised ...................... (1) 5.62 -- -- 0 0.00 Cancelled ...................... (45) 5.63 (78) 8.64 (33) 9.98 - ------------------------------------------------------------------------------------------------------------------------- Outstanding, end of period .......... 1,060 $ 7.24 1,106 $ 7.24 1,184 $ 7.33 ========================================================================================================================= Options exerciseable at year end .... 786 $ 7.76 672 $ 8.19 550 $ 9.02 Weighted-average fair value of options granted during the year ... -- -- $ 2.36
The following table summarizes information about stock options outstanding at March 2, 2002: OPTIONS OUTSTANDING OPTIONS EXERCISABLE - -------------------------------------------------------- ------------------- WEIGHTED-AVERAGE NUMBER REMAINING NUMBER RANGE OF OUTSTANDING AT CONTRACTURAL EXERCISABLE AT EXERCISE PRICES MARCH 2, 2002 LIFE (YEARS) MARCH 2, 2002 - --------------- -------------- ---------------- -------------- 5.625 ........ 654,050 7.7 392,430 8.00 ......... 87,500 4.6 75,000 8.50 ......... 25,100 0.6 25,100 9.75 ......... 50,000 1.3 50,000 9.88 ......... 25,000 5.2 25,000 10.625 ........ 5,650 1.1 5,650 10.6875 ....... 200,000 6.6 200,000 11.50 ......... 12,500 0.1 12,500 --------- ------- 1,059,800 785,680 F-16 NOTE 12 - NET INCOME PER SHARE In accordance with SFAS 128, basic net income (loss) 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:
FISCAL 2001 FISCAL 2000 FISCAL 1999 ----------- ------------ ----------- BASIC NET INCOME PER SHARE: Net Income (loss) ..................... ($ 2,319) ($ 8,333) $ 2,224 Average shares outstanding ............ 15,741 15,950 16,351 Basic net income (loss) per share ..... ($ 0.15) ($ 0.52) $ 0.14 DILUTED NET INCOME PER SHARE: Net Income (loss) ..................... ($ 2,319) ($ 8,333) $ 2,224 Average shares outstanding ............ 15,741 15,950 16,351 Stock options ......................... 0 0 11 -------- ------- ------- Total average equivalent shares ....... 15,741 15,950 16,362 Diluted net income (loss) per share ... ($ 0.15) ($ 0.52) $ .14
Options to purchase 1,060,000, 1,106,000 and 367,000 shares of common stock at prices ranging from $5.625 to $10.6875 per share were outstanding in 2001, 2000 and 1999, respectively, but were not included in the computation of diluted net income (loss) per share because the exercise price of the options exceed the average market price and would have been antidilutive. NOTE 13 - RELATED PARTY TRANSACTIONS Included in the Statements of Operations are the expenses relating to a real estate capital lease with an officer for the Elmsford, New York store, which lease expired November 30, 1999 and which property is now occupied by the Company on a month-to-month basis. During fiscal year 2001 and 2000 the Company paid to Sy Syms $600,000 in fixed rent. The Company recorded depreciation and interest expenses associated with the capital lease in fiscal 1999 of $100 and $31, respectively. On April 2, 2001, the Company loaned the Marcy Syms Revocable Trust $800,000. The loan is evidenced by the Trust's ten-year Note which is guaranteed by Ms. Syms and is secured by a first priority mortgage on the real estate which Ms. Syms owns in Westchester County. The Note bears interest at the rate of 5.43% per annum (the then applicable federal long-term rate) payable annually. On January 10, 2002, an independent audit committee of the Board of Directors was established to review the potential acquisition of Stanley Blacker, Inc. a corporation owned by the Sy Syms Revocable Living Trust. This committee obtained an independent appraisal as to the fair market value of the business enterprise of Stanley Blacker, Inc. and on F-17 April 18, 2002, the Board of Directors approved the acquisition based on the independent committee's recommendation to acquire the assets of Stanley Blacker, Inc. The assets of Stanley Blacker, Inc. consisted substantially of trademarks and trade names licensed to third party manufacturers of clothing and accessories. The acquisition of such assets was consummated on May 1, 2002, for a purchase price consisting of $250,000 paid in cash, $250,000 paid by the issuance of 44,138 shares o the Company's Common Stock and the balance by the taking of the assets subject to a note payable to Fleet National Bank in the principal amount of $1,655,000 together with interest thereon of approximately $11,355.14, which note was paid in full by the Company. NOTE 14 - UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
QUARTER ---------------------------------------------------------- FIRST SECOND THIRD FOURTH -------- -------- -------- ------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED MARCH 2, 2002 Net sales ................................. $ 71,554 $ 65,319 $ 75,043 $75,828 Gross profit .............................. 29,470 22,474 29,819 26,818 Net income (loss) ......................... (777) (2,077) 425 110 Net income (loss) per share - basic ..... (0.05) (0.13) 0.03 0.01 Net income (loss) per share - diluted ... (0.05) (0.13) 0.17 0.01 QUARTER ---------------------------------------------------------- FIRST SECOND THIRD FOURTH -------- -------- -------- ------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED MARCH 3, 2001 Net sales ................................. $ 81,192 $ 74,621 $ 94,309 $92,194 Gross profit .............................. 31,317 26,725 33,417 35,428 Net income (loss) ......................... 144 (2,976) (7,699) 2,198 Net income (loss) per share - basic ..... 0.01 (0.19) (0.48) 0.14 Net income (loss) per share - diluted ... 0.01 (0.19) (0.48) 0.14
F-18 EX-10.45 3 e88864_ex10-45.txt FIFTH AMENDMENT FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT This FIFTH AMENDMENT is dated as of the 3rd day of May, 2002 and is by and between FLEET NATIONAL BANK having an office at 750 Walnut Avenue, Cranford, New Jersey 07016 (the "Bank"), and SYMS CORP., a New Jersey corporation having an address at One Syms Way, Secaucus, New Jersey 07094 (the "Borrower"). WITNESSETH: WHEREAS, the Borrower and the Bank have entered into a Revolving Credit Agreement dated as of December 1, 1993, as amended by that certain First Amendment to Revolving Credit Agreement dated as of November 24, 1997, as further amended by that certain Second Amendment to Revolving Credit Agreement dated as of May 27, 2000, as further amended by that certain Third Amendment to Revolving Credit Agreement dated as of November 25, 2000, and as further amended by that certain Fourth Amendment to Revolving Credit Agreement dated as of May 4, 2001 (as amended, the "Credit Agreement"); and WHEREAS, the Borrower and the Bank have agreed to amend certain terms of the Credit Agreement as more fully described herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: 1. Definitions. Except as otherwise defined herein, terms defined in the Credit Agreement shall have the same meaning when used herein. 2. Amendment of Credit Agreement. The Credit Agreement is hereby amended as follows (all Section references are to the corresponding Sections of the Credit Agreement): (a) The definition of "Base Rate" is deleted in its entirety. Each reference in this Agreement to "Base Rate" shall be deemed to be "Prime Rate." (b) The definition of "Commitment" which appears in Section 1.1 is amended to read as follows: "Commitment" shall mean $20,000,000, or such lower amount to which the Commitment shall be reduced by the Borrower in accordance with the terms hereof. Included within the Commitment is a $10,000,000 sublimit for commercial and standby letters of credit ("Letters of Credit"). All Letters of Credit shall expire no later than one year after the Maturity Date. No Letter of Credit shall expire more than 365 days from issuance. 1 (c) The definition of "Consolidated Rental Payments" which appears in Section 1.1 is amended to read as follows: "Consolidated Rental Payments" shall mean for any period, all rental payments in respect of operating leases, and shall also include all payments under any other leases including but not limited to common area maintenance charges and real estate taxes, paid in cash by Borrower and its Consolidated Subsidiaries, each as determined in accordance with GAAP. (d) The definition of "Maturity Date" which appears in Section 1.1 is amended to read as follows: "Maturity Date" shall mean May 2, 2003. (e) The following new definitions are hereby added to Section 1.1: "Prime Rate" means the variable per annum rate of interest so designated from time to time by the Bank as its prime rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. (f) Section 2.5 (a) is amended to read as follows: (a) Except as provided in subsection (b) below, each Note shall bear interest from the date thereof on the outstanding daily principal balance thereunder at a fluctuating rate per annum equal to the Floating Rate. As used herein, the term "Floating Rate" shall mean the greater of (i) the Prime Rate minus: (x) .50%, if the Fixed Charge Coverage Ratio is not less than 1.20 to 1.0 but not greater then 1.35 to 1.0; (y) .625%, if the Fixed Charge Coverage Ratio is not less than 1.36 to 1.0 but not greater than 1.50 to 1.0; and (z) .75%, if the Fixed Charge Coverage Ratio is greater than or equal to 1.51 to 1.0, or (ii) the Federal Funds Rate plus one and one-quarter of one percent (1 1/4%). Each change in the Prime Rate or the Federal Funds Rate shall be effective as of the opening of business on the day on which such change shall be announced an be effective. (g) Section 2(b)(i) is amended by deleting the first sentence and replacing it with the following: (i) A rate per annum (the "LIBOR Rate") equal to: (x) 1.00% plus the Base LIBOR Rate, if the Fixed Charge Coverage Ratio is not less than 1.20 to 1.0 but not greater than 1.35 to 1.0; (y) .875%, plus the Base LIBOR Rate, if the Fixed Charge Coverage Ratio is not less than 1.36 to 1.0 but not greater than 1.50 to 1.0; and (z) .75% plus the Base LIBOR Rate, if the Fixed Charge Coverage Ratio is greater than 1.51 to 1.0. (h) Section 2.5(b) (ii) is deleted in its entirety and all references to "Secondary CD Based Rate" and "Reserve Adjusted Secondary CD Rate" throughout the Credit Agreement shall be eliminated. 2 (i) Section 2.9 is amended to read as follows: 2.9 Commitment Fee. The Borrower agrees to pay to the Bank a commitment fee on the average daily unused portion of the applicable Commitment from time to time, from the date hereof until the termination of the Commitment as provided in Section 2.10 hereof, at a rate per annum as follows: (x) .375%, if the Fixed Charge Coverage Ratio is not less than 1.20 to 1.0 but not greater than 1.35 to 1.0; (y) .25%, if the Fixed Charge Coverage Ratio is not less than 1.36 to 1.0 but not greater than 1.50 to 1.0; and (z) .125% if the Fixed Charge Coverage Ratio is greater than 1.51 to 1.0. Such commitment fee shall be payable, in arrears, on the first Business Day of each calendar quarter commencing July 1, 2002, and on the first Business Day of each October, January, April and July thereafter. The commitment fee shall be computed on the basis of the actual number of days elapsed over a year of 360 days (having 12 months of 30 days each). (j) Article II is amended by adding the following new sections at the end thereof: 2.14 Letters of Credit. The Borrower agrees to pay to the Bank a letter of credit fee for each letter of credit issued by the Bank at the request of Borrower as follows: (a) 1.00%, if the Fixed Charge Coverage Ratio is not less than 1.20 to 1.0 but not greater then 1.35 to 1.0; (b) .875%, if the Fixed Charge Coverage Ratio is not less than 1.36 to 1.0 but not greater than 1.50 to 1.0; and (c) .75%, if the Fixed Charge Coverage Ratio is greater than or equal to 1.51 to 1.0. 2.15 Application of Payments. All payments shall be applied first to the payment of all fees, expenses and other amounts due to the Bank (excluding principal, and interest, and the balance on account of outstanding principal; provided, however, that after default, payments will be applied to the obligations of Borrower to Bank as Bank determines in its sole discretion. 2.16 Payment of Fees and Expenses. Borrower shall pay on demand all expenses of Bank in connection with the preparation, administration, default, collection, waiver or amendment of loan terms, or in connection with Bank's exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associates with travel or other costs relating to any appraisals or examinations conducted in connection with the loan or any collateral therefor and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder (including the Default Rate) and be an obligation secured by any collateral. 2.17 Interest Computation. All computations of interest shall be made on the basis of a three hundred sixty (360) day year and the actual number of days elapsed. 2.18 Default Rate. Upon an Event of Default (whether or not the Bank has accelerated payment of the Revolving Credit Note), the Borrower's right to select pricing options shall cease, and the obligations shall bear interest, payable on demand, at a rate, per annum, determined on a daily basis, of three (3%) percent in excess of the Prime Rate, but in no event more than the highest rate permitted by the applicable usury law in respect of the Borrower, until the unpaid balance of the principal sum and interest shall have been paid in full. 2.19 Replacement of Promissory Note of Other Documents. Upon receipt of an affidavit of an officer of the Bank as to the loss, theft, destruction or mutilation of the Revolving Credit Note or any other security document which is not of public record, and in the case of any such loss, theft, destruction or mutilation upon surrender and cancellation or such note or other document, Borrower will issue, in lieu thereof, a replacement Revolving Credit Note or other security document in the same principal amount thereof and otherwise of like tenor. 3 2.20 Late Fee. If the entire amount of any required principal and/or interest is not paid in full within ten (10) days after the same is due, Borrower shall pay to Bank a late fee equal to five percent (5%) of the required payment. 2.21 Interest Limitation. All agreements between Borrower and Bank are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agree to be paid to Bank for the use or the forbearance of the indebtedness evidence hereby exceed the maximum permissible under applicable law. As used herein, the term "applicable law" shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then the Revolving Credit Note shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of Borrower and Bank in the execution, delivery and acceptance of the Revolving Credit Note to contract in strict compliance with the laws of the State of New Jersey from time-to-time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Loan Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever Bank should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest. This provision shall control every other provision of all agreements between Borrower and Bank. 2.22 Use of Proceeds (Regulation U). No portion of the proceeds of the loan shall be used, in whole or in part, for the purpose or purchasing or carrying any "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System. (k) Section 6.12 is amended to read as follows: 6.12 Capital Expenditures. The Borrower shall not permit the sum of Capital Expenditures plus Dividends to exceed $10,000,000 at the end of its fiscal year. (l) Section 6.21 is hereby amended as follows: 6.21 Notwithstanding the foregoing, during a single period comprised of any 30 consecutive days prior to the Maturity Date, there shall be no advances outstanding hereunder. (m) Article X is hereby amended by adding the following Sections at the end thereof: 10.10 Pledge to the Federal Reserve. The Bank may at any time pledge all or any portion of its rights under the Loan Documents including any portion of the Note to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement thereof shall release the Bank from its obligations under any of the Loan Documents. 10.11 Sale of Loan. The Bank shall have the unrestricted right at any time or from time to time, and without Borrower's consent, to assign all or any portion of its rights and obligations hereunder to one or more banks or other financial institutions (each, an "Assignee"), and Borrower agrees that it shall execute or cause to be executed such documents, including, without limitation, amendments to 4 the Agreement and to any other documents, instruments and agreements executed in connection herewith as Bank shall deem necessary to effect the foregoing. In addition, at the request of Bank and any such Assignee, Borrower shall issue one or more new promissory notes, as applicable, to any such Assignee and, if Bank has retained any of its rights and obligations hereunder following such assignment, to Bank, which new promissory notes shall be issued in replacement of, but not in discharge of, the liability evidenced by the promissory note held by Bank prior to such assignment and shall reflect the amount of the respective commitments and loans held by such Assignee and Bank after giving effect to such assignment. Upon the execution and delivery of appropriate assignment documentation, amendments and any other documentation required by Bank in connection with such assignments, and the payment by Assignee of the purchase price agreed to by Bank and such Assignee, such Assignee shall be a party to the Agreement and shall have all of the rights and obligations of Bank hereunder (and under any and all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by Bank pursuant to the assignment documentation between Bank and such Assignee, and Bank shall be released from its obligations hereunder and thereunder to a corresponding extent. The Bank may furnish any information concerning the Borrower to a prospective Assignee(s), provided that the Bank shall require such prospective Assignee to agree in writing to maintain the confidentiality of such information. 10.12 Integration Clause. The Loan Documents are intended by the parties as the final, complete and exclusive statement of the transactions evidenced by the Credit Agreement and the other Loan Documents. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superseded by the Credit Agreement and the other Loan Documents, and no party is relying upon any promise, agreement or understanding not set forth in the Credit Agreement and the other Loan Documents. The Credit Agreement may not be amended or modified except by a written instrument describing such amendment or modification executed by Borrower and Bank. 10.13 Setoff. The Borrower hereby grants to the Bank a lien, security interest and right of setoff as security for all liabilities and obligations to the Bank, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of the Bank or any entity under the control of FleetBoston Financial Corporation and its successors and assigns, or in transit to any of them (collectively, the "Deposits"). In addition to the Bank's common law setoff rights and not in limitation thereof, at any time, without demand or notice, the Bank may set off the same or any part thereof and apply the same to any liability or obligation of the Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. Such right of debit may be exercised by the Bank against the Borrower or against any bankruptcy trustee, debtor-in-possession, assignee for the benefit of creditors, receiver, or execution, judgment, or attachment creditor of the Borrower, or against anyone else claiming through or against the Borrower. Furthermore, in the event any attachment, trustee process, garnishment, or other levy or lien (collectively a "Garnishment") issues against any Deposits (the "Liened Funds"), then the Bank shall have the unconditional right, without prior notice to the Borrower, to debit any such Liened Funds immediately prior to giving effect to such Garnishment and apply the same to any indebtedness of the Borrower to the Bank under the Loan Documents, whether or not the same has matured. In addition, without limiting any of the foregoing rights, during the existence of an Event of Default (or any event which with the passage of time, giving of notice, or both, would constitute an Event of Default), the Bank shall have the right, without notice, to "freeze" or segregate any or all of the Deposits such that the Borrower may not access, control, or draw upon them. 5 10.14 Collateral Pledge. Bank may transfer Collateral into its name or that of its nominee and may receive the income and any distributions thereon and hold the same as Collateral for the Obligations, or apply the same to any Obligation, whether or not a Default or any Event of Default has occurred. (n) Section 10.1 shall be amended to by deleting "Wolff & Samson" and the address therefor and replacing it with: "Emmet, Marvin & Martin, LLP, 177 Madison Avenue, Morristown, New Jersey; Attention: Elyse D. Beidner, Esq." 3. Substitute Note. Concurrently herewith, the Borrower shall execute and deliver to the Bank a fourth substitute revolving credit note (the "Substitute Note") which shall supersede, and be in substitution for, the third substitute revolving credit note dated as of May 4, 2001 (the "Prior Note") executed and delivered by the Borrower to the Bank. It is expressly agreed that the execution and delivery of such Substitute Note shall not evidence or represent a refinancing, repayment, accord and satisfaction or novation of the indebtedness evidenced by the Prior Note. As soon as practicable following its receipt of the Substitute Note, the Bank will return the Prior Note to the Borrower for cancellation. 4. Representations and Warranties. In order to induce the Bank to enter into this Agreement and amend the Credit Agreement as provided herein, the Borrower hereby represents and warrants to the Bank that: (a) All of the representations and warranties of the Borrower set forth in the Credit Agreement are true, complete and correct in all material respects on and as of the date hereof with the same force and effect as if made on and as of the date hereof and as if set forth at length herein (except that representations and warranties which are expressly stated to be as of a certain date are true, complete and correct in all material respects as of such certain date). (b) No Default or Event of Default presently exists and is continuing on and as of the date hereof. (c) Since the date of the Borrower's most recent financial statements delivered to the Bank, no material adverse change has occurred in the business, assets, liabilities, financial condition or results of operations of the Borrower, and no event has occurred or failed to occur which has had, or reasonably may be expected to have, a material adverse effect on the business, assets, liabilities, financial condition or results of operations of the Borrower. (d) The Borrower has full power and authority to execute, deliver and perform any action or step which may be necessary to carry out the terms of this Agreement and all other agreements, documents and instruments executed and delivered by the Borrower to the Bank concurrently herewith or in connection herewith (collectively, the "Amendment Documents"); each Amendment Document to which the Borrower is a party has been duly executed and delivered by the Borrower and is the 6 legal, valid and binding obligation of the. Borrower enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency, general equity principles or other similar laws affecting the enforcement of creditor's rights generally. (e) The execution, delivery and performance of the Amendment Documents will not (i) violate any provision of any existing law, statute, rule, regulation or ordinance (ii) conflict with, result in a breach of or constitute a default under (a) any order, judgment, award or decree of any court, governmental authority, bureau or agency, or (b) any mortgage, indenture, lease, contract or other agreement or undertaking to which the Borrower is a party or by which the Borrower or any of its properties or asset may be bound, or (iii) result in the creation or imposition of any lien or other encumbrance upon or with respect to any property or asset now owned or hereafter acquired by the Borrower. (f) Except for such filing as may be required under the Securities Exchange Act of 1934, as amended, which filing (if required) shall be made by the Borrower as and when required, no consent, license, permit, approval or authorization of, exemption by, notice to, report to, or registration, filing or declaration with any person is required in connection with the execution, delivery, performance or validity of the Amendment Documents or the transactions contemplated thereby. 5. Bank Costs. The Borrower agrees to reimburse the Bank for all reasonable costs and expenses, including reasonable counsel fees and disbursements, incurred by the Bank in connection with the Amendment Documents and the transactions contemplated therein. If such amounts are not paid within ten days of the Bank's request therefor, the Borrower hereby authorizes the Bank to charge the Borrower's account for the amount of such fees and expenses. 6. No Change. Except as expressly set forth herein, all of the terms and provisions of the Credit Agreement shall continue in full force and effect and are hereby ratified and confirmed in all respects. 7. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts and all such counterparts taken together shall constitute one and the same instrument. 8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey. IN WITNESS WHEREOF, the Borrower and the Bank have executed this Agreement as of the date above written. FLEET NATIONAL BANK By: /s/ WILLIAM DINICOLA ---------------------------- Name: William DiNicola Title: Senior Vice President 7 SYMS CORP. Attest: - ---------------------- By: /s/ ANTONE F. MOREIRA --------------------------- Name: Antone F. Moreira Title: Vice President & CFO 8 FOURTH SUBSTITUTE REVOLVING CREDIT NOTE $20,000,000 As of May 3, 2002 FOR VALUE RECEIVED, the undersigned, SYMS CORP, a New Jersey corporation (the "Borrower"), hereby unconditionally promises to pay on or before the Maturity Date, to the order of FLEET NATIONAL BANK, a national banking association (successor by merger to Summit Bank) (the "Bank"), at the office of the Bank located at 750 Walnut Avenue, Cranford, New Jersey, 07016 or at such other location as the Bank shall designate, in lawful money of the United States of America and in immediately available funds, the principal amount of the lesser of (i) $20,000,000 or (ii) so much thereof as shall have been advanced (the "Advances") by the Bank to the Borrower pursuant to that certain Revolving Credit Agreement between the Borrower and the Bank dated December 1, 1993, as amended (as amended, the "Credit Agreement"). Terms defined in the Credit Agreement shall have the same meaning when used herein. All of the terms and provisions of the Credit Agreement are incorporated herein by reference as if set forth at length herein. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time as hereinafter provided. Except as hereinafter provided, the unpaid principal amount hereof shall bear interest commencing with the date hereof at a fluctuating rate per annum equal to the Prime Rate. The Borrower may elect to have all or any portion of the outstanding principal balance of this Note, in an amount equal to or greater than $500,000 (and, if greater, in additional increments of $100,000), bear interest at the LIBOR Rate for any Interest Period, to the extent and in the manner provided in the Credit Agreement. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed and, except for that portion of this Note bearing interest at a Fixed Rate, shall be adjusted automatically as of the opening of business on each day on which any change in the Base Rate or the Federal Funds Rate shall be announced and be effective. Except for that portion of this Note bearing interest at a Fixed Rate, installments of accrued interest only shall be due and payable hereon quarterly, in arrears, with the first such installment being due and payable on the first Business Day of the first calendar quarter following the date hereof, and the remainder of such quarterly installments of interest being due and payable on the first Business Day of each and every calendar quarter thereafter until this Note shall have been paid in full. The Borrower shall pay (i) the outstanding principal amount of each Fixed Rate Loan on each Fixed Rate Interest Payment Date applicable thereto and (ii) all unpaid interest accrued on such Fixed Rate Loan on the first Business Day of each calendar quarter following the making of such Fixed Rate Loan and on the Fixed Rate Interest Payment Date; provided, however, that if any Fixed Rate Interest Payment Date shall not be a Business Day, then such payment shall be made on the next succeeding Business Day, unless, with respect to that portion of this Note which bears interest at a LIBOR Rate, the next such succeeding Business Day falls in the next calendar month, in which case such payment shall be made in the next preceding Business Day. All Advances made by the Bank to the Borrower hereunder may be noted by the Bank on any schedule or other record annexed hereto or otherwise so designated, and the Bank is authorized to make such notations, which shall be prima facia evidence of the principal amount outstanding hereunder at any time; provided, however, that any failure to make such a notation (or any error in notation) shall not limit or otherwise affect the obligation of the Borrower hereunder which are and shall remain absolute and unconditional. The Borrower agrees to pay to the Bank the commitment fee provided for in the Credit Agreement. The Borrower shall pay to the Bank a late charge of five percent (5%) of any amount due hereunder or under the Credit Agreement if such amount is not received by the Bank within ten calendar days after the date it is due; provided, however, that such late charge shall not be less than $25 nor more than $2,500. The acceptance by the Bank of payment of the late charge shall not be considered an election of remedies or waiver by the Bank of any of its rights or remedies. The Bank may declare this Note to be immediately due and payable if any of the following events shall have occurred and be continuing: (1) Failure by the Borrower to (i) make any payment of principal on this Note or under the Credit Agreement on any date when due or (ii) make any payment of interest or commitment fee payable hereunder or under the Credit Agreement within 15 days from any date when due; or (2) An Event of Default shall have occurred under the Credit Agreement. Upon any nonpayment of any amount owing under this Note at its stated or accelerated maturity, the Bank may, in addition to such other and further rights and remedies as provided by law or under the Credit Agreement, (i) collect interest on such overdue amount from the date of such maturity until paid at a rate per annum equal to the Prime Rate plus three (3%) percent, (ii) setoff such amount against any deposit account maintained in the Bank by the Borrower, and such right of setoff shall be deemed to have been exercised immediately upon such stated or accelerated maturity even though such setoff is not noted on the Bank's records until a later time and (iii) hold as security any property heretofore or hereafter delivered into the custody, control or possession of the Bank or any entity acting as agent for the Bank (other than property contained in any safe deposit box maintained in the Bank) by any person liable for the payment of this Note. 2 This Note is being issued in substitution for that certain Third Substitute Revolving Credit Note dated as of May 4, 2001 in the maximum principal amount of $30,000,000 executed and delivered by the Borrower in favor of the Bank (the "Prior Note"). The execution and delivery of this Note shall not evidence or represent a refinancing, repayment, accord and satisfaction or novation of the Prior Note or the indebtedness evidenced thereby. This Note may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. Should the indebtedness represented by this Note or any part hereof be collected at law or in equity, or in bankruptcy, receivership, or any other court proceeding, or should this Note be placed in the hands of attorneys for collection upon default, the Borrower agrees to pay, in addition to the principal and interest due and payable hereon, all reasonable costs of collecting or attempting to collect this Note, including reasonable attorneys' fees and expenses. This Note shall be and remain in full force and effect and in no way impaired until the actual payment thereof to the Bank, its successors or assigns. Anything herein to the contrary notwithstanding, the obligations of the Borrower under this Note shall be subject to the limitation that payments of interest shall not be required to the extent that receipt of any such payment by the Bank would be contrary to provisions of law applicable to the Bank limiting the maximum rate of interest which may be charged or collected by the Bank. The Borrower and all endorsers and guarantors of this Note hereby waive presentment, demand for payment, protest and notice of dishonor of this Note. This Note is binding upon the Borrower and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. This Note and the rights and obligations of the parties hereto shall be subject to and governed by the laws of the State of New Jersey. IN WITNESS WHEREOF, the undersigned has caused this Third Substitute Revolving Credit Note to be duly executed by its authorized officers, as of the day and year above written. ATTEST: SYMS CORP. By: By: /s/ ANTONE F. MOREIRA --------------------------- --------------------------- Name: Name: Antone F. Moreira Title: Title: Vice President & CFO 3 EX-10.46 4 e88864_ex10-46.txt AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 1, 2002, between STANLEY BLACKER, INC., a Pennsylvania corporation ("Seller"), and SYMS CORP, a New Jersey corporation ("Buyer"). RECITALS: WHEREAS, Seller is an apparel and accessories designer company whose business is the licensing of its copyrights and trademarks to manufacturers for receipt of royalty payments in exchange therefor (the "Seller Business"); WHEREAS, Seller desires to transfer all of its assets to Buyer, and Buyer desires to purchase such assets; WHEREAS, to effect such transfer, the parties desire that Seller will transfer and assign all of its assets and certain of its liabilities comprising the Seller Business, including certain license agreements, to Buyer in exchange for consideration specified herein; and WHEREAS, the parties to this Agreement intend that the transactions hereunder will qualify as a reorganization within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"). NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants hereinafter set forth, Seller and Buyer hereby agree as follows: ARTICLE I. DEFINITIONS Section 1.1. Certain Defined Terms. As used in this Agreement, the following terms have the following meanings: "Accounts Receivable" means all accounts and notes receivable of Seller existing on the Closing Date. "Action" means any claim, action, suit, arbitration or proceeding by or before any Governmental Authority or arbitrator. "Affiliate" means, when used with respect to a specified Person, another Person that, either directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. "Assumed Contracts" has the meaning specified in Section 2.1(a). "Assumed Liabilities" has the meaning specified in Section 2.3. "Balance Sheet Date" has the meaning specified in Section 3.6. "Blumenkranz Infringement" has the meaning specified in Section 2.1(e). "Business Day" means any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in the State of New York. "Closing" has the meaning specified in Section 2.6. "Closing Date" has the meaning specified in Section 2.6. "Code" has the meaning specified in the preamble of this Agreement. "Disclosure Schedules" means the Disclosure Schedules delivered to Buyer by Seller pursuant to this Agreement. "Employee Benefit Plan" means any "plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. "Encumbrance" means any security interest, pledge, mortgage, lien, charge, adverse claim of ownership or use or other encumbrance of any kind. "Environmental Law" means any Law relating to pollution, natural resources or protection of the environment. "Excluded Assets" has the meaning specified in Section 2.2. "Excluded Liabilities" has the meaning specified in Section 2.4. "Fleet Debt" has the meaning specified in Section 2.5. "Governmental Authority" means any United States federal, state or local government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal or judicial or arbitral body. "Hazardous Materials" means any chemical, substance or waste regulated or identified as toxic or hazardous under any Environmental Law or petroleum, including crude oil or any fraction, or natural gas, including liquids and synthetic gas usable for fuel. "Intellectual Property" means all of the following that are owned or used in the operations of the Seller Business or relate to the Seller Assets: (i) trademarks and service marks (registered or unregistered), trade dress, trade names and other names and slogans embodying the Seller Business or product goodwill or indications of origin, all applications or registrations in any jurisdiction pertaining to the foregoing and all goodwill associated therewith, including without limitation, the trade name "Stanley Blacker"; (ii) patents, patentable inventions, discoveries, improvements, ideas, know-how, formula methodology, processes, technology and computer programs, software and databases (including source code, object code, development -2- documentation, programming tools, drawings, specifications and data) and all applications or registrations in any jurisdiction pertaining to the foregoing, including all reissues, continuations, divisions, continuations-in-art, renewals or extensions thereof; (iii) trade secrets, including confidential and other non-public information, and the right in any jurisdiction to limit the use or disclosure thereof; (iv) copyrights (registered or unregistered) in writings, designs, mask works or other works, and registrations or applications for registration of copyrights in any jurisdiction; (v) Internet web sites, domain names and registrations or applications for registration thereof; (vi) licenses, immunities, covenants not to sue and the like relating to any of the foregoing; (vii) books and records describing or used in connection with any of the foregoing; and (viii) claims or causes of action arising out of or related to infringement or misappropriation of any of the foregoing. "Law" means any United States federal, state, local statute, law, ordinance, regulation, rule, code, order or rule of common law. "Licenses" has the meaning set forth in Section 3.11 and shall include those Licenses set forth on Schedule 3.11. "Material Adverse Effect" means any change, circumstance, or effect that is materially adverse to the business, assets, condition (financial or otherwise) or results of operations of Seller or the Seller Business as it is currently being conducted; provided, however, that any adverse change, circumstance or effect that is primarily caused by conditions affecting the United States economy as a whole shall not be taken into account when determining if such change, circumstance, or effect is a Material Adverse Effect. "Note" has the meaning specified in Section 2.5. "Permitted Encumbrances" means such of the following as to which no notice has been received or enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (i) liens for taxes, assessments and governmental charges or levies not yet due and payable or the validity of which is being contested in good faith; (ii) Encumbrances that arise by operation of law, such as materialmen's, mechanics', workmen's, repairmen's, warehousemen's and carrier's liens and other similar liens arising in the ordinary course of the Seller Business; (iii) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; (iv) the Encumbrances listed on Schedule 1.1; (v) with respect to the Assumed Contracts, restrictions imposed under the terms thereof; and (vi) Encumbrances which, individually or in the aggregate, do not detract from the value of the property subject thereto in any material respect and do not impair the operations of the Seller Business or materially adversely affect the Seller Assets. "Person" means any individual, partnership, firm, corporation, association, trust, limited liability company, unincorporated organization, Governmental Authority or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. "Securities Act" means the Securities Act of 1933, as amended. -3- "Seller Assets" has the meaning specified in Section 2.1. "Seller Business" has the meaning specified in the preamble of this Agreement. "Seller Software" means all software currently used in connection with the Seller Business, including: (i) the object code, or machine-readable form, of such software; (ii) the password unprotected interpretive code or source code, or human readable form, of such software, including, but not limited to, all source files, uncompiled code, graphics, audio source files, instructions, control logic, flow charts, internal documentation, designs, drawings, prints, technical data and such other documentation as is necessary to recreate, modify or enhance the software or any portion thereof; (iii) all materials provided in connection with such software, including but not limited to, all diskettes, tapes and print informational or instructional materials relating to such software; and (iv) all copies of any of the foregoing in the possession or control of Seller. "Shares" has the meaning specified in Section 2.5. "Tax" or "Taxes" means all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severance, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions. "Tax Return" means all federal, state, local and foreign returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes, including any amendments thereto. Section 1.2. Other Definitional Provisions. Unless the context requires otherwise, references to "Articles" and "Sections" are to the Articles or Sections of this Agreement, and references to "Exhibits" and "Schedules" are to the Exhibits and Schedules annexed hereto. Any of the terms defined in this Article I may, unless the context requires otherwise, be used in the singular or the plural depending on the reference. Wherever used herein, the masculine pronoun shall include the feminine and the neuter, as appropriate in the context. With respect to any matter or thing, "including" or "includes" means including but not limited to such matter or thing. ARTICLE II. PURCHASE AND SALE OF ASSETS Section 2.1. Transfer of Assets to Buyer. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall transfer, convey, assign and deliver to Buyer, and Buyer shall accept from Seller, free and clear of any Encumbrances, other than Permitted Encumbrances, all of Seller's right, title and interest in and to all of the assets of Seller, tangible or intangible, related to and used in the Seller Business, as they exist as of the Closing Date, -4- together with all accrued benefits and rights pertaining thereto, including all of the following assets (collectively, the "Seller Assets"): (a) all furniture, office and computer equipment and other tangible personal property in each case used in the operation of the Seller Business (other than those items disposed of in the ordinary course of business since the Balance Sheet Date); (b) all of Seller's interest in and to all of the contracts related to the Seller Business (the "Assumed Contracts"), a complete list of such Assumed Contracts being set forth on Schedule 2.1(b); (c) all Accounts Receivable, deposits made under the Assumed Contracts, prepaid expenses and other receivables arising out of the Seller Business and outstanding as of the Closing Date; (d) all Intellectual Property of the Seller; (e) all claims, demands, causes of action, judgments and decrees in favor of Seller, including any and all claims and causes of action with respect to the domain name (stanleyblacker.com) registered in the name of Adam Blumenkranz with register.com (the "Blumenkranz Infringement"); (f) all books of account, financial, business and operational records relating to the Seller Business, including customer and supplier lists, accounts and records, forms and office supplies, advertising and promotional literature, price lists, records of employees of Seller, and manuals in each case relating to the Seller Business; (g) the right to receive and retain mail, accounts receivable payments and other communications relating to the Seller Business; (h) the right to bill and receive payment for services performed by the Seller but unbilled or unpaid as of the Closing; (i) to the extent transferable, all telephone numbers (e.g., toll free numbers), fax numbers, Internet addresses and similar numbers or addresses related to the Seller Business; and (j) all other assets, properties, and rights of every kind used in the Seller Business, on the Closing Date, known or unknown, fixed or unfixed, accrued, absolute, contingent or otherwise, whether or not specifically referred to in this Agreement. Section 2.2. Excluded Assets. Notwithstanding any other provision of this Agreement, the term "Seller Assets" shall not include, and Buyer shall not acquire hereunder (a) any cash (other than deposits made under the Assumed Contracts), cash equivalents, prepaid taxes, securities, certificates of deposit and other investments, (b) any corporate, stock and organizational books or records of Seller, (c) any claim or cause of action with respect to monies -5- owed to Seller by Adam Blumenkranz and (d) any books, records and other documentation relating to any of the Excluded Liabilities (collectively, the "Excluded Assets"). Section 2.3. Liabilities and Contracts Assumed by Buyer. Subject to the terms and conditions of this Agreement, at the Closing, Buyer shall assume and become responsible to pay, perform and discharge as if the Seller Business had been operated by Buyer from the commencement thereof and had never been owned by Seller, all of the debts, obligations and liabilities arising out of or relating to the Assumed Contracts, whether known or unknown, fixed or unfixed, accrued, absolute, contingent or otherwise whether existing on the Closing Date or arising at any time or arising theretofore or thereafter, and (except for pending or, to the knowledge of Seller, threatened Actions, all of which are disclosed on Schedule 3.13) whether or not such debts, obligations and liabilities shall have been disclosed herein or reflected on the books and records of the Seller, including the following debts, obligations, and liabilities of Seller (collectively, the "Assumed Liabilities"): (a) all debts, obligations and liabilities with respect to any Assumed Contract; and (b) all accounts payable under the Assumed Contracts. Upon assumption by Buyer of the Assumed Liabilities, Buyer shall be entitled to all of Seller's rights and benefits thereunder, and Buyer shall relieve Seller of its obligations to perform the same. Section 2.4. Retained Liabilities and Obligations. Anything in this Agreement to the contrary notwithstanding, Seller shall be responsible for all of the liabilities and obligations not hereby expressly assumed by Buyer and Buyer shall not assume, or in any way be liable or responsible for, any liabilities or obligations of Seller that are not expressly assumed by Buyer under Section 2.3 hereof (the "Excluded Liabilities"). Without limiting the generality of the foregoing, the Excluded Liabilities shall include: (A) any liability or obligation under contracts or other agreements to which Seller is a party or by or to which it or any of its assets, properties or rights are bound or subject but which are not Assumed Contracts; (B) any liability or obligation arising out of the employment by Seller or any of its Affiliates of any employees, whether before or after the Closing Date, other than any such employment liability or obligation which relates to the employees of the Seller Business (excluding any such liability relating to the employee benefit plans described in clause (F) below, or any severance obligation in respect of any employee of Seller terminated in connection with the transactions contemplated by this Agreement); (C) any liability or obligation of Seller owing to any stockholder, subsidiary or Affiliate thereof; (D) any liabilities related to (i) Taxes of the Seller, (ii) Taxes attributable to the transfer of the Seller Assets pursuant to this Agreement, (iii) Taxes of any person other than Buyer pursuant to an agreement or otherwise and (iv) any Taxes for which Buyer may be liable under Treas. Reg. ss. 1.1502-6 or similar provisions of state or foreign law; (E) any liability or obligation arising under any Environmental Law attributable to or incurred as a result of any acts, omissions, or conditions first occurring or in existence as of or prior to the Closing Date, including, but not limited to, any liability or obligation with respect to the generation, release, handling, discharge, treatment, storage, disposal, or presence of Hazardous Materials; (F) except -6- with respect to any contribution obligations directly related to any Transferred Employee's period of coverage under or participation in any 401(k) plan, any liability or obligation of Seller or any of its Affiliates under any and all employee benefit arrangements or practices providing retirement benefits, stock options, stock purchase rights or, in connection with the transactions contemplated by this Agreement, severance; (G) any obligations or liabilities in respect of written employment agreements relating to the employment of any employee of Seller (with the exception of contracts for the engagement of independent contractors); (H) any liability, obligation or debt of Seller with respect to any Action (i) listed on Schedule 3.13 or (ii)(a) pending or threatened against the Seller, or any of its Affiliates as of the Closing Date and (b) not listed on Schedule 3.13; and (I) liabilities exclusively arising out of or related to any of the Excluded Assets. Section 2.5. Consideration for Seller Assets. In exchange for the transfer by Seller to Buyer of the Seller Assets, Buyer shall pay to Seller consideration consisting of (i) $250,000 in cash (the "Cash Portion"), (ii) 44,138 shares of common stock, par value $.05 per share, of Buyer (the "Shares") and (iii) the taking by Buyer of the Seller Assets subject to a master advance note, dated May 2000, issued by Seller to Summit Bank, predecessor in interest to Fleet National Bank, in the original principal amount of $1,675,000.05 (the "Note" and together with the Cash Portion and the Shares, the "Purchase Price"). The Purchase Price shall be paid at the Closing as follows: (a) Buyer shall pay the Cash Portion by wire transfer of immediately available funds to an account designated by Seller; (b) Subject to Article IX, Buyer shall deliver to Seller a certificate or certificates representing the Shares issued to Seller; and (c) Buyer shall pay the outstanding principal, together with accrued and unpaid interest thereon as of the Closing Date, of the Note (the "Fleet Debt") by wire transfer of immediately available funds to an account designated by the holder thereof. Section 2.6. Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m., New York time, on the date hereof (the "Closing Date") at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104. Section 2.7. Subsequent Documentation. 1. Seller shall, at any time and from time to time after the Closing Date, upon the reasonable request of Buyer and at the expense of Seller, do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further deeds, assignments, transfers and conveyances as may be required for the better assigning, transferring, granting, conveying and confirming to Buyer or its successors and assigns, or for aiding and assisting in collecting and reducing to possession, any or all of the Seller Assets. -7- (b) Buyer shall, at any time and from time to time after the Closing Date, upon the reasonable request of Seller and at the expense of Buyer, do, execute, acknowledge and deliver, or cause to be done, executed acknowledged and delivered, all such further acknowledgements and instruments of assumption as may be required for the better assumption and confirming to Seller or its successors and assigns, or for aiding and assisting in the release of Seller of, any or all of the Assumed Liabilities and the Fleet Debt. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer as follows: Section 3.1. Corporate Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of the Commonwealth of Pennsylvania, and has all requisite corporate power and authority to own its properties and assets and to conduct the Seller Business as it has been previously conducted. Copies of the Certificate or Articles of Incorporation and By-laws (or equivalent documents) of Seller, with all amendments thereto to the date hereof, have been furnished or made available to Buyer or its representatives, and such copies are accurate and complete as of the date hereof. Section 3.2. Qualification to Do Business. Seller is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect. Section 3.3. Authorization and Validity of Agreement. Seller has all requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of Seller's obligations hereunder have been duly authorized by all necessary corporate action by the Board of Directors and stockholder of Seller, and no other corporate proceedings on the part of Seller are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Seller and constitutes a valid and binding obligation, enforceable against Seller in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors' rights generally and except for the limitations imposed by general principles of equity. Section 3.4. No Conflict or Violation. The execution, delivery and performance by Seller of this Agreement do not and will not violate or conflict with any provision of the Certificate or Articles of Incorporation or By-laws (or equivalent documents) of Seller and do not and will not violate any provision of law, or any order, judgment or decree of any court or other governmental or regulatory authority, nor violate nor will result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which Seller is a party or by which it is bound or to which any of its respective properties or assets is subject, nor will result in the creation or imposition of any Lien upon any of the Seller Assets, nor will -8- result in the cancellation, modification, revocation or suspension of any of the authorizations or approvals of Seller which are included in the Seller Assets. Section 3.5. Consents and Approvals. Schedule 3.5 sets forth a true and complete list of each consent, waiver, authorization or approval of any governmental or regulatory authority, domestic or foreign, or of any other Person, and each declaration to or filing or registration with any such governmental or regulatory authority, that is required in connection with the execution and delivery of this Agreement by Seller or the performance by Seller of its obligations hereunder. Section 3.6. Financial Statements. The unaudited balance sheet of Seller (the "Balance Sheet") as of December 31, 2001 (the "Balance Sheet Date"), fairly presents the financial position of Seller as of the date thereof, and the related unaudited statement of income for the period ended on such date fairly presents the results of operations of Seller for the period indicated (collectively, the "Financial Statements"). The Financial Statements (a) present fairly the financial condition of the Seller Business as of such date, (b) are complete and correct in all material respects and were prepared in accordance with the books of account and records of Seller, (c) can be legitimately reconciled with the financial statements and the financial records maintained and the accounting methods applied by Seller for federal income tax purposes and (d) reflect accurately in all material respects all accrued costs and expenses of Seller related to the Seller Business. Section 3.7. Absence of Certain Changes or Events. (a) Except as set forth in Schedule 3.7, since the Balance Sheet Date, there has not been: (i) any adverse change in the business, operations, properties, assets or condition (financial or other) of the Seller Business, or any event that has had or is reasonably likely to have a Material Adverse Effect, and no factor or condition exists and no event has occurred that would be likely to result in any such change; (ii) any material loss, damage, destruction or other casualty to the Seller Assets (whether or not insurance awards have been received or guaranteed); or (iii) any change in any method of accounting or accounting practice of Seller. (b) Since the Balance Sheet Date, Seller has operated the Seller Business in the ordinary course of business and consistent with past practice and, except as set forth in Schedule 3.7 hereto, has not: (i) incurred any material obligation or liability (whether absolute, accrued, contingent or otherwise) relating to its operations, except in the ordinary course of business consistent with past practice; -9- (ii) failed to discharge or satisfy any Encumbrance or pay or satisfy any obligation or liability (whether absolute, accrued, contingent or otherwise) arising from the operation of the Seller Business, other than liabilities being contested in good faith and for which adequate reserves have been provided and Encumbrances arising in the ordinary course of business that do not, individually or in the aggregate, interfere materially with the use, operation or enjoyment of any of the Seller Assets; (iii) mortgaged, pledged or subjected to any Encumbrance any of the Seller Assets, except for Permitted Encumbrances; (iv) sold or transferred any of the assets of the Seller Business material to the Seller Business or canceled any debts or claims or waived any rights material to the Seller Business relating to the operations of the Seller Business, except in the ordinary course of business consistent with past practice; (v) except for licenses set forth on Schedule 3.11(c), disposed of, abandoned, transferred or encumbered any Intellectual Property; (vi) defaulted on any material obligation relating to the operations of the Seller Business; (vii) entered into any transaction material to the Seller Business or relating to the Seller Business, except in the ordinary course of business consistent with past practice; (viii) written down the value of any inventory or written off as uncollectible any Accounts Receivable specifically relating to the Seller Business or any portion thereof not reflected in the Balance Sheet; (ix) made any capital expenditure in excess of $20,000, or additions to property, plant and equipment used in the operations of the Seller Business other than ordinary repairs and maintenance; (x) laid off any employees; or (xi) entered into any agreement or made any commitment to do any of the foregoing. Section 3.8. Tax Matters. Except as set forth in Schedule 3.8, all material Tax Returns required to be filed (taking into account all validly filed extensions) on or before the Closing Date in respect of Seller have been filed, and Seller has paid, accrued or otherwise adequately reserved for the payment of all Taxes shown as due and payable on such Tax Returns. Section 3.9. Real Property. Schedule 3.9 contains a list of all leases, licenses, permits, subleases, and occupancy agreements, together with any amendments thereto, with respect to (i) all real property leased by Seller (whether as lessor or lessee and including those in the names of -10- nominees or other entities) and used or occupied in connection with the Seller Business, and (ii) all real property leased or subleased by Seller, as lessor or sublessor, to third parties. Section 3.10. Title to Assets. Seller has good title to the Seller Assets, free and clear of all Encumbrances (other than Permitted Encumbrances). The Seller Assets are sufficient and adequate to carry on the Seller Business as conducted prior to the date hereof. Section 3.11. Intellectual Property. (a) Seller owns all right, title and interest in the Intellectual Property, which represents all intellectual property necessary to the conduct of the Seller Business as now conducted. To the knowledge of Seller, there are no conflicts with or infringements of any Intellectual Property by any third party other than the Blumenkranz Infringement. To the knowledge of Seller, the conduct of the Seller Business as currently conducted does not conflict with or infringe any proprietary right of any third party. Schedule 3.1l(a) sets forth a complete list of all applications, registrations and patents for Intellectual Property in the Seller's name in all jurisdictions ("Scheduled Intellectual Property"). All Scheduled Intellectual Property is registered or currently pending with the U.S. Patent and Trademark Office or the appropriate national trademark office and unexpired and all fees relating to the Scheduled Intellectual Property that are due on or prior to the effective date of this Agreement have been paid. Except as set forth in Schedule 3.11(a), no Scheduled Intellectual Property is the subject of any inter partes proceeding in any jurisdiction or any final office action or final refusal of registration. The consummation of the transactions contemplated by this Agreement will not alter or impair any Intellectual Property. (b) Schedule 3.11(b) sets forth a complete list of all agreements relating to Seller's use of the Intellectual Property or to the right of Seller to use the proprietary rights of any third party. Except as disclosed in Schedule 3.11(b), Seller is not under any obligation to pay royalties or other payments in connection with use of any Intellectual Property or proprietary rights of any third party, is not restricted from assigning any of its rights in the Intellectual Property or under any agreement related thereto, and will not otherwise be, as a result of the execution and delivery of this Agreement or the performance of Seller's obligations under this Agreement, in breach of any agreement relating to the Intellectual Property. (c) Except as disclosed in Schedule 3.11(c), neither Seller nor any of its Affiliates has granted any right to any third party to use or exploit any of the Intellectual Property in any jurisdiction, which right has not expired or terminated on the date hereof. Except as set forth in Schedule 3.11(c), all rights in any of the Intellectual Property granted to third parties are or have been set forth in written and executed contracts that, to the knowledge of Seller, have not been breached in any material respect by said third parties. Schedule 3.11(c) sets forth each agreement, contract or license under which the Seller has licensed any rights in any of the Intellectual Property to another Person (such agreements, contracts or licenses being referred to collectively as the "Licenses"). (d) Except as set forth on Schedule 3.11(d), no claims, suits, actions or proceedings are pending or, to the knowledge of Seller, threatened, against or by Seller by or against any Person with respect to the ownership, validity, enforceability or use of any Intellectual Property or otherwise challenging or questioning the validity or effectiveness of any -11- Intellectual Property, except for any such claims that individually, or in the aggregate, have not had, and would not be reasonably expected to have, a Material Adverse Effect. Except as set forth on Schedule 3.11(d), no claims are pending or, to the knowledge of Seller, threatened, by or against the Seller against or by any Person in which such Person alleges that any activities or conduct of the Seller Business infringes upon the intellectual property rights of any Person or that any product packaging design infringes upon a proprietary packaging design of any Person, except for any such claims that individually, or in the aggregate, have not had, and would not be reasonably expected to have, a Material Adverse Effect. (e) No present or former employee, officer or director of Seller or any subsidiary, or agent or outside contractor of Seller, holds any right, title or interest, directly or indirectly, in whole or in part, in or to any Intellectual Property. (f) To Seller's knowledge, Seller's transmission, reproduction, use, display or modification (including framing and linking Web site content) or other practices infringe or violate any proprietary or other right of any other Person and, to Seller's knowledge, no claim relating to such infringement or violation is threatened or pending. (g) Except as set forth in Schedule 3.11(g), Seller owns or has the right to use, disclose and transfer, without the consent of any third party, all Seller Software, other than immaterial "off-the-shelf software," the failure of which to transfer would not have a Material Adverse Effect. Section 3.12. Compliance with Law. Except as set forth in Schedule 3.12, the operations of the Seller Business have been conducted in all material respects in accordance with all applicable laws, regulations, orders and other requirements of all courts and other governmental or regulatory authorities having jurisdiction over Seller and its assets, properties and operations. Except as set forth in Schedule 3.12, Seller has not received notice of any violation of any such law, regulation, order or other legal requirement, and is not in default with respect to any order, writ, judgment, award, injunction or decree of any federal, state or local court or governmental or regulatory authority or arbitrator, domestic or foreign, applicable to the Seller Business or any of Seller's assets, properties or operations. Section 3.13. Litigation. Except as set forth in Schedule 3.13, there are no claims, actions, suits, proceedings, labor disputes or investigations pending or, to the best knowledge of Seller, threatened, before any federal, state or local court or governmental or regulatory authority, domestic or foreign, or before any arbitrator of any nature, brought by or against Seller or any of its officers, directors, and to the best of Seller's knowledge, employees, agents or Affiliates involving, affecting or relating to the Seller Business, the Seller Assets, or the transactions contemplated by this Agreement, nor is any basis known to Seller or its directors or officers for any such action, suit, proceeding or investigation. Schedule 3.13 sets forth a list and a summary description of all such pending actions, suits, proceedings, disputes or investigations. Neither the Seller Business nor the Seller Assets are subject to any order, writ, judgment, award, injunction or decree of any national, state or local court or governmental or regulatory authority or arbitrator, domestic or foreign, that affects or might affect the Seller Business or the Seller Assets, or that would or might interfere with the transactions contemplated by this Agreement. -12- Section 3.14. Contracts. Each Assumed Contract is valid, binding and enforceable against the parties thereto in accordance with its terms, and in full force and effect on the date hereof. Seller has performed all obligations required to be performed by it to date under, and is not in default or delinquent in performance, status or any other respect (claimed or actual) in connection with, any Assumed Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default. Except as set forth in Schedule 3.11(c), to the best knowledge of Seller, no other party to any Assumed Contract is in default in respect thereof, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default. Seller has delivered to the Buyer or its representatives true and complete originals or copies of all the Assumed Contracts. Section 3.15. Receivables. Except as set forth in Schedule 3.15, Accounts Receivable payable to or for the benefit of the Seller Business reflected on the Balance Sheet, or acquired by Seller after the date thereof and before the Closing Date have been collected or are (or will be) current and collectible in amounts not less than the aggregate amount thereof (net of reserves established in accordance with prior practice) carried (or to be carried) on the books of the Seller, and are not subject to any counterclaims or set-offs. Section 3.16. Employee Plans. Except as set forth on Schedule 3.16, Seller has no Employee Benefit Plans. Section 3.17. Licensees. Except as set forth in Schedule 3.17, none of the licensees under the Licenses has, or to the best knowledge of Seller, intends to terminate or change significantly its relationship with the Seller Business. Section 3.18. Transactions with Directors, Officers and Affiliates. Except as set forth on Schedule 3.18, (a) since January 1, 2000, there have been no transactions between Seller and any director, officer, employee, stockholder or other Affiliate of Seller, (b) during the past three years none of the officers, directors or employees of Seller, or any spouse or relative of any of such persons, has been a director or officer of, or has had any direct or indirect interest in, any firm, corporation, association or business enterprise which during such period has been a supplier, customer or sales agent of Seller or has competed with or been engaged in any business of the kind being conducted by Seller, and (c) no Affiliate of Seller owns or has any rights in or to any of the assets, properties or rights used by the Seller Business in the ordinary course of its business. Section 3.19. Fleet Debt. As of the date hereof, the aggregate principal amount outstanding under the Note is $1,655,000.00 and accrued and unpaid interest thereon is $11,355.14, and there are no other monies owed under the Note. Section 3.20. Accuracy of Information. None of Seller's representations, warranties or statements contained in this Agreement, or in the Exhibits hereto, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make any of such representations, warranties or statements in light of the circumstances under which they were made not misleading. -13- Section 3.21. Survival. Each of the representations and warranties set forth in this Article III shall be deemed represented and made by Seller at the Closing as if made at such time and shall survive the Closing notwithstanding any investigation on the part of Buyer for a period terminating 12 months after the Closing Date, provided, however, that the representations and warranties set forth in Section 3.8 and Section 3.12 shall survive the applicable statute of limitations. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY EXPRESSLY DISCLAIMED. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller as follows: Section 4.1. Corporate Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, and has all requisite corporate power and authority to own its properties and assets and to conduct its businesses as now conducted. Section 4.2. Qualification to Do Business. Buyer is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified would not have a material adverse affect on the business, operations, assets, properties, condition (financial or otherwise) or prospects of Buyer. Section 4.3. Authorization and Validity of Agreement. Buyer has all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the performance of the Buyer's obligations hereunder have been duly authorized by all necessary corporate action by Buyer, and no other proceedings on the part of Buyer are necessary to authorize such execution, delivery and performance. This Agreement has been duly executed by Buyer and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors' rights generally and except for the limitations imposed by general principles of equity. Section 4.4. No Conflict or Violation. The execution, delivery and performance by Buyer of this Agreement does not and will not violate or conflict with any provision of the Certificate of Incorporation and the By-laws of the Buyer and does not and will not violate any provision of law, or any order, judgment or decree of any court or other governmental or regulatory authority, nor violate nor will result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which Buyer is a party or by which it is bound or to which any of its properties or assets is subject. -14- Section 4.5. Approvals and Consents. Except for such consents, approvals and filings, the failure of which to obtain or make would not, individually or in the aggregate, have a material adverse effect on the ability of the Buyer to consummate the transactions contemplated hereby, the execution, delivery and performance of this Agreement on behalf of the Buyer does not require the consent or approval of, or filing with, any government, governmental body or agency or other entity or Person. Section 4.6. Status of the Shares. All of the Shares will be duly authorized at the Closing and when issued at the Closing in accordance with the terms hereof, will be validly issued, fully paid and nonassessable. Other than as specifically set forth in this Agreement, Buyer makes no representation or warranty. ARTICLE V. ADDITIONAL AGREEMENTS Section 5.1. Taxes. (a) Any sales, use or transfer taxes payable by reason of the sale and transfer of any of the Seller Assets hereunder ("Transfer Taxes") shall be borne by Seller. (b) Seller agrees to timely file all Returns relating to the Transfer Taxes referred to in subsection (a) above, after the review and consent of Buyer, such consent not to be unreasonably withheld, and shall timely remit on behalf of itself and Buyer all such Taxes. (c) Buyer and Seller hereby agree that of the Purchase Price, (i) $500 shall be allocated to the tangible personal property including, without limitation, furniture, office and computer equipment included in the Seller Assets and (ii) the balance shall be allocated to the Assumed Contracts, goodwill and any other intangible assets included in the Seller Assets. Each of Buyer and Seller further agree to file its federal income tax returns and its other tax returns reflecting such allocation and neither party shall, for tax or other purposes, take any position respecting the allocation of the Purchase Price that is inconsistent with such allocation. (d) As soon as practicable following the Closing, Seller shall extinguish its liabilities and distribute and assign all of its remaining assets to its stockholder pursuant to this Agreement in accordance with Section 354(b)(1)(B) of the Code. Section 5.2. Further Action; Post Closing Matters. Subject to the terms and conditions herein provided, each of the parties hereto covenants and agrees to use its reasonable efforts to deliver or cause to be delivered after the Closing Date such documents and other papers and to take or cause to be taken such further actions as may be necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated hereby including, without limitation, the following: (a) Seller shall promptly forward to Buyer, duly endorsed, any checks received by Seller in connection with the Seller Business and shall deliver to Buyer, with interest thereon, if any, any funds received by Seller after the Closing Date as a result of Seller's depositing any such checks into Seller's own account. Furthermore, Seller shall also deliver to -15- Buyer, with interest thereon, if any, any funds received by Seller after the Closing Date in connection with the Seller Business by means of electronic wire transfer or otherwise; and (b) Seller shall file all domestic and foreign trademark assignments required to be filed by it in connection with the transactions contemplated hereunder but not filed as of the date hereof. Section 5.3. Bulk Sales Compliance. Buyer hereby waives compliance by Seller with any applicable laws relating to bulk transfers in connection with the transactions contemplated hereby. Seller shall indemnify Buyer with respect to any failure to comply with such bulk transfer laws. Section 5.4. Assignment of Contracts and Warranties. Notwithstanding anything contained herein to the contrary, to the extent that any of the Assumed Contracts are non-assignable or non-transferable to Buyer, or non-assignable or non-transferable without the consent of a third party, or shall be subject to any option in any third party by virtue of a request for permission to assign or transfer by reason of or pursuant to this Agreement or the transactions contemplated hereby, this Agreement shall not constitute a contract to assign or transfer the same if an attempted assignment or transfer would (i) constitute a breach thereof or (ii) create rights in others not desired by Buyer, and with respect to Assumed Contracts that cannot be assigned to Buyer on the Closing Date, the performance obligations of Seller thereunder shall, unless not permitted by such Assumed Contract, be deemed to be subleased or subcontracted to Buyer until such Assumed Contract has been assigned. Seller and Buyer shall (1) use reasonable efforts to obtain all necessary consents and (2) cooperate with each other in any arrangement designed to provide to Buyer the benefits (including the exercise of rights) under any such Assumed Contracts, including enforcement for the benefit of Buyer (and at Seller's expense) of any and all rights of Seller against a third party thereto arising out of the breach or cancellation by such third party or otherwise; provided, however, that Seller shall not be obligated to pay more than de minimis monies or to commence a legal action unless at the request and at the expense of Buyer. Seller shall (A) hold all monies paid thereunder in trust for the account of Buyer and (B) remit all such money without set-off of any kind whatsoever to Buyer as promptly as possible. Buyer shall indemnify and hold harmless Seller with respect to any obligations or liabilities under or respect to any of such Assumed Contracts. Section 5.5. Intellectual Property. Seller will not use, seek to register, register or authorize others to use, seek to register or register the Intellectual Property included in the Seller Assets or any other intellectual property substantially or confusingly similar thereto anywhere in the world and will not challenge Buyer's right to use, seek to register or register such Intellectual Property anywhere in the world. Section 5.6. Cessation of Use of the Name "Stanley Blacker". From the date hereof, Seller shall not use the name "Stanley Blacker" or any words or names confusingly similar to the name "Stanley Blacker" in connection with any activities or businesses. Within 30 days from the date hereof, Seller shall take all necessary action, including the filing of any documents required to be filed with any Governmental Authority to effect a change of its corporate name from -16- "Stanley Blacker" to another name not including either "Stanley" or "Blacker" or words confusingly similar. Section 5.7. Books and Records. For a period of three years from the Closing Date, and upon reasonable notice, Buyer shall allow Seller and its agents access to the Seller Assets during normal business hours at Buyer's principal places of business or at any locations where such records are stored and Seller shall have the right at its own expense, to make copies of any records and files included in the Seller Assets; provided that any such access or copying shall be had or done in such a manner so as not to interfere with the normal conduct of Buyer's business. ARTICLE VI. INDEMNIFICATION Section 6.1. Indemnification by Seller. Notwithstanding the Closing or the delivery of the Seller Assets and regardless of any investigation at any time made by or on behalf of Buyer or of any knowledge or information that Buyer may have, Seller shall indemnify and fully defend, save and hold Buyer and its Affiliates, directors, officers and employees (the "Buyer Indemnitees") harmless if any Buyer Indemnitee shall at any time or from time to time suffer any damage, liability, loss, cost, expense (including all reasonable attorneys' fees incurred by the Buyer Indemnitees in any action or proceeding between Seller and the Buyer Indemnitees or between the Buyer Indemnitees and any third party or otherwise), deficiency, interest, penalty, imposition, assessment or fine (collectively, "Buyer Losses") arising out of or resulting from, or shall pay or become obliged to pay any sum on account of, any and all the Seller Events of Breach; provided, however, that (i) Seller shall have no liability to indemnify Buyer Indemnitees in respect of Buyer Losses unless and until the aggregate amount of Buyer Losses incurred by Buyer Indemnitees exceeds $12,500 (the "Deductible"), at which time Seller shall be liable to indemnify Buyer Indemnitees for the full amount of such Buyer Losses to the extent they exceed the Deductible and (ii) Seller's maximum aggregate liability in respect to all Buyer Losses shall not exceed an amount equal to the Purchase Price. As used herein, "Seller Event of Breach" shall be and mean any one or more of the following: (a) any breach of a representation or warranty made by Seller; (b) any failure of Seller duly to perform or observe any term, provision, covenant or agreement contained herein on the part of Seller to be performed or observed; or (c) any claim or cause of action by any party against any Buyer Indemnitee, with respect to the Seller Assets, the Excluded Liabilities or the Excluded Assets or the ownership or use of the Seller Assets by Seller prior to the Closing Date. Section 6.2. Sy Syms Guaranty. Sy Syms ("Syms") hereby represents and warrants that all of the outstanding capital stock of Seller is owned by The Sy Syms Revocable Living Trust, of which Syms is the sole trustee. Syms hereby unconditionally guarantees to Buyer the payment of any amounts which shall become due pursuant to the provisions of Section 6.1 above. Syms hereby acknowledges and agrees that this is an unconditional and absolute guaranty of payment and not a guaranty of collection, and if for any reasons any Buyer Losses -17- shall not be paid in full when the same become due and payable, Syms undertakes to perform or cause to be paid forthwith such amounts to Buyer, regardless of whether Buyer or anyone on its behalf shall have instituted any suit, action or proceeding or exhausted its remedies or taken any steps to enforce any rights against Buyer or any other person to compel any such performance or observance or to collect all or part of any such amount, either pursuant to the provisions of this Agreement or at law or in equity. Syms hereby unconditionally: (i) waives any requirement that Buyer, in the event of any default by Buyer, first make demand upon, or seek to enforce remedies against, Syms or any other person before demanding payment under or seeking to enforce this guaranty; (ii) covenants that this guaranty will not be discharged except by payment in full of any Buyer Losses, subject to the terms and provisions of this Agreement; (iii) waives diligence, presentment and protest with respect to, and any notice of default in the payment of any amount at any time payable by Syms under or in connection with, any Buyer Losses; and (iv) waives all suretyship defenses. Section 6.3. Indemnification by Buyer. Notwithstanding the Closing or the delivery of the Seller Assets and regardless of any knowledge or information that Seller may have, Buyer shall indemnify and agree to fully defend, save and hold Seller and its Affiliates, directors, officers, shareholders and employees (the "Seller Indemnitees"), harmless if any Seller Indemnitee shall at any time or from time to time suffer any damage, liability, loss, cost, expense (including all reasonable attorneys' fees incurred by the Seller Indemnitees in any action or proceeding between Buyer and the Seller Indemnitees or between the Seller Indemnitees and any third party or otherwise), deficiency, interest, penalty, imposition, assessment or fine (collectively, "Seller Losses") arising out of or resulting from, or shall pay or become obligated to pay any sum on account of, any and all Buyer Events of Breach. As used herein, "Buyer Events of Breach" shall be construed to be and mean any one or more of the following: (a) any breach of a representation or warranty made by Buyer; (b) any failure of Buyer duly to perform or observe any term, provision, covenant or agreement contained herein on the part of Buyer to be performed or observed after the Closing Date; or (c) any claim or cause of action by any party against any Seller Indemnitee with respect to the Assumed Liabilities, the ownership or use of the Seller Assets from and after the Closing Date or the payment of the Fleet Debt. ARTICLE VII. DELIVERIES BY BUYER TO SELLER AT CLOSING Concurrently with the execution and delivery of this Agreement on the Closing Date, the following shall have been satisfied or waived by Seller: Section 7.1. Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other Person required in connection with the execution, delivery and performance of this Agreement shall have been duly obtained and shall be in full force and effect on the Closing Date. -18- Section 7.2. No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that declares this Agreement invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby shall be in effect. Section 7.3. Purchase Price. Buyer shall have delivered the Purchase Price in accordance with Section 2.5. Section 7.4. Buyer Closing Documents. Buyer shall have delivered to Seller an Assignment and Assumption of Contracts, dated as of the date hereof, between Buyer and Seller (the "Assignment and Assumption"), and such other instruments of assignment that are necessary to evidence the assumption by Buyer of the Assumed Liabilities. Section 7.5. Legal Matters. All certificates, instruments and other documents required to be executed or delivered on behalf of Buyer under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of Buyer in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for Seller. ARTICLE VIII. DELIVERIES BY SELLER TO BUYER AT CLOSING Concurrently with the execution and delivery of this Agreement on the Closing Date, the following shall have been satisfied or waived by Buyer: Section 8.1. Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement shall have been duly obtained and shall be in full force and effect on the Closing Date. Section 8.2. No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that declares this Agreement invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby shall be in effect. Section 8.3. No Material Adverse Change. During the period from the Balance Sheet Date to the Closing Date, there shall not have been any material adverse change in the assets, business, results of operations or financial condition of the Seller Business. Section 8.4. Seller Closing Documents. Seller shall have delivered to Buyer the following documents: -19- (a) the files and records forming a part of the Seller Assets; (b) a Bill of Sale by Seller to Buyer, the Assignment and Assumption and such other instruments of conveyance that are necessary to effect the purchase and sale of the Seller Assets; (c) copies of the consents, waivers and approvals specified on Schedule 3.5; (d) such other documents relating to the transactions contemplated by this Agreement as the Buyer reasonably requests; and (e) physical possession and control of the Seller Assets. Section 8.5. Legal Matters. All certificates, instruments and other documents required to be executed or delivered by or on behalf of Seller under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of Seller in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for Buyer. ARTICLE IX. THE SHARES Section 9.1. Legend. Seller represents that it understands and agrees that, unless and until registered under the Securities Act or transferred pursuant to the provisions of Rule 144 promulgated under the Securities Act, each certificate or other document evidencing any of the Shares shall be endorsed with a legend substantially in the form set forth below: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL (WITH SUCH COUNSEL AND OPINION TO BE REASONABLY SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933." Section 9.2. Removal of Legend. At the request of Seller, Buyer shall remove the foregoing legend if Seller shall have obtained an opinion of counsel (which counsel may be counsel to Buyer) reasonably satisfactory to Buyer to the effect that the Shares proposed to be transferred may lawfully be disposed without registration, qualification or legend. -20- ARTICLE X. GENERAL PROVISIONS Section 10.1. Expenses. Except as otherwise provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. Section 10.2. Notices. All notices, requests, claims, demands and other. communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by telecopy or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.2): (a) if to Seller: Stanley Blacker, Inc. One Syms Way Secaucus, NJ 07094 Attention: Mr. Sy Syms Telecopier: (201) 902-9874 Telephone: (201) 902-9600 (b) if to Buyer: SYMS Corp One Syms Way Secaucus, NJ 07094 Attention: Chief Executive Officer Telecopier: (201) 902-9874 Telephone: (201) 902-9600 Section 10.3. Public Announcements. Buyer and Seller shall use reasonable efforts to consult with each other before issuing any press release or otherwise making any public statement with respect to this Agreement or the transactions contemplated hereby, unless otherwise required by applicable law or by obligation pursuant to any listing agreement with or rules of any securities exchange. Except as otherwise provided in this Section 10.3 or required by Law, no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby, or use the name of any other party hereto in any public announcement, without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld or delayed. Section 10.4. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. -21- Section 10.5. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible. Section 10.6. Entire Agreement. This Agreement (including the Disclosure Schedules and Exhibits) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral between Buyer and Seller with respect to the subject matter hereof and except as otherwise expressly provided herein. Section 10.7. Assignment. Neither this Agreement nor any of the rights and obligations of the parties hereunder may be assigned by any of the parties hereto without the prior consent of each other parties hereto. Notwithstanding the foregoing, any party assigning its rights or obligations hereunder shall remain liable for all of its respective obligations under this Agreement. Subject to the preceding, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and no other Person shall have any right, obligation or benefit hereunder. Section 10.8. No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 10.9. Waivers and Amendments. This Agreement may be amended or modified, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties hereto or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any other right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity. Section 10.10. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement required to be performed prior to the Closing was not performed in accordance with the terms hereof and that, prior to the Closing, the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. -22- Section 10.11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Section 10.12. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -23- IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be executed as of the date first written above by their respective officers. SELLER STANLEY BLACKER, INC. By: s/ SY SYMS -------------------------------- Name: Sy Syms Title: Chairman BUYER SYMS CORP By: s/ MARCY SYMS -------------------------------- Name: Marcy Syms Title: Chief Executive Officer Acknowledged and Agreed as of the date first above written solely with respect to Section 6.2: s/ SY SYMS - ------------------------------------- Sy Syms -24- EX-23 5 e88864_ex23.txt INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-44254 on Form S-8 of our report dated April 18, 2002, appearing in this Annual Report on Form 10-K of Syms Corp and subsidiaries for the fiscal year ended March 2, 2002. Deloitte & Touche LLP Parsippany, New Jersey May 20, 2002 -----END PRIVACY-ENHANCED MESSAGE-----