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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1996.
REGISTRATION NO. 333-3188
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OPEN PLAN SYSTEMS, INC.
(Name of small business issuer in its charter)
4299 CAROLINA AVENUE
BUILDING C
RICHMOND, VIRGINIA 23222
(804) 228-5600
(Address and telephone number of registrant's principal executive offices and
place of business)
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<S> <C> <C>
VIRGINIA 2522 54-1515256
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Code Number) Identification Number)
</TABLE>
STAN A. FISCHER
PRESIDENT
OPEN PLAN SYSTEMS, INC.
4299 CAROLINA AVENUE, BUILDING C
RICHMOND, VIRGINIA 23222
(804) 228-5600
(Name, address and telephone number of agent for service)
COPIES OF COMMUNICATIONS TO:
THEODORE L. CHANDLER, JR., ESQUIRE
ROBERT E. SPICER, JR., ESQUIRE
WILLIAMS, MULLEN, CHRISTIAN & DOBBINS
1021 EAST CARY STREET, 16TH FLOOR
RICHMOND, VIRGINIA 23219
CARR L. KINDER, III, ESQUIRE
HUNTON & WILLIAMS
RIVERFRONT PLAZA, EAST TOWER
951 EAST BYRD STREET
RICHMOND, VIRGINIA 23219-4074
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box:
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 16, 1996
1,700,000 SHARES
COMMON STOCK
All of the shares of Common Stock, no par value, offered hereby (the
"Shares") are being sold by Open Plan Systems, Inc. ("Open Plan" or the
"Company"). Prior to this offering, there has been no public trading market for
the Company's Common Stock. It is currently anticipated that the initial public
offering price will be between $8.00 and $10.00 per share. See "Underwriting"
for information regarding the factors considered in determining the initial
public offering price.
The Common Stock has been approved for listing on the Nasdaq National
Market under the symbol "PLAN."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[CAPTION]
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total (3)........................................... $ $ $
</TABLE>
(1) Assumes the sale of 170,000 Shares to existing shareholders of the Company
at an underwriting discount of 3.0% and the sale of the remaining 1,530,000
shares at an underwriting discount of 7.5%. The Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of this offering payable by the Company estimated
at $ . Approximately $4.6 million of the net proceeds of the offering
will be used to fund a final cash distribution of $3.5 million to current
shareholders of the Company in connection with the termination of the
Company's S Corporation status and to repay $1.1 million in debt incurred
from a prior distribution on March 29, 1996. See "Use of Proceeds" and
"Prior S Corporation Status."
(3) The Company has granted the Underwriters an option to purchase up to an
additional 255,000 shares of Common Stock, at an underwriting discount of
7.5%, solely to cover over-allotments, if any. If all such shares are
purchased, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
The Shares are being offered by the several Underwriters named herein,
subject to prior sale, when, as and if delivered to and accepted by them, and
subject to certain conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. Delivery
of the Shares is expected against payment therefor on or about , 1996, in
Richmond, Virginia at the offices of Scott & Stringfellow, Inc.
DAVENPORT & CO. OF VIRGINIA, INC. SCOTT & STRINGFELLOW, INC.
THE DATE OF THIS PROSPECTUS IS , 1996
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[PHOTOGRAPH]
The photograph depicts an office Work Station of the type remanufactured by
the Company and certain miscellaneous items commonly found in an office such as
chairs and a computer.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) REFLECTS THE
TERMINATION PRIOR TO THE CONSUMMATION OF THE OFFERING OF THE COMPANY'S STATUS AS
AN S CORPORATION (SEE "PRIOR S CORPORATION STATUS") AND (III) ASSUMES AN INITIAL
PUBLIC OFFERING PRICE OF $9.00 PER SHARE.
THE COMPANY
The Company believes it is the largest independent remanufacturer of office
work stations ("Work Stations") in the United States as measured by revenues.
Work Stations, which consist of moveable panels, work surfaces, storage units,
lighting and electrical distribution combined into a single integrated unit,
offer a popular alternative to the desk, free-standing file and permanent
drywall dividers common to traditional office layouts. The Company purchases
used Work Stations from end-users, brokers and dealers throughout the United
States and restores these Work Stations to like-new condition at its
remanufacturing facility located in Richmond, Virginia. Limited finishing and
assembly operations are conducted at the Company's plant in Atlanta, Georgia.
The Company primarily sells its remanufactured Work Stations directly to
end-users, which range from small businesses to Fortune 500 companies. The
Company's Work Stations are sold principally in the mid-Atlantic and
southeastern regions of the United States.
Since its inception in late 1989, the Company has experienced significant
growth in sales and profitability each year. The Company attributes its success
to date to (i) the growth in demand for Work Stations and the greater
availability of Work Stations for remanufacturing, (ii) its ability to provide
value to customers by producing like-new Work Stations that are typically sold
at 30% to 50% below the actual selling prices of new Work Stations of comparable
grade, (iii) its responsive customer service, including its ability to ship Work
Stations within three weeks of an order, (iv) the increasing demand for recycled
products, (v) its network of direct sales offices which allows the Company to
bypass dealers and dealer commissions while enhancing the Company's ability to
create long-term customer relationships and (vi) its experienced management team
with over 160 years of aggregate experience in the office furniture industry.
The Company's products compete against new and remanufactured Work Stations
as well as more traditional office furniture. Herman Miller, Inc. ("Herman
Miller"), Haworth, Inc. ("Haworth") and Steelcase, Inc. ("Steelcase") are the
leading manufacturers of new Work Stations in the United States, collectively
representing approximately two-thirds of the installed base of Work Stations.
The Company currently focuses on the remanufacturing of Work Stations produced
by Herman Miller. According to The Business and Institutional Furniture
Manufacturer's Association, Work Stations accounted for approximately $3.3
billion of the $9.4 billion domestic market for office furniture in 1995. The
Company believes that the domestic market for used and remanufactured Work
Stations was approximately $500 million in 1995 and is growing more rapidly than
the market for new Work Stations.
The Company's goal is to become the dominant independent remanufacturer of
Work Stations in the United States. Key components of Open Plan's strategy to
achieve this goal include (i) opening additional direct sales offices in major
markets throughout the United States, (ii) further developing its innovative
sales and marketing techniques, (iii) expanding its remanufacturing capabilities
to include Work Stations produced by manufacturers other than Herman Miller and
(iv) continuing to capitalize on its high level of customer service and pricing
advantages.
Open Plan sells approximately 80% of its Work Stations through a network of
seven Company-owned direct sales offices with the remaining 20% of sales being
made through the Company's dealer network. The Company believes that each of the
fifty largest metropolitan areas of the United States will support a sales
office. In marketing its products, the Company utilizes several innovative
programs, including its asset banking program, which allows customers to
trade-in used Work Stations in exchange for a credit towards future purchases.
The Company's sales and purchasing efforts are supported by a telemarketing
division which identifies potential customers and sources of used Work Stations.
THE OFFERING
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<S> <C>
Shares Offered by the Company...................... 1,700,000 shares
Shares Outstanding After the Offering.............. 4,129,933 shares
Use of Proceeds.................................... The net proceeds of approximately $13.9 million will be used for:
general corporate purposes, including the establishment of additional
sales offices and the expansion of the Company's product lines
(approximately $5.4 million), repayment of debt (approximately $4.0
million, which includes $1.1 million of debt incurred in connection with
a prior S Corporation distribution to shareholders), payment of a final
S Corporation distribution to shareholders (approximately $3.5 million),
and upgrading existing production facilities and establishing additional
finishing plants (approximately $1.0 million). See "Use of Proceeds."
Nasdaq National Market Symbol...................... "PLAN"
</TABLE>
3
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SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
STATEMENT OF INCOME DATA:
Net sales......................................... $1,633 $3,670 $7,843 $12,218 $15,478 $4,574 $5,580
Cost of sales..................................... 1,124 2,256 5,441 8,015 10,434 3,084 3,595
Gross profit...................................... 509 1,414 2,402 4,203 5,044 1,490 1,985
Operating expenses................................ 407 849 1,501 2,399 3,032 752 1,022
Operating income.................................. 102 565 901 1,804 2,012 738 963
Other expense, net................................ 18 26 32 117 127 24 49
Net income........................................ $ 84 $ 539 $ 869 $ 1,687 $ 1,885 $ 714 $ 914
STATISTICAL DATA:
Gross profit margin............................... 31.2% 38.5% 30.6% 34.4% 32.6% 32.6% 35.6%
Operating margin (1).............................. 6.2% 15.4% 11.5% 14.8% 13.0% 16.1% 17.3%
Ending number of sales offices.................... 1 3 4 7 6 7 7
PRO FORMA DATA (2):
Pro forma income before income taxes.............. $ 84 $ 539 $ 869 $ 1,687 $ 1,885 $ 714 $ 914
Pro forma provision for income taxes.............. - 208 344 673 746 283 356
Pro forma net earnings............................ $ 84 $ 331 $ 525 $ 1,014 $ 1,139 $ 431 $ 558
Pro forma net earnings per share.................. $ 0.42 $ 0.16 $ 0.21
Weighted average shares outstanding (3)........... 2,734,635 2,745,615 2,718,548
<CAPTION>
AT MARCH 31, 1996
PRO
FORMA
PRO AS
ACTUAL FORMA(4) ADJUSTED(5)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $3,265 $3,313 $ 14,236
Total assets......................................................... 9,849 9,897 16,820
Long-term debt and capital leases.................................... 435 435 435
Shareholders' equity................................................. 4,110 4,158 15,081
</TABLE>
(1) Operating income as a percentage of net sales.
(2) Upon completion of the offering, the Company's status as an S Corporation
will terminate, and the Company will be subject to corporate income taxes.
Accordingly, pro forma net earnings reflect a pro forma adjustment for
income taxes which would have been recorded had the Company been a C
Corporation. See "Selected Financial Data" and "Prior S Corporation Status."
(3) Weighted average common shares outstanding have been increased for 288,615
shares of Common Stock deemed to be outstanding, which represents the
approximate number of shares of Common Stock deemed sold by the Company at
an estimated initial public offering price of $9.00 per Share to fund the
assumed distribution of $2,598 to the Company's shareholders.
(4) Adjusted to give effect to the recognition of net deferred income tax assets
in the amount of $48 upon the termination of the Company's status as an S
Corporation.
(5) Adjusted to give effect to the sale by the Company of 1,700,000 shares of
Common Stock offered hereby at an estimated initial public offering price of
$9.00 per Share and the application of the estimated net proceeds of $13,866
as follows: (i) payment of the line of credit balance at March 31, 1996 of
$4,000, (ii) distribution of pro forma retained earnings of $2,943 at March
31, 1996, including the pro forma deferred income tax benefit of $48, and
(iii) the remainder to increase working capital.
4
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION PRESENTED ELSEWHERE IN THIS PROSPECTUS, BEFORE
PURCHASING THE SHARES OFFERED HEREBY. THIS PROSPECTUS CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS. THE COMPANY WISHES TO CAUTION READERS THAT THE
FOLLOWING IMPORTANT FACTORS, AMONG OTHERS, IN SOME CASES HAVE AFFECTED, AND IN
THE FUTURE COULD AFFECT, THE COMPANY'S ACTUAL RESULTS AND COULD CAUSE THE
COMPANY'S ACTUAL RESULTS FOR 1996 AND BEYOND TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE HEREIN.
POTENTIAL LIMITATIONS ON FUTURE GROWTH
The Company has experienced rapid growth since it commenced operations in
1989. The Company's continued growth will be dependent in part on the Company's
ability to manage growth effectively, including the improvement and expansion of
the Company's financial and management information systems and remanufacturing
operations and the recruitment
and retention of executive staff and key employees. The Company will also be
required to manage working capital and generate cash flow from operations to
meet the needs of an expanding business. There can be no assurances that the
Company's future growth will not be limited by insufficient cash flow or the
lack of adequate financing required to fund such growth. See "Business-Growth
Strategy" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
IMPACT OF CUSTOMER PREFERENCES AND TECHNOLOGICAL ADVANCES ON SALES
Certain potential customers may prefer new Work Stations to the Company's
remanufactured Work Stations due to various factors, including the more
developed and better financed marketing efforts of new Work Station
manufacturers and such potential customers' reluctance to purchase
remanufactured products because of image, perceived questions of quality or
other factors. In addition, technological advances are frequently incorporated
in new Work Stations by the leading manufacturers, particularly with respect to
electrical circuits necessary for more advanced computer and telecommunications
features. Although the Company has the ability to incorporate these
technological advances in its remanufactured Work Stations, any such
incorporation may increase remanufacturing costs and may reduce the price
advantage of remanufactured Work Stations over newly manufactured Work Stations.
DEPENDENCE UPON SUPPLY OF WORK STATIONS AND COMPONENT PARTS
The Company presently purchases only used Herman Miller Work Stations in
its remanufacturing operations. The Company does not have any binding agreements
relating to the purchase of used Herman Miller Work Stations for remanufacturing
and generally purchases such used Work Stations from end-users, brokers and
dealers through competitive bids or directly negotiated transactions. Although
the Company in the past has not experienced a shortage of used Work Stations at
competitive prices, the success of the Company in the future will depend in part
upon its continued ability to obtain Herman Miller and other manufacturers' used
Work Stations for remanufacturing in sufficient quantities and at competitive
prices. While the Company believes that the availability of used Work Stations
for remanufacturing will increase as the installed base of Work Stations
increases and ages, there may be periods of tight supply as the demand for used
Work Stations increases which could have a material adverse effect on the
Company's business and profitability. See "Business-Inventory."
The Company also purchases new and used component parts for use in the
remanufacture of Work Stations. The Company experienced a shortage in the supply
of certain component parts during 1995 that resulted in the Company's purchase
of such component parts at higher prices. There can be no assurances that
shortages of component parts or higher prices for such parts will not occur in
the future. An inability to obtain necessary component parts in adequate
quantities and at competitive prices could have a material adverse effect on the
Company's results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NO ASSURANCE OF EXPANSION OF PRODUCT LINES AND BUSINESS
The Company has concentrated its business on remanufacturing Work Stations
manufactured by Herman Miller. The Company intends to expand its product line to
include Work Stations of other manufacturers (particularly those of Haworth
and/or Steelcase) through the acquisition of other companies specializing in
remanufacturing products of those manufacturers or the establishment of
additional remanufacturing facilities. However, the Company is not currently
engaged in negotiations with acquisition candidates and has not selected any
locations for the construction of additional facilities. In addition, the
Company has limited experience in remanufacturing Work Stations of manufacturers
other than Herman Miller. Due to the differences in and lack of
interchangeability of the various Work Stations and certain component parts
produced by the major
5
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manufacturers, the Company's expansion of its product line will require
additional training of production personnel, the establishment of additional
sources of supply of used Work Stations and component parts and, in some cases,
the establishment of different remanufacturing processes. As a result of these
factors, there can be no assurance that the Company will be able to expand
successfully its product line or maintain its historical gross margins. The
failure of the Company to expand successfully its product line could have a
material adverse effect on the growth and profitability of the Company's
business.
DEPENDENCE UPON PRIMARY REMANUFACTURING FACILITY
The Company primarily remanufactures its Work Stations at one facility in
Richmond, Virginia. The Company also operates a limited finishing and assembly
plant in Atlanta, Georgia. Although the Company presently maintains $3,000,000
of business interruption insurance on the Richmond facility and $100,000 of such
insurance on the Atlanta plant, a lengthy interruption of its remanufacturing
operations at the Richmond facility would have a material adverse effect on the
Company's results of operations and financial condition. See
"Business-Insurance."
TAX MATTERS ASSOCIATED WITH PRIOR S CORPORATION STATUS
The Company has elected to be taxed under Subchapter S of the Internal
Revenue Code of 1986, as amended, as an "S Corporation" for federal and state
income tax purposes since its incorporation in 1989. Unlike a regular or "C
Corporation," an S Corporation is generally not subject to income tax at the
corporate level; instead, the S Corporation's income is taxed on the personal
income tax returns of its shareholders. The Company's status as an S Corporation
will terminate prior to the closing of the offering. If the Company's S
Corporation status were denied for any periods prior to this termination by
reason of a failure to satisfy the S Corporation election or eligibility
requirements of the Code, the Company would be subject to tax on its income as
if it were a C Corporation for these periods. The payment of any such tax could
have a material adverse effect on the Company's financial condition and results
of operations if the full amount thereof is not reimbursed by the current
shareholders of the Company, who have agreed to pay their pro rata share of any
such tax and related interest, penalties and expenses in the event that the
Company's S Corporation status is denied for any taxable periods up to the date
immediately preceding the closing of the offering. See "Prior S Corporation
Status."
DEPENDENCE UPON KEY PERSONNEL
The Company's development and operations to date have been, and are
expected in the immediate future to be, substantially dependent on the services
of its President, Stan A. Fischer. Mr. Fischer has suffered two heart attacks
from which the Company believes he has fully recovered. Mr. Fischer currently is
not experiencing any health problems. However, there can be no assurances that
Mr. Fischer will not suffer a recurrence of his previous health problem. The
Company has made application for "key-man" insurance in the amount of $3,000,000
on the life of Mr. Fischer naming the Company as the sole beneficiary. The loss
of his services could materially and adversely affect the Company's business
prospects. The Company's future success will also depend in part on its
continuing ability to attract and retain capable and experienced personnel.
There can be no assurance that the Company will be successful in attracting and
retaining such personnel. See "Management."
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY
Historically, the Company's business has been significantly affected by
seasonal factors. The Company typically has higher sales during the first and
fourth quarters of its fiscal year due primarily to the tendency of customers to
expend funds budgeted for office furniture either early in the calendar year or
after the summer vacation season. Because the Company recognizes revenues upon
shipment and typically ships Work Stations within three weeks of an order, a
substantial portion of the Company's revenue in each quarter results from orders
placed by customers in that quarter. Accordingly, quarterly revenue levels are
subject to substantial fluctuations and are often difficult to predict.
Fluctuations in operating results could result in volatility in the price of the
Company's Common Stock. If revenue levels are below expectations, operating
results will be adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business-Seasonality and
Backlog."
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public trading market for the
Company's Common Stock. The initial public offering price of the Shares offered
hereby has been determined through negotiations between the Company and the
representatives of the Underwriters and may not be indicative of the market
price for the Common Stock after this offering. The Company's Common Stock has
been approved for listing on the Nasdaq National Market; however, there can be
no assurance that an active market in the Company's Common Stock will develop
after this offering, or if developed, that such
6
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market will be sustained. Additionally, there can be no assurance that the
Company will continue to meet the criteria for continued inclusion of the Common
Stock on the Nasdaq National Market. See "Underwriting."
COMPETITION
Competition in the Work Station segment of the office furniture industry is
intense. The Company competes with many other companies in the sale of its
remanufactured products as well as in the purchase of "as is" Work Stations and
component parts for use in the Company's remanufactured Work Stations. In the
sale of remanufactured Work Stations, the Company competes with manufacturers of
new Work Stations and their remanufacturing subsidiaries, other independent
remanufacturers and dealers of "as is" Work Stations. In the purchase of used
Work Stations that are the primary source of the Company's supply for its
remanufacturing operations, the Company competes with the manufacturers of new
Work Stations and their remanufacturing subsidiaries, both of which sometimes
provide a trade-in allowance to purchasers of their products, other independent
remanufacturers and Work Station brokers and dealers.
Sales of the Company's remanufactured Work Stations depend on maintaining a
successful balance between price and quality so that its Work Stations are
positioned in the marketplace to provide a product that is (i) comparable or
superior in quality, design and appearance to higher cost new Work Stations and
(ii) superior in quality, features and appearance to lower cost "as is" Work
Stations. Failure by the Company to maintain this balance due to increased
competition in either the purchase or sale of Work Stations could adversely
affect the Company's business. Additionally, certain of the Company's
competitors have greater financial, technical, manufacturing, marketing, sales
and other resources than the Company. See "Business-Competition."
OWNERSHIP OF MANAGEMENT
Immediately following this offering, the Company's executive officers and
directors will beneficially own approximately 33.8% of the outstanding shares of
the Company's Common Stock based on the number of shares beneficially owned by
them at March 31, 1996 (excluding any Shares that may be purchased by such
persons in the offering). As a result, such persons, acting together, would have
the ability to significantly affect the outcome of all matters requiring
shareholder approval and, in certain circumstances, would have the ability to
block a transaction with an "Interested Shareholder" as defined in the Company's
Amended and Restated Articles of Incorporation. The concentration of ownership
also could have the effect of discouraging certain unsolicited offers to acquire
the Company or otherwise inhibiting a change in control of the Company, and as a
result, may deprive shareholders of an opportunity to sell their stock at higher
prices. See "Management-Security Ownership of Management" and "Description of
Capital Stock-Certain Provisions of the Company's Articles of Incorporation and
Bylaws."
The Company and the Underwriters have agreed to reserve up to 10% of the
offering, or 170,000 shares, for sale to existing shareholders, including
directors and executive officers of the Company. None of these persons have any
obligation to purchase Shares in the offering.
ANTI-TAKEOVER MEASURES
Immediately prior to the closing of this offering, the Company's Articles
of Incorporation and Bylaws will be amended and restated to include certain
provisions that provide for a classified board of directors, prohibit cumulative
voting for the election of directors, eliminate the right of shareholders to
call special meetings, and impose various procedural requirements which could
make it difficult for shareholders to effect certain corporate actions. These
provisions may have the effect of deterring hostile takeovers or delaying or
preventing changes in control of the Company. In addition, the Board of
Directors will have the authority to issue up to 5,000,000 shares of
undesignated Preferred Stock, to determine the powers, preferences and rights
and the qualifications, limitations or restrictions granted to or imposed upon
any unissued series of undesignated Preferred Stock and to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by the Company's shareholders. The Preferred Stock could
be issued with voting, liquidation, dividend and other rights superior to the
rights of the Common Stock. Furthermore, such Preferred Stock may have other
rights, including economic rights, senior to the Common Stock, and as a result,
the issuance of such stock could have a material adverse effect on the market
value of the Common Stock. The Company also will be afforded the protection of
certain provisions of the Virginia Stock Corporation Act, which could delay or
prevent a change in control of the Company, impede a merger, consolidation or
other business combination involving the Company or discourage a potential
acquiror from making a tender offer or otherwise attempting to obtain control of
the Company. Any of these provisions which may have the effect of delaying or
preventing a change in control of the Company could have a material adverse
effect on the market value of the Company's Common Stock. See "Description of
Capital Stock."
7
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DILUTION
The offering price of the Shares is substantially in excess of the present
book value per share. Purchasers of Shares will experience immediate and
substantial dilution in the amount of $5.35 per share in the net tangible book
value per Share of Common Stock. See "Dilution."
ENVIRONMENTAL REGULATIONS
The Company is subject to a variety of federal, state and local
governmental laws and regulations related to the storage, use, discharge and
disposal of toxic, volatile or otherwise hazardous chemicals used in its
manufacturing processes. In addition, regulations currently proposed under the
Clean Air Act Amendments of 1990 may require reduced emissions of volatile
organic compounds including emissions from paints and solvents used by the
Company in the remanufacturing process. As a result, the Company may be required
to institute changes in its remanufacturing processes in order to comply with
these reduced emission standards. There can be no assurance that these and other
changes in environmental regulations in the future will not result in the need
for capital expenditures or otherwise impose financial burdens on the Company.
Further, such regulations could restrict the Company's ability to expand its
operations. Any failure by the Company to obtain required permits for, control
the use of, or adequately restrict the discharge of, hazardous substances under
present or future regulations could subject the Company to substantial liability
or could cause its manufacturing operations to be suspended. Such liability or
suspension of manufacturing operations could have a material adverse effect on
the Company's results of operations and financial condition. See
"Business-Government Regulation."
RISK OF PATENT INFRINGEMENT CLAIMS
Newly manufactured Work Stations contain numerous patented component parts.
Although the Company is not aware of any existing or threatened patent
infringement claims asserted against it and does not believe that the
remanufacturing of Work Stations infringes the proprietary rights of any third
parties, there can be no assurance that infringement claims will not be asserted
against the Company. In addition, the Company manufactures or purchases certain
new and used component parts included in its remanufactured Work Stations and
intends to begin selling newly manufactured private label Work Stations. To the
extent that such activities involve purchasing or manufacturing component parts
similar to patented component parts, the Company could become subject to claims
of patent infringement if the manufacture or use of such component parts
infringed the proprietary rights of third parties. In addition, the existence of
third party proprietary rights could limit the Company's ability to produce or
use certain component parts. Damages for violation of third party proprietary
rights could be substantial and could have a material adverse effect on the
Company's financial condition and results of operation. Regardless of the
validity or the successful assertion of such claims, the Company would incur
significant costs and diversion of resources with respect to the defense
thereof. See "Business-Intellectual Property."
SHARES ELIGIBLE FOR FUTURE SALE
All 2,429,933 shares of Common Stock currently outstanding are "restricted
securities" as that term is defined in
Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Such shares may be sold only in compliance with Rule 144,
pursuant to registration under the Securities Act or pursuant to an exemption
therefrom. Generally, under Rule 144, a person holding restricted securities for
a period of two years would be entitled to sell within any three month period, a
number of shares that does not exceed the greater of 1% of the then-outstanding
shares of common stock of the company or the average weekly trading volume for
the four weeks prior to the proposed sale. Sales of substantial amounts of
Common Stock by shareholders of the Company under Rule 144, or otherwise, or
even the potential for such sales, could have a depressive effect on the market
price of the Common Stock and could impair the Company's ability to raise
capital through the sale of its equity securities. All officers, directors and
current shareholders of the Company have agreed with the Underwriters not to
sell any of their restricted securities without the Underwriters' consent until
180 days from the date of this Prospectus. All of the restricted securities
currently outstanding will be available for sale in the public market upon the
expiration of such 180 day period. See "Shares Eligible for Future Sale" and
"Underwriting."
8
<PAGE>
THE COMPANY
The Company believes it is the largest independent remanufacturer of office
Work Stations in the United States as measured by revenues. Work Stations, which
consist of moveable panels, work surfaces, storage units, lighting and
electrical distribution combined into a single integrated unit, offer a popular
alternative to the desk, free-standing file and permanent drywall dividers
common to traditional office layouts. The Company purchases used Work Stations
from end-users, brokers and dealers throughout the United States and restores
these Work Stations to like-new condition at its remanufacturing facility
located in Richmond, Virginia. Limited finishing and assembly operations are
conducted at the Company's plant in Atlanta, Georgia. The Company primarily
sells its remanufactured Work Stations directly to end-users, which range from
small businesses to Fortune 500 companies. The Company's Work Stations are sold
principally in the mid-Atlantic and southeastern regions of the United States.
Since its inception in late 1989, the Company has experienced significant
growth in sales and profitability each year. The Company attributes its success
to date to (i) the growth in demand for Work Stations and the greater
availability of Work Stations for remanufacturing, (ii) its ability to provide
value to customers by producing like-new Work Stations that are typically sold
at 30% to 50% below the actual selling prices of new Work Stations of comparable
grade, (iii) its responsive customer service, including its ability to ship Work
Stations within three weeks of an order, (iv) the increasing demand for recycled
products, (v) its network of direct sales offices which allows the Company to
bypass dealers and dealer commissions while enhancing the Company's ability to
create long-term customer relationships and (vi) its experienced management team
with over 160 years of aggregate experience in the office furniture industry.
The Company's products compete against new and remanufactured Work Stations
as well as more traditional office furniture. Herman Miller, Haworth and
Steelcase are the leading manufacturers of new Work Stations in the United
States, collectively representing approximately two-thirds of the installed base
of Work Stations. The Company currently focuses on the remanufacturing of Work
Stations produced by Herman Miller. According to The Business and Institutional
Furniture Manufacturer's Association, Work Stations accounted for approximately
$3.3 billion of the $9.4 billion domestic market for office furniture in 1995.
The Company believes that the domestic market for used and remanufactured Work
Stations was approximately $500 million in 1995 and is growing more rapidly than
the market for new Work Stations.
The Company's goal is to become the dominant independent remanufacturer of
Work Stations in the United States. Key components of Open Plan's strategy to
achieve this goal include (i) opening additional direct sales offices in major
markets throughout the United States, (ii) further developing its innovative
sales and marketing techniques, (iii) expanding its remanufacturing capabilities
to include Work Stations produced by manufacturers other than Herman Miller and
(iv) continuing to capitalize on its high level of customer service and pricing
advantages.
Open Plan sells approximately 80% of its Work Stations through a network of
seven Company-owned direct sales offices with the remaining 20% of sales being
made through the Company's dealer network. The Company believes that each of the
fifty largest metropolitan areas of the United States will support a sales
office. In marketing its products, the Company utilizes several innovative
programs, including its asset banking program, which allows customers to
trade-in used Work Stations in exchange for a credit towards future purchases.
The Company's sales and purchasing efforts are supported by a telemarketing
division which identifies potential customers and sources of used Work Stations.
The Company's executive offices are located at 4299 Carolina Avenue,
Building C, Richmond, Virginia 23222, and its telephone number is (804)
228-5600.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,700,000 shares of
Common Stock offered hereby are estimated to be approximately $13.9 million
($16.0 million if the Underwriters' over-allotment option is exercised in full)
after deducting the underwriting discount and estimated offering expenses.
Approximately $5.4 million of the net proceeds of the offering will be used for
general corporate purposes, including the establishment of additional sales
offices and the expansion of the Company's product lines. Approximately $4.0
million of the net proceeds of the offering will be used to repay outstanding
debt incurred by the Company under its working capital line of credit with
Crestar Bank, Richmond, Virginia (the "Line of Credit"), which at April 30, 1996
had an outstanding balance of $3,952,000 with interest payable at the lesser of
Crestar Bank's prime rate or the thirty day LIBOR plus 2.25% (7.69% at May 1,
1996). The outstanding balance on the Crestar Bank Line of Credit at April 30,
1996 included borrowings of $1.1 million that were used to make S Corporation
distributions to shareholders on March 29, 1996. See "Prior S Corporation
Status." Approximately $3.5 million of the net proceeds of the offering will be
distributed to existing shareholders in connection with the termination of the
Company's status as an S Corporation. Approximately $1.0 million of the net
proceeds will be used to upgrade the Company's existing manufacturing
9
<PAGE>
facilities in Richmond, Virginia and to establish additional finishing plants in
Chicago, Illinois and New York, New York. The Company may also use a portion of
the net proceeds from the offering for acquisitions of remanufacturing and
related businesses. However, the Company is not currently engaged in
negotiations with any acquisition candidates and cannot predict whether, when or
on what terms any such acquisitions may occur.
Pending the application of proceeds, the Company will invest some or all of
the proceeds from this offering in income-producing securities which will
provide adequate safety of principal, such as U.S. Treasury securities and bank
certificates of deposit.
PRIOR S CORPORATION STATUS
The Company has been taxed under Subchapter S of the Internal Revenue Code
of 1986, as amended, as an "S Corporation" for federal income tax purposes since
its incorporation in 1989. As a consequence, the taxable net earnings of the
Company are taxed as income to the Company's shareholders in proportion to their
individual stockholdings, and the federal income taxes on such proportionate
share of the Company's taxable net earnings is the personal obligation of each
shareholder. Commencing in 1992, the Company made distributions to shareholders
to enable them to pay the federal and state income taxes on their pro rata share
of the Company's S Corporation earnings and to provide a return on their
investment. In 1994 and 1995, the Company made distributions to shareholders in
the amount of $469,401 and $947,773 for tax years 1993 and 1994, respectively.
On March 29, 1996, the Company borrowed $1,131,005 under its working capital
line of credit with Crestar Bank to make the distribution to shareholders for
tax year 1995. See "Use of Proceeds."
Prior to the closing of the offering, the Company's election to be taxed as
an S Corporation will be terminated, and the Company will declare a final cash
dividend to existing shareholders estimated to be approximately $3,495,000. This
final distribution to shareholders will be payable from the net proceeds of the
offering. The entire amount of the final distribution represents retained
earnings of the Company upon which the shareholders have paid, or will be
required to pay, federal and state income taxes. The estimated amount of
approximately $3,495,000 represents the sum of (i) approximately $2,895,000 in
retained earnings which remained undistributed at March 31, 1996 and (ii)
approximately $600,000 as the estimated net income (before income taxes) of the
Company from April 1, 1996 through the termination of the Company's S
Corporation status. The exact amount of the final distribution cannot be
determined at this time since it is dependent upon the actual net earnings of
the Company from April 1, 1996 through the termination of the Company's S
Corporation status. The $600,000 estimate is based on information available to
management of the Company as of the date hereof and is provided solely for
purposes of presenting the expected amount of the final S Corporation
distribution. The Company's actual results of operations may vary from the
estimated amount of net income. No portion of the final distribution will be
paid to new investors purchasing Shares in the offering.
Following the offering, the Company will be taxed for federal and state
income tax purposes as a regular or "C Corporation" and will pay income tax at
the corporate level on all taxable net earnings from the date of termination of
the Company's S Corporation status. If the Company's S Corporation status were
denied for any periods prior to such termination by reason of a failure to
satisfy the S Corporation election or eligibility requirements of the Code, the
Company would be subject to tax on its income as if it were a C Corporation for
these periods. The Company believes, however, that it has met all requirements
of the Code with respect to its S Corporation status. In addition, the Company
has entered into an agreement with each existing shareholder pursuant to which
each such shareholder has agreed to pay his pro rata portion of any additional
taxes and any related interest, penalties and expenses, which may be imposed
against or incurred by the Company based upon or in connection with a
determination by a taxing authority that the Company's S Corporation status was
invalid for any taxable periods up to the date immediately preceding the closing
of the offering. See "Risk Factors-Tax Matters Associated with Prior S
Corporation Status."
DIVIDEND POLICY
Since 1992, the Company has made distributions to shareholders of a portion
of its retained earnings to enable shareholders to pay federal and state income
taxes on their pro rata share of the Company's S Corporation earnings and to
provide a return on their investment. See "Prior S Corporation Status." The
Company currently anticipates that, following the closing of the offering, it
will retain any future earnings to provide funds for the operation and expansion
of its business, and therefore does not intend to pay dividends on its Common
Stock for the foreseeable future. Payment of dividends in the future will be
determined by the Company's Board of Directors and will be dependent upon the
financial condition, capital requirements and earnings of the Company, together
with other factors that the Board of Directors may deem relevant.
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
March 31, 1996, (ii) on a pro forma basis as of March 31, 1996 and (iii) on a
pro forma basis as adjusted as of March 31, 1996 to reflect the sale of the
Shares at an estimated initial public offering price of $9.00 per Share and the
application of the net proceeds from the offering. See "Use of Proceeds." This
table should be read in conjunction the financial statements of the Company and
the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED
<S> <C> <C> <C>
(IN THOUSANDS)
Long-term debt and capital leases, including current portion.......................... $ 435 $ 435 $ 435
Shareholders' Equity:
Preferred Stock, no par value, 5,000,000 authorized, no shares issued and
outstanding..................................................................... - - -
Common Stock, no par value, 50,000,000 authorized, 2,429,933 shares issued and
outstanding, 2,429,933 shares issued and outstanding pro forma, and 4,129,933
shares issued and outstanding, pro forma as adjusted............................ 1,215 1,215 15,081
Retained earnings................................................................ 2,895 2,943 -
Total shareholders' equity..................................................... 4,110 4,158 15,081
Total capitalization........................................................ $4,545 $4,593 $ 15,516
</TABLE>
(1) Adjusted to give effect to the recognition of net deferred income tax assets
of $48 upon the termination of the Company's status as an S Corporation. See
"Prior S Corporation Status."
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996
would have been approximately $4,158,000 or $1.71 per share of Common Stock,
after pro forma adjustments giving effect to the recording of net deferred
income tax assets of approximately $48,000 upon the termination of the Company's
status as an S Corporation. Pro forma net tangible book value per share
represents the amount of total tangible assets of the Company reduced by the
amount of its total liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale of the Shares at an estimated
initial public offering price of $9.00 per Share (after deduction of the
underwriting discount and estimated offering expenses), the adjusted pro forma
net tangible book value as of March 31, 1996 would have been approximately
$15,081,000 or $3.65 per share of Common Stock. This represents an immediate
increase in net tangible book value of $1.94 per share to existing shareholders
and an immediate dilution of $5.35 per Share to new investors purchasing the
Shares. The following table illustrates the pro forma per share dilution as of
March 31, 1996:
<TABLE>
<S> <C> <C>
Estimated initial public offering price per share............................................................ $9.00
Pro forma net tangible book value per share at March 31, 1996........................................... $1.71
Increase per share in pro forma net tangible book value attributable to new investors................... 1.94
Pro forma net tangible book value per share after the offering............................................... 3.65
Dilution per share to new investors.......................................................................... $5.35
</TABLE>
The following table sets forth, on a pro forma basis as of March 31, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per Share paid by the
existing shareholders and by the new investors in this offering, based upon the
estimated initial public offering price of $9.00 per Share (before deduction of
the underwriting discount and estimated offering expenses):
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders............................................ 2,429,933 58.8% $ 1,215,299 7.4% $0.50
New investors.................................................... 1,700,000 41.2 15,300,000 92.6 $9.00
Total............................................................ 4,129,933 100.0% $16,515,299 100.0%
</TABLE>
11
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for each of the years in the
five year period ended December 31, 1995 have been derived from the audited
financial statements of the Company and notes thereto. The financial data for
the three month periods ended March 31, 1995 and 1996 are derived from unaudited
financial statements. The unaudited financial statements reflect all adjustments
of a normal recurring nature which management considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three month period ended March 31, 1996 are
not necessarily indicative of the results that may be achieved for the entire
year ending December 31, 1996 or for any other interim period. The data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements, notes thereto and other financial and statistical information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
STATEMENT OF INCOME DATA:
Net sales......................................... $1,633 $3,670 $7,843 $12,218 $15,478 $4,574 $5,580
Cost of sales..................................... 1,124 2,256 5,441 8,015 10,434 3,084 3,595
Gross profit................................... 509 1,414 2,402 4,203 5,044 1,490 1,985
Operating expenses:
Selling and marketing.......................... 132 427 768 1,490 2,057 498 680
General and administrative..................... 275 422 733 909 975 254 342
Total operating expenses..................... 407 849 1,501 2,399 3,032 752 1,022
Operating income.................................. 102 565 901 1,804 2,012 738 963
Interest expense.................................. 19 18 50 105 163 30 63
Other (income) expense, net....................... (1) 8 (18) 12 (36) (6) (14)
Net income........................................ $ 84 $ 539 $ 869 $ 1,687 $ 1,885 $ 714 $ 914
STATISTICAL DATA:
Gross profit margin............................... 31.2% 38.5% 30.6% 34.4% 32.6% 32.6% 35.6%
Operating margin (1).............................. 6.2% 15.4% 11.5% 14.8% 13.0% 16.1% 17.3%
Ending number of sales offices.................... 1 3 4 7 6 7 7
PRO FORMA DATA (2):
Pro forma income before income taxes.............. $ 84 $ 539 $ 869 $ 1,687 $ 1,885 $ 714 $ 914
Pro forma provision for income taxes.............. - 208 344 673 746 283 356
Pro forma net earnings............................ $ 84 $ 331 $ 525 $ 1,014 $ 1,139 $ 431 $ 558
Pro forma net earnings per share.................. $ 0.42 $ 0.16 $ 0.21
Weighted average shares outstanding (3)........... 2,734,635 2,745,615 2,718,548
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
AT DECEMBER 31, PRO FORMA
1991 1992 1993 1994 1995 ACTUAL PRO FORMA(4) AS ADJUSTED(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Working capital....................... $271 $1,127 $1,725 $2,895 $3,360 $3,265 $3,313 $ 14,236
Total assets.......................... 706 2,015 3,911 5,783 9,009 9,849 9,897 16,820
Long-term debt and capital leases..... 53 31 236 169 486 435 435 435
Shareholders' equity.................. 315 1,352 2,104 3,547 4,327 4,110 4,158 15,081
</TABLE>
(1) Operating income as a percentage of net sales.
(2) Upon completion of the offering, the Company's status as an S Corporation
will terminate, and the Company will be subject to corporate income taxes.
Accordingly, pro forma net earnings reflect a pro forma adjustment for
income taxes which would have been recorded had the Company been a C
Corporation. See "Prior S Corporation Status."
(3) Weighted average common shares outstanding have been increased for 288,615
shares of Common Stock deemed to be outstanding, which represents the
approximate number of shares of Common Stock deemed sold by the Company at
an estimated initial public offering price of $9.00 per Share to fund the
assumed distribution of $2,598 to the Company's shareholders.
(4) Adjusted to give effect to the recognition of net deferred income tax assets
in the amount of $48 upon the termination of the Company's status as an S
Corporation.
(5) Adjusted to give effect to the sale by the Company of 1,700,000 shares of
Common Stock offered hereby at an estimated initial public offering price of
$9.00 per Share and the application of the estimated net proceeds of $13,866
as follows: (i) payment of the line of credit balance at March 31, 1996 of
$4,000, (ii) distribution of pro forma retained earnings of $2,943 at March
31, 1996, including the pro forma deferred income tax benefit of $48, and
(iii) the remainder to increase working capital.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since its inception in 1989, the Company has generated the majority of
revenues from the sale of remanufactured Work Stations and to a lesser extent
from the sale of "as-is" Work Stations and rentals. The Company's sales are
highly dependent upon its network of Company-owned sales offices and sales
personnel because the Company sells approximately 80% of its Work Stations
directly to end-users. Sales from these offices have increased each year as the
Company has added sales personnel, as these personnel have gained experience and
as the Company has achieved greater consumer awareness and name recognition.
Generally, branch sales offices do not generate significant sales in their first
six months to one year of operation.
The Company sells approximately 20% of its Work Stations through its dealer
network. While the Company prefers to sell directly to the end-user through its
own sales offices, it will continue to use dealers in non-exclusive
relationships, in markets that are too small to support a sales office or in
markets where it does not expect to be able to open a sales office in the near
future. Selling through Company-owned sales offices rather than through dealers
increases the Company's selling costs due to increased overhead and salesperson
compensation expenses. However, the Company believes that these increased costs
are more than offset by the portion of the dealer gross profit margin captured
by the Company. The Company believes that the fifty largest metropolitan areas
in the United States are of sufficient size to support a Company sales office. A
core component of the Company's growth strategy is to increase sales by opening
new sales offices and adding additional sales personnel. To date, the Company's
limited financial resources have constrained the pace of its sales office
expansion.
Historically, the Company's business has been significantly affected by
seasonal factors. The Company typically has greater sales revenue during the
first and fourth quarters. Since most of the Company's orders are shipped within
three weeks of booking the order, the Company has no significant backlog of
orders and forecasting short-term revenue levels is difficult. The Company uses
temporary employees and other measures to increase production capacity during
periods of higher sales while keeping its baseline operating expenses to a
minimum during periods of lower sales.
RESULTS OF OPERATIONS
The following table sets forth the relationship of costs and expenses as a
percentage of the Company's sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 69.4 65.6 67.4 67.4 64.4
Gross profit....................................... 30.6 34.4 32.6 32.6 35.6
Selling and marketing expenses..................... 9.8 12.2 13.3 10.9 12.2
General and administrative expenses................ 9.3 7.4 6.3 5.6 6.1
Operating income................................... 11.5 14.8 13.0 16.1 17.3
Other (income) expense............................. 0.4 1.0 0.8 0.5 0.9
Net income......................................... 11.1% 13.8% 12.2% 15.6% 16.4%
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
SALES. Sales in the first three months of 1996 were $5,580,000, an increase
of $1,010,000 or 22.1% over the same period in 1995, despite the number of sales
offices remaining constant at seven. This increase was primarily the result of
increased same-office sales in each of the five offices open during both periods
as well as modest sales from two new offices. The two new offices, located in
Chicago, Illinois and New York, New York, were opened during the fourth quarter
of 1995 and the first quarter of 1996, respectively, and replaced the two
Florida offices that were closed in 1995. The two new offices performed at sales
levels typical for new sales offices during the initial months of operation. The
Company believes the increase in same-office sales is the result of additional
market penetration and an increase in the experience of its sales force.
COST OF SALES. The Company's cost of sales includes cost of raw materials
(used Work Station components, new fabric, laminate, paint, and other materials)
labor, supplies, freight, utilities, and other manufacturing related expenses.
13
<PAGE>
The increase in cost of sales for the first quarter of 1996 of $510,000 was
primarily attributable to increased sales volume. In addition, the gross profit
margin increased during the period to 35.6% from 32.6%. This increase was
primarily attributable to economies of scale in purchases of component parts and
in cost reductions realized in the Company's wood fabrication operations which
were commenced in the fourth quarter of 1995.
Component and fabric costs increased $220,000 or 13.3%. As a percentage of
sales, component and fabric costs decreased from 36.2% to 33.7%. This decrease
is largely attributable to cost savings realized as a result of the commencement
of the manufacture of certain component parts in the Company's wood fabricating
facility that were previously purchased from third parties.
Remanufacturing costs increased $290,000 or 20.2%. Compensation costs, the
largest single component of remanufacturing costs, increased $210,000 or 39.6%.
Compensation as a percentage of sales increased from 11.6% to 13.3%. The
increase was primarily attributable to the additional employees added to staff
the wood fabrication operations which commenced in the fourth quarter of 1995,
and to staff a second shift in certain other departments of the Richmond
facility. The increase in compensation related to the wood fabricating operation
had the effect of lowering component costs as certain components were
manufactured rather than purchased. While the manufacturing of these components
resulted in increased compensation costs, the overall cost of sales for these
components was reduced. The Company plans to expand this practice wherever
production capabilities allow and cost savings can be achieved. The partial
second shift, which was comprised almost entirely of temporary workers, was
added in response to the additional demand for certain products and increased
sales volume. Other remanufacturing costs increased $80,000 or 8.9% primarily as
a result of increased sales volume. As a percentage of sales, these costs
decreased from 19.7% to 17.6%.
SELLING AND MARKETING EXPENSES. The most significant selling and marketing
expenses are salesperson compensation, advertising and other marketing expenses
and rents. The Company compensates its salespeople through a combination of
salaries, commissions and bonuses. While most of these expenses are directly
related to the current year's sales, certain other marketing expenses are
incurred to build name recognition and generate sales leads which may contribute
to sales in later periods.
During the first three months of 1996, the Company continued to expand its
marketing efforts through increased advertising and expansion of its
telemarketing efforts begun in 1995. Salesperson compensation increased $91,000
or 27.9%. Advertising costs increased $65,000 or 110.5%, as the Company expanded
advertising into the two new markets as well as continued advertising in
existing markets.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
include administrative salaries and related employee benefits, and legal and
accounting fees. Total general and administrative expenses increased $88,000 or
34.6% relating primarily to increased legal and accounting fees and increased
administrative staffing to support increased sales volume.
OTHER (INCOME) EXPENSE. The Company operates under a Line of Credit from
Crestar Bank, Richmond, Virginia, that bears interest at the lesser of the
Crestar Bank prime rate or the thirty day LIBOR plus 2.25% (7.33% at March 31,
1996). The Company also has obligations under long-term notes incurred in
connection with the acquisition of manufacturing equipment. Interest expense
increased $33,000 or 110.0% during the first quarter of 1996 versus the prior
year period as a result of increased borrowings to support increases in
inventory and accounts receivable.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
SALES. Sales in 1995 were $15,480,000, an increase of $3,260,000 or 26.7%
over 1994. This increase in sales was achieved despite a net decrease during
1995 in the Company's number of sales offices in operation from seven to six.
Fiscal year 1995 was the first year in the Company's history that its ending
sales offices decreased. The Company did open a sales office in Chicago, but
this opening was offset by the closing of two sales offices in Florida. Expiring
leases for its offices in Florida coupled with limited financial resources and a
more favorable opportunity in Chicago resulted in the Company's decision not to
retain the Florida offices.
The Company increased its sales personnel from 18.2 full-time equivalents
("FTEs") in 1994 to 25.2 FTEs in 1995, an increase of 38.5%. The Company
believes that this increase in sales personnel was the primary reason for the
increased sales volume during 1995. Another factor contributing to the sales
growth in 1995 was an average price increase of 5% that was implemented by the
Company in August 1995.
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COST OF SALES. The increase in cost of sales for 1995 of $2,420,000 was
primarily attributable to increased sales volume and increases in the cost of
certain raw materials as described below. As a result of the increase in cost of
sales, the gross profit margin decreased slightly during 1995 to 32.6% from
34.4% in 1994.
Component and fabric costs increased $1,450,000 or 35.1%. As a percentage
of sales, component and fabric costs increased from 33.8% to 36.0%. This
increase is largely attributable to the purchase of certain higher priced new
components rather than used components due to the limited availability of such
used components. In particular, the Company began purchasing certain wood
components from third party suppliers at prices substantially higher than had
been customary in the used market. In the fourth quarter, the Company expanded
its woodworking capabilities in order to manufacture these components internally
at costs more closely aligned with the lower costs found in the used market.
Also, suppliers of new metal components and parts increased prices early in 1995
in response to a general increase in the price of steel. During 1995 the Company
began contracting with third party metal suppliers to provide certain component
parts which are either in short supply in the used furniture market or which are
more economically purchased new. Rather than buying additional Work Stations to
source a single part, the Company buys only the parts needed. The Company is
expanding this practice where practical and believes significant cost savings
can be achieved as compared to purchasing all parts in the used furniture
market.
Remanufacturing costs increased $970,000 or 24.9%. Compensation costs, the
largest single component of remanufacturing costs, increased $250,000 or 12.6%.
Compensation as a percentage of sales decreased from 16.3% to 14.5% as the
Company continued to reduce labor costs per unit produced. Expressed as a
percentage of cost of sales, compensation declined from 24.8% to 21.5%. Other
remanufacturing costs increased $720,000 or 37.9% primarily as a result of
increased freight, utility and employee benefit costs. As a percentage of sales
these costs increased from 15.5% to 16.9%. During 1995 the Company relocated its
Washington, D.C. sales office and established a regional installation operation.
The building was leased early in the year, but the installation operation was
not staffed until late in the year. Consequently, rent expense was incurred for
a portion of the year without corresponding revenues.
SELLING AND MARKETING EXPENSES. During 1995 the Company continued to expand
its marketing efforts through increased advertising and the establishment and
operation of a telemarketing function. While print and other media advertising
have been effective in identifying short term leads, and to some extent in
building name recognition, the Company believes the telemarketing process will
be more effective in identifying longer term prospects and sources of supply for
used Work Stations. Expenses incurred in 1995 in operating the telemarketing
function include salaries, employee benefit costs, telephone expense and call
list fees.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative
expenses increased $60,000 or 6.6%. As a percentage of sales these expenses
decreased to 6.3% in 1995 from 7.4% in the prior year, and further decreases are
expected in the future as the Company continues to enjoy certain economies of
scale.
OTHER (INCOME) EXPENSE. Interest expense increased $60,000 or 60.0% during
1995 as a result of increased borrowings under the Line of Credit to support
increases in inventory and accounts receivable.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993
SALES. Sales in 1994 were $12,220,000, an increase of $4,380,000 or 55.9%
over sales in 1993. The Company's sales are highly dependent upon its
company-owned sales offices which increased from four offices at the end of 1993
to seven offices at the end of 1994. The Company also increased sales personnel
from 8.4 FTEs in 1993 to 18.2 FTEs in 1994, an increase of 117%. The Company
believes that these increases in sales offices and personnel were the primary
reasons for the increase in sales during 1994.
COST OF SALES. Cost of sales increased $2,580,000 or 47.4% during 1994. The
gross margin increased to 34.4% from 30.6% in 1993, primarily as a result of
reduced production costs per unit as described below. Component and fabric costs
increased $1,520,000 or 58.2%. As a percentage of sales, components and fabric
costs increased from 33.3% to 33.8%.
Remanufacturing costs increased $1,060,000 or 37.5%. Compensation costs,
the largest single component of remanufacturing costs, increased $440,000 or
28.4%. During 1994 the Company converted its production facility from a "job
shop" to a "process shop" to enable it to reduce labor costs per unit produced.
Partly as a result of this conversion, compensation as a percentage of sales
decreased from 19.8% to 16.3%. As a percentage of cost of sales, compensation
decreased from 28.5% to 24.8%. Other remanufacturing costs increased $620,000 or
48.4%. As a percentage of sales these costs decreased from 16.3% to 15.5% as the
Company more fully utilized production capacity added in 1993.
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SELLING AND MARKETING EXPENSES. During 1994 the Company continued to expand
its marketing efforts through increased advertising and promotion. Total selling
expenses increased $720,000 or 93.5%. Salesperson compensation increased
$540,000 or 103.8% resulting from a large increase in the number of salespeople
employed. Advertising and promotional expenses increased $80,000 or 114.3% in
support of the larger sales force.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative
expenses increased $180,000 or 24.7%. As a percentage of sales, these expenses
decreased to 7.4% from 9.3%. The number of administrative personnel was
increased to support the higher sales volume, while all other expenses were
tightly controlled.
OTHER (INCOME) EXPENSE. Interest expense increased $50,000 or 100.0% during
1994 as a result of increased borrowings to support increases in inventory and
accounts receivable.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's working capital needs have been driven
primarily by the growth associated with its rapidly expanding business. The
Company's primary sources of liquidity have been cash generated from operations
and borrowings under its Line of Credit from Crestar Bank. On May 9, 1996, the
Company increased the maximum amount available under its Line of Credit to
$5,000,000 and extended the expiration date to April 30, 1997. At April 30,
1996, there were $3,952,000 in borrowings outstanding under the Line of Credit
partly as a result of a dividend paid to existing shareholders on March 29,
1996. See "Prior S Corporation Status." Borrowings on the Line of Credit bear
interest at the lesser of the Crestar Bank prime rate or the thirty day LIBOR
plus 2.25% (7.69% at May 1, 1996).
Net cash provided by (used in) operating activities was $(420,000) for the
quarter ended March 31, 1996, and $10,000, $290,000 and $(330,000) for the years
ended December 31, 1995, 1994 and 1993, respectively. Because of the Company's
rapid growth, substantially all of its net cash provided by operating activities
(before changes in operating assets and liabilities) for the quarter ended March
31, 1996 and in 1995, 1994 and 1993 was used primarily to fund increased
receivables and inventories. Trade accounts receivable and inventories increased
a total of $1,190,000 during the quarter ended March 31, 1996, $2,440,000 during
1995 and $1,460,000 during 1994. The increases in trade accounts receivable were
due primarily to the growth in sales volume and in part to increases in the
accounts receivable collection period (the "Collection Period"). The Collection
Period, computed by dividing ending accounts receivable by the average daily
sales during the quarter, grew from 43 days at December 31, 1994 to 63 days at
December 31, 1995 to 64 days at March 31, 1996. The 43-day Collection Period at
December 31, 1994 was unusually low due to prepayments on certain orders shipped
in the fourth quarter of 1994. Since 1993, the Company's Collection Period has
ranged from a low of 43 days to a high of 71 days, with an average of 55 days.
Total bad debt writeoffs, net of recoveries, for the past three calendar years
were $180,000 or 0.5% of sales. The Company requires most new customers to pay a
cash deposit at the time an order is placed primarily as a means to reduce its
exposure to credit losses. Customer deposits, excluding non-cash deposits made
under the Company's asset banking program, as of December 31, 1995 and 1994 were
$280,000 and $300,000, respectively. The Company does not anticipate future
credit losses to differ materially from historical percentages. Inventories at
December 31, 1994 and 1995 and for the quarter ended March 31, 1996 increased in
line with the general increase in the Company's business. In addition, since
prices of used furniture vary greatly in the marketplace based on seasonality
and source, the Company generally purchases inventory when prices are favorable
rather than based on target stocking levels. While this methodology may increase
carrying costs somewhat, overall costs are generally reduced.
Net cash used in investing activities was $210,000 for the quarter ended
March 31, 1996, and $520,000, $100,000 and $270,000 for the years ended December
31, 1995, 1994 and 1993, respectively. During 1995, the Company's primary use of
cash in investing activities was for the purchase of $525,000 in factory and
office equipment. The most significant investment was the expansion and
modernization of the Richmond wood fabricating facility. This facility produces
new panels, worksurfaces, and shelf ends. The Company has no plans for capital
expenditures during the remainder of 1996 other than those discussed under "Use
of Proceeds."
Net cash was provided by financing activities for the first quarter of 1996
and in 1995, 1994 and 1993. In addition to borrowings under the Line of Credit,
the Company financed the acquisition of woodworking equipment in 1995 through a
three-year term note with a principal amount of $300,000. The note bears
interest at 7.75% and requires current payment of principal and interest.
Historically, the Company has distributed a portion of its earnings each year to
its shareholders to enable them to pay federal and state income taxes on their
pro rata share of S Corporation income and to provide them with a return on
their investment. The Company distributed $950,000 to shareholders in 1995 and
$470,000 in 1994. The Company made cash payments in 1995 totaling $140,000 to
purchase and retire Common Stock, thereby reducing the number of outstanding
shares from 2,457,000 at December 31, 1994 to 2,429,933 at December 31, 1995.
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As the Company implements its planned expansion, it will require more funds
than it has historically needed. Management believes that the net proceeds of
the offering, together with cash generated from operations and available
borrowings under the Line of Credit, will provide adequate funds for the
Company's anticipated needs, including working capital and expansion of sales
offices and product lines, for at least twelve months following the offering.
Management also believes that cash provided from operations will be sufficient
to satisfy all existing debt obligations as they mature.
IMPACT OF INFLATION
Inflation has not had a significant effect on the Company's operations.
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BUSINESS
The Company was incorporated under the laws of the Commonwealth of Virginia
on September 11, 1989. The Company believes it is the largest independent
remanufacturer of office Work Stations in the United States as measured by
revenues. The Company operates a remanufacturing facility in Richmond, Virginia
and a limited finishing and assembly plant in Atlanta, Georgia. To date, the
Company's products have been sold principally in the mid-Atlantic and
southeastern regions of the United States.
THE OFFICE FURNITURE INDUSTRY
The trend in the office furniture industry for the past twenty years has
been away from a simple desk and file design to a sophisticated Work Station
design because of the flexibility and productivity advantages that such Work
Stations provide. Work Stations have become more sophisticated as the usage of
computers and telecommunications equipment has increased in modern offices.
The market for new and remanufactured office furniture in the United States
for 1995 has been estimated to be approximately $9.4 billion. This represents an
increase of approximately 7.8% over the estimated 1994 market for new and
remanufactured office furniture of approximately $8.7 billion. The Company
believes that the market for used and remanufactured Work Stations was
approximately $500 million in 1995. The Company believes that the
remanufacturing sector of the industry will continue to grow at a much faster
rate than the new office furniture market.
The Company competes in the office furniture industry with national and
regional manufacturers of new office furniture and with local and regional
remanufacturers of used office furniture. Steelcase, Herman Miller and Haworth
constitute the dominant manufacturers, collectively representing approximately
two-thirds of the installed base of Work Stations. Each of these manufacturers
has created a unique system for connecting panels, power and telecommunications
raceways, resulting in virtually no interchangeability between products of
different manufacturers. Each manufacturer's Work Stations provide for several
hundred variations. In recent years, more sophisticated telecommunications,
power distribution and wire management elements have been added to Work Stations
as computer usage has increased in offices. With respect to independent
remanufacturers of used Work Stations, the Company believes that the vast
majority of such remanufacturers are local operations serving a single city or
metropolitan area from a single sales office.
Since the mid-1980s, end-users with existing Work Stations have had four
primary options when considering changes in their existing Work Stations: (i)
acquire upgraded power components, new fabric and panel trim from the Work
Station manufacturer to be retrofitted on existing Work Stations, frequently
during installation in a new facility, (ii) acquire new Work Stations from a
manufacturer or dealer while disposing of existing furniture and Work Stations
to a broker or remanufacturing company, (iii) acquire remanufactured Work
Stations while disposing of the old furniture and Work Stations to brokers or
the remanufacturer, and (iv) acquire "as is" Work Stations.
The business of remanufacturing Work Stations has grown steadily over the
past several years. The Company believes this growth is principally due to the
greater availability of high quality remanufactured Work Stations at prices
substantially below manufacturers' retail list prices for new Work Stations,
thereby providing end-users with substantial value. In addition, the growth of
the remanufacturing business has been assisted by the increased availability of
used Work Stations for remanufacturing. Used Work Stations have become more
readily available in recent years due to an increased base of installed Work
Stations and corporate events such as mergers, acquisitions, divestitures,
downsizings and relocations. The adoption of recycling programs or policies by
businesses has also been a major factor leading to increased demand for
remanufactured Work Stations.
OVERVIEW OF THE COMPANY'S OPERATIONS
The Company purchases used Work Stations from end-users, brokers and
dealers and transports the Work Stations to its facility in Richmond, Virginia.
The Work Stations are disassembled, inventoried by component parts and stored.
Remanufacturing usually includes sanding, painting, laminating, reupholstering
and updating electrical components. All of the Company's components installed
during the remanufacturing process meet the safety standards established by
Underwriters Laboratories. The Company believes it is one of only a few
remanufacturers whose Work Station components are listed with Underwriters
Laboratories.
The Company's design staff works with customers to maximize available
office space through customized space plans. Customers are able to choose from
among several colors of laminate and paint and over 1,000 different fabrics.
After the initial sales call, the Company responds to the customer's needs with
a proposal which includes a computer-aided design
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(CAD) of the space, the number of Work Stations and the cost, typically within
72 hours. Once a purchase order is received, the fabric selected by the customer
is applied to the panels, and the various components of the Work Stations are
assembled for shipping. The remanufactured Work Stations sold by the Company's
direct sales force are installed at the customer's offices by the Company's
employees or by approved outside installers giving the Company control over the
entire process. The Company's large inventory of disassembled component parts
permits shipping generally within three weeks of receiving a purchase order. The
Company believes that its ability to provide high quality Work Stations at
discounted prices, coupled with its emphasis on superior customer service
through its design staff and Company trained or approved installers, gives it a
competitive advantage over manufacturers and other remanufacturers of Work
Stations.
The Company's Richmond, Virginia facility includes all of the equipment
required to manufacture and/or remanufacture Work Stations including closed and
open painting and drying booths as well as sanding, woodworking and
reupholstering equipment. Plant layout has been designed to facilitate the most
efficient flow of materials and streamline the remanufacturing process through
disassembly, storage, remanufacturing and shipping. Quality control for the
remanufactured products occurs at various stages during the remanufacturing
process including the final quality control verifications at shipment and upon
installation. Limited finishing and assembly operations also take place at the
Company's facility in Atlanta, Georgia.
Open Plan primarily sells Work Stations through a network of seven
Company-owned direct sales offices. The Company believes that each of the fifty
largest metropolitan areas of the United States will support a sales office. In
marketing its products, the Company utilizes several innovative programs,
including its asset banking program, which allows customers to trade-in used
Work Stations in exchange for a credit towards future purchases. The Company's
sales and purchasing efforts are supported by a telemarketing division which
identifies potential customers and sources of used Work Stations.
BUSINESS STRATEGY
The Company believes its success is attributable to the following key
components of its business strategy:
LOW COST PRODUCER. The Company buys used Work Stations for approximately 6%
to 10% of the manufacturer's list price from end-users and brokers. Used Work
Stations are sourced through the Company's customers, telemarketing efforts,
dealer network, industry brokers and its own sales force. The Company generally
maintains a level of capital that permits it to purchase used Work Stations at
opportunistic prices when they become available. As a result, the Company's cost
of inventory is believed to be lower than other remanufacturers that purchase
available inventory at current market prices at the time of a customer's order.
By opportunistically purchasing inventory and streamlining operations to provide
a more efficient manufacturing process, the Company has been able to maintain
gross margins of 30% to 35% on Work Stations sold. The Company expects to
continue emphasizing low cost manufacturing by increasing automation within its
plants and utilizing additional eight-hour work shifts to manufacture and
assemble certain components of Work Stations.
VALUE PRICING. The Company's marketing strategy targets both large and
mid-sized businesses. Although the Company's typical order is for ten Work
Stations, or approximately $25,000, the Company also serves several Fortune 500
customers who generally order in much larger quantities. In a typical order, the
Company will sell remanufactured Work Stations at 30% of the manufacturer's list
price for new Work Stations. In contrast, new office furniture from a major
manufacturer will typically sell through such manufacturer's dealer network at
approximately 55% of the manufacturers' list price for new Work Stations. The
Company believes that its ability to sell remanufactured Work Stations at
substantial discounts to the manufacturers' list price gives the Company a
competitive advantage that will help sustain future growth. Due to volume
discounting by the manufacturers and their dealers, the price differential
becomes smaller as the size of the customer order becomes larger. Nevertheless,
the Company believes its low overall costs provide it with a pricing advantage
on all but the very largest orders.
CUSTOMER SERVICE. The Company believes that it offers superior customer
service particularly in providing a quick response to customer needs. The
Company's designers typically deliver to potential customers a computer-assisted
floor plan design and pricing information within 72 hours of making the initial
contact with the customer. The Company delivers substantially all of its Work
Stations to customers within three weeks from the date of the purchase order, as
compared to the typical delivery time for new Work Stations of eight to sixteen
weeks. The Company only uses company employees or approved outside contractors
to install its Work Stations. As a result, the Company can better manage
customer satisfaction and quality control during the installation process. For
example, if additional parts or design changes are required during installation
of the Work Stations, the Company is positioned to quickly supply the needed
parts or make the necessary changes.
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DIRECT SALES FORCE. The Company employs six sales managers and twenty-nine
trained salespersons located in seven sales offices in the metropolitan areas of
Richmond, Washington, D.C./Baltimore, Atlanta, Charlotte, Nashville, Chicago and
New York. The salespersons are supported by seven telemarketers who collect data
on existing and potential customers. The Company's sales force is compensated
through salary, commissions and bonuses that are based on gross sales to
maximize incentives to produce sales. The Company believes that its direct sales
force provides an important competitive advantage over manufacturers of new Work
Stations who distribute through a dealer network and over independent
remanufacturers. Independent remanufacturers are primarily local operations
without a significant number of trained sales employees. Dealers often have
conflicts of interest as a result of carrying other products that compete with
Work Stations. A direct sales force not only gives the Company complete control
over the selling process, but also allows the Company to capture a portion of
the dealer's "mark-up" in addition to the manufacturing profit.
GROWTH STRATEGY
In recent years, the Company has grown by increasing its direct sales staff
and manufacturing capacity. The Company's strategy for future growth includes
the following elements:
EXPANSION OF MARKETS. Approximately 90% of the Company's sales through the
Company's seven sale offices presently occur in the mid-Atlantic and
southeastern regions of the United States. The Company believes it can
substantially increase sales, even without further expansion of its product
line, by opening new sales offices throughout the United States. The Company
believes that the fifty largest metropolitan areas in the United States will
support a sales office. Consequently, the Company intends to use a portion of
the proceeds of the offering to establish sales offices in new market areas,
including the midwestern, southwestern and western regions of the United States,
and to enhance its current sales force of 33 employees as new sales offices are
established.
The following table shows the Company's annual net sales, by sales office
location, for the five years ended December 31, 1995:
<TABLE>
<CAPTION>
ANNUAL SALES BY LOCATION
LOCATION DATE OPENED 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Richmond............................................................ October 1989 $1.6 $3.2 $5.1 $ 5.5 $ 6.2
Washington, D.C./Baltimore.......................................... April 1991 - 0.5 1.6 2.9 3.5
Atlanta............................................................. November 1991 - - 0.8 2.8 3.1
Charlotte........................................................... August 1994 - - - 0.1 1.0
Nashville........................................................... August 1994 - - - 0.1 0.6
Chicago............................................................. November 1995 - - - - 0.1
New York............................................................ March 1996 - - - - -
Closed offices (1).................................................. - - - 0.3 0.8 1.0
Total........................................................ $1.6 $3.7 $7.8 $12.2 $15.5
Salespersons (2)............................................. 2.0 3.8 8.4 18.2 25.2
</TABLE>
(1) Includes sales offices in Fort Lauderdale and Tampa, Florida that were
closed in 1995.
(2) Represents the number of full-time equivalent salespersons employed during
the years indicated.
INNOVATIVE MARKETING PROGRAMS. The Company primarily markets directly to
end-users and, accordingly, has developed a number of innovative marketing
programs. These programs include:
Asset Banking. The Company has established an "asset banking" program in
which businesses may dispose of used Work Stations by "depositing" them with the
Company in exchange for a "credit" toward purchases of the Company's
remanufactured Work Stations in the future. The asset banking program eliminates
storage costs for the customers while at the same time positioning the Company
for a future sale and increasing inventory.
Telemarketing. The Company employs seven telemarketers to prospect for
customers and to acquire used Work Stations for remanufacturing. The Company has
established a database through its telemarketing efforts that identifies
immediate, intermediate and long term prospects for the purchase of
remanufactured Work Stations. There are currently in excess of 100,000 records
in the database and it is the Company's goal to build the most complete database
of any furniture systems producer in the industry. The Company believes that due
to the traditional industry practice of manufacturers distributing their product
through local dealers, original equipment manufacturers have not developed such
a database.
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Private Label. The Company is currently planning to introduce its own newly
manufactured private label Work Stations which it intends to market and sell
through national office products retailers. Although the Company has no prior
experience in manufacturing new Work Stations, the process is similar to the
remanufacturing of used Work Stations. The Company believes it is
well-positioned to capitalize on a private label opportunity that is unavailable
to many manufacturers or remanufacturers who would be competing against their
own dealer network by marketing a private label product through a national
office products retailer. The Company has no such impediment.
Rental. The Company also recently established a rental program in which "as
is" and remanufactured Work Stations are rented to customers and, upon
expiration of the term of the rental, returned to the Company for additional
rental or remanufacturing and sale to other customers. To date, substantially
all of the Company's rentals have been of "as is" Work Stations, although the
Company is planning to expand its rentals of remanufactured Work Stations. The
rental program is attractive to certain customers as a cost-effective
alternative to purchasing Work Stations.
GSA Program. The United States Government Services Administration ("GSA")
recently approved the Company's inclusion on the GSA's New Introductory Schedule
as a distributor of Work Stations and other related products and services to the
federal government. The Company is currently in the process of negotiating the
pricing structures that will be available to the government. This process is
expected to be completed during the second quarter of 1996.
For additional information on the Company's marketing strategies, see
"-Sales and Marketing."
EXPANSION OF PRODUCT LINE. The Company historically has concentrated its
efforts on remanufacturing Herman Miller Work Stations. The Company believes
that it can apply its inventory management, low cost manufacturing and sales and
marketing techniques to products manufactured by Steelcase and Haworth.
Dedicated plant facilities will allow the Company to maintain its operating
efficiency and productivity in manufacturing. The Company intends to use a
portion of the proceeds of the offering to acquire or construct dedicated plant
facilities for remanufacturing Steelcase and/or Haworth products within twelve
to twenty-four months following completion of the offering.
The Company also expects during 1996 to begin to offer its own line of new
office chairs assembled from components acquired from original equipment
manufacturers. The office chairs will be sold as a complement to the sale of
Work Stations and to enhance the concept of one-stop shopping. The Company
currently purchases office chairs from a nationally recognized manufacturer for
sale under a private label program. Fourteen chairs with styles ranging from
adjustable task chairs to high-back executive seating to stack chairs are
currently available. The sale of new office chairs is expected to increase
profit margins by providing more flexibility in finish options and reducing lead
times to customers.
PRODUCTS
The Company's principal product to date has been remanufactured Herman
Miller Work Stations. The Company believes that Work Stations offer significant
advantages over the traditional desk, free-standing file and permanent drywall
dividers common to historical office layouts. Work Stations enable businesses to
house more people in a given space than previously was possible because Work
Stations combine moveable panels, work surfaces, storage units, lighting and
electrical distribution combined into a single integrated unit. The end result
is less square feet of office space per worker and, therefore, lower facility
costs per employee.
Work Stations often are acoustically treated to provide conversational
privacy required by closer quarters. Because Work Stations usually are lower
than ceiling height, lighting, heating, ventilation and air conditioning are not
confined to individual spaces, allowing distribution among more workers which
reduces building and operating costs per employee. Work Stations incorporate
electrical circuitry necessary to operate computers and telecommunications
equipment. The Company's Work Stations meet the safety standards established by
Underwriters Laboratories. The Company believes it is one of only a few
remanufacturers whose Work Station components are listed with Underwriters
Laboratories. Such listing provides the Company with a significant marketing
advantage over other independent remanufacturers.
Manufacturers and remanufacturers customize Work Stations to accommodate
specific job functions. Each manufacturer offers its Work Stations with or
without power access in a variety of panel heights, widths, paint colors and
fabrics. Work surfaces, drawer and file pedestals, storage components and
accessories are offered with various size and finish options.
The core of the Work Station is a panel two inches thick with widths
varying from 12 inches to 60 inches. Heights vary from 34 inches to 96 inches.
The panel frame may be covered with a laminated surface or, most frequently,
fabric over an acoustical batting to which removable, slotted steel side rails
and top caps are attached to accommodate the customized
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interconnection of panels and the hanging of work surfaces or other components.
Electrical outlets and space for telephone and computer cables are provided by
removable raceways of metal and plastic attached at the base of the panel.
Using component parts purchased from third parties, the Company intends to
assemble and upholster its own line of office chairs to sell with its Work
Stations. The Company believes that expanding its product line to offer office
chairs is a natural extension of its product line and an excellent growth
opportunity that fits well with its current operations. In addition, the Company
is planning to introduce its own private label Work Stations which it intends to
market and sell through a national office products retailer. See "-Growth
Strategy."
INVENTORY
The number of installed Work Stations has increased steadily over the past
twenty years and is now believed to exceed 19 million. The gradual aging of this
installed base of Work Stations has resulted in the increased availability of
used Work Stations for remanufacturing. The Company continuously seeks
opportunities to purchase used Work Stations throughout the United States
through competitive bids or private negotiations with end-users, brokers and
dealers. The Company also operates a telemarketing program to locate inventory
throughout the United States.
Manufacturers of new Work Stations have developed trade-in programs to
assist their dealers in encouraging their customers to purchase the most current
products. Trade-ins also have been used to entice customers of dealers and
manufacturers to trade-in a competitor's Work Stations for new Work Stations of
the manufacturer. While each manufacturer has a slightly different approach to
the trade-in market, each manufacturer frequently contacts a list of brokers or
remanufacturers, such as the Company, to solicit the highest bid for the entire
inventory.
At the time the Company purchases inventory, it disassembles the Work
Stations and ships the disassembled Work Stations to its facilities where the
Company determines whether the parts should be cleaned and sold as part of its
"as is" sales program or remanufactured and stored as inventory and sold
thereafter. The Company currently has in its inventory the requisite component
parts with which to remanufacture approximately 5,000 Work Stations. The Company
strives to ship its customers' orders in three weeks or less. The Company also
has the ability to purchase new parts and accessories which are in short supply
in the used furniture market from third party vendors, thereby eliminating the
need to purchase additional Work Stations for these specific parts. The Company
believes its ability to opportunistically acquire used Work Stations at
attractive prices and hold them for future sale gives it a competitive advantage
over other remanufacturers with less capital to do the same.
The Company utilizes a computerized inventory control system which serves
its sales, production, shipping and accounting functions. The system enables the
Company to continually monitor its inventory of component parts, to determine
its needs for additional purchases of used Work Stations, to track its work in
process and to facilitate the prompt delivery of remanufactured Work Stations to
its customers.
The Company plans to use a portion of the net proceeds of this offering to
acquire additional inventory of Herman Miller Work Stations as well as inventory
of Steelcase and/or Haworth in connection with the Company's planned expansion
into additional product lines.
DISTRIBUTION
SALES OFFICES. The Company operates seven sales offices in the metropolitan
areas of Richmond, Washington D.C./Baltimore, Atlanta, Charlotte, Nashville,
Chicago and New York. The Company believes that marketing and distributing its
Work Stations through a direct sales force located in geographically dispersed
sales offices gives it a competitive advantage over independent remanufacturing
competitors who are typically local companies with limited sales and
distribution capacity outside of their immediate market area. Approximately 80%
of Open Plan's sales historically have been made to end-users by the Company's
own sales representatives. The Company intends to open a substantial number of
additional sales offices as conditions permit using a portion of the proceeds of
the offering.
Marketing and distributing its Work Stations through its own sales staff
allows the Company to eliminate the costs and additional price mark-up
associated with wholesale distribution, as well as enabling the Company to
retain direct control and oversight of its products and the selling process. A
direct sales force also permits the Company to deliver quality service to each
customer through its design and installation programs.
DEALER NETWORK. In addition to its own sales staff, the Company maintains a
dealer network in those markets that are not sufficiently developed to support a
sales office or in larger markets where the Company does not yet have a sales
office. The
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<PAGE>
dealer network allows the Company to market Work Stations on a cost-effective
basis to a large number of businesses which may not be reached by the Company's
sales representatives. Approximately 20% of Open Plan's sales historically have
been made through dealers. The Company believes that its limited dealer network
complements its core growth strategy of expanding revenues through its own sales
offices. All dealer agreements are non-exclusive and may be terminated at any
time, which gives the Company the ability to establish a sales office as soon as
a market becomes capable of supporting an office.
"AS IS" SALES. A small but profitable portion of Open Plan's sales are made
to brokers, end-users and others who buy used Work Stations from the Company on
an "as is" basis. The Company's "as is" program involves the selective purchase
of used Work Stations in good condition that do not require substantial repair
or other alteration. The Company sells "as is" Work Stations at prices that are
typically 20% of the retail list price for new Work Stations. The "as is"
program appeals to customers seeking "budget" prices for quality used Work
Stations. The Company also uses the "as is" program as a means to reduce excess
inventory.
SALES AND MARKETING
GENERAL. The Company's sales and marketing strategy relies primarily upon
producing quality products at competitive prices and providing superior customer
service. See "-Business Strategy." The Company's sales offices account for
approximately 80% of sales. See "-Distribution." Each sales office expends
approximately 3% of its revenues for advertising through direct mail,
billboards, newspapers, business magazines and journals. Direct mailing to
targeted professional groups as well as mailings prior to and following trade
shows have resulted in large sales to several new customers. The Company often
uses booth displays at trade shows for national organizations of purchasing
managers, facility managers, interior designers, architects and local business
groups. The Company retained a regional advertising firm in the past calendar
year to design a new logo, corporate brochure and sales presentation materials,
as well as a variety of retail advertising campaigns. The Company is firmly
committed to advertising and constantly re-evaluates the most efficient means of
reaching prospective customers.
The Company's marketing also emphasizes its commitment to recycling.
Through its remanufacturing process, the Company recycles several million pounds
of office systems furniture each year that might otherwise be deposited in
landfills. Some companies have adopted recycling policies or programs that
require those businesses to purchase recycled products in varying quantities.
Because the Company's Work Stations are a recycled product, the Company has a
marketing advantage over manufacturers of new Work Stations.
ASSET BANKING. The Company developed its asset banking program in 1994 as a
means to offer additional services to larger middle market and Fortune 500
businesses who reconfigure, dismantle and warehouse large quantities of Work
Stations as an ongoing part of their operations. The asset banking program
allows businesses to trade-in used Work Stations by "depositing" them with the
Company in exchange for a "credit" based on current list prices of new Work
Stations toward future purchases of the Company's remanufactured Work Stations.
Work Stations "deposited" by customers become part of the Company's inventory of
used Work Stations that can be remanufactured and are not expected to be
returned to the customer. When a business with a "credit" chooses to purchase
Work Stations at then-prevailing prices, the customer can make a complete or
partial "withdrawal" from its account to pay for the Work Stations. The customer
has the option to receive cash rather than a "credit" toward a Work Station
purchase. The effect of the program is to make a customer's used Work Stations a
renewable asset. The program eliminates the customer's inventory, storage and
maintenance costs for Work Stations not in use, while at the same time
positioning the Company for a future sale and increasing the Company's inventory
which can be immediately remanufactured and sold. The Company also provides
value-added services, such as design and project management, without charge to
the customer to enhance the attractiveness of the program. Although a customer
may receive a "credit" for non-Herman Miller Work Stations in the program, the
Company is currently able to offer only Herman Miller Work Stations as a
replacement. However, the Company's planned expansion into Steelcase and/or
Haworth Work Stations will allow the Company to "bank" these lines as well,
thereby expanding the availability and attractiveness of the program to more
prospective purchasers of Work Stations.
TELEMARKETING. The Company employs seven telemarketers to prospect for
customers and to acquire used Work Stations for remanufacturing. The Company has
established a database through its telemarketing efforts that identifies
immediate, intermediate and long term prospects for the purchase of
remanufactured Work Stations. The database is not limited to potential
purchasers of Herman Miller Work Stations, but includes potential customers who
currently desire other brands of Work Stations. Thus, when the Company expands
its product line to include Steelcase and/or Haworth, it will be possible to
access the telemarketing database for potential purchasers of these product
lines as well. The database currently contains
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<PAGE>
more than 100,000 records of actual and potential customers. It is the Company's
goal to build the most complete database of any furniture systems manufacturer.
The Company believes that due to the traditional industry practice of
manufacturers distributing their product through local dealers, original
equipment manufacturers have not developed such a database. With time,
utilization of the database may supplant a portion of the Company's retail print
advertising as it allows the Company to identify specific companies to be
directly marketed by a Company representative.
RENTAL PROGRAM. The Company's rental program offers a cost-effective
alternative to ownership of Work Stations which the Company believes could
become a significant source of revenue in the future. Under the rental program,
the Company rents its Work Stations and receives rent payments during the term
of the lease. Upon expiration of the term of the rental, the Work Stations are
returned to the Company and can be rented again or remanufactured and sold for
an additional profit. The minimum rental term is six months. The rental program
is an attractive alternative for those customers with capital spending
constraints. In addition, customers who wish to evaluate long-term furniture
requirements are able to defer a commitment to purchase Work Stations while
meeting their short-term requirements for office furniture. To date,
substantially all of the Company's rentals have been of "as is" Work Stations,
although the Company is planning to expand its rentals of remanufactured Work
Stations.
GOVERNMENT SERVICES ADMINISTRATION. The GSA recently approved the Company's
inclusion on the GSA's New Introductory Schedule as a distributor of Work
Stations and other related products and services to the federal government. The
Company is currently in the process of negotiating the pricing structures that
will be available to the government. This process is expected to be completed
during the second quarter of 1996 and will enable the Company to sell its
remanufactured Work Stations to the federal government as well as develop a
previously untapped source of supply through trade-ins and "asset banking." The
Company believes that its asset banking program should be very attractive to the
government due to the large inventories of excess and aging Work Stations held
by the government.
CUSTOMERS
The Company's customers range from small businesses to Fortune 500
companies. The typical size of a customer order is ten Work Stations or
approximately $25,000. Profit margins on smaller orders by small to mid-sized
customers are greater than on larger orders by Fortune 500 companies due to
volume discounts provided by manufacturers of new Work Stations on large orders,
which the Company is required to meet to compete for such orders. The Company is
not dependent upon any single customer or any single group of customers for a
significant portion of its sales. In 1995, the largest customer accounted for
less than 6% of sales. The loss of any one customer would not have a material
adverse effect on the Company.
COMPETITION
The Company experiences intense competition in both the purchase of used
Work Stations and the sale of remanufactured and "as is" Work Stations. See
"Risk Factors-Competition." In purchasing used Work Stations, the Company
competes with manufacturers, dealers, brokers and other remanufacturers. The
competition between remanufacturers and either manufacturers or dealers
generally takes place in connection with trade-ins by end-users of used Work
Stations for new Work Stations. Brokers typically purchase used Work Stations
for resale to end-users and customers which may include the Company, while other
remanufacturers generally purchase Work Stations for their own remanufacturing
activities.
The Company competes with manufacturers, dealers, brokers and other
remanufacturers in the sale of remanufactured and "as is" Work Stations.
Competition is primarily based upon price, design, quality and customer service.
Certain manufacturers, such as Herman Miller and Steelcase, have operations that
remanufacture their own brand of used Work Stations for resale to customers.
These manufacturers and their dealers are able to offer both new and
remanufactured Work Stations to customers. The Company believes it has a
competitive advantage over such manufacturers and other remanufacturers due to
its innovative marketing programs, direct sales force, discount pricing and
customer service. However, manufacturers and dealers of new and remanufactured
Work Stations have certain competitive advantages, including established
distribution channels and marketing programs, substantial financial strength,
long-term customers, ready access to component parts, and availability of used
Work Stations through trade-ins. Manufacturers also can sell new Work Stations
at very substantial discounts which reduces the Company's pricing advantage.
Such deeply discounted sales, however, generally occur only for very large
orders which often provide remanufacturers such as the Company the opportunity
to acquire used Work Stations of such purchasers at very attractive prices.
The Company believes it is the largest independent remanufacturer of Work
Stations in the United States based on gross revenues. Unlike most independent
remanufacturers, which are typically local operations serving a single city or
metropolitan area from a single sales office, the Company is able to compete
effectively in many markets through its distribution channels.
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<PAGE>
See "-Distribution." The Company also believes that its remanufacturing services
are more comprehensive than the services provided by most other remanufacturers.
Many remanufacturers provide minor repair services, but lack the personnel,
equipment and facilities necessary to completely remanufacture Work Stations.
The Company's remanufacturing facilities include all of the equipment required
to produce new as well as remanufactured Work Stations including sanding,
painting, drying, woodworking and reupholstering equipment, and parts
manufacturing equipment.
INTELLECTUAL PROPERTY
The Company is the owner of a service mark for "Open Plan Systems"
registered with the United States Patent and Trademark Office. The Company has
no trademarks or patents.
Original equipment manufacturers have obtained United States patents on
certain component parts and design and manufacturing processes associated with
their own Work Stations. Management of the Company believes that the
remanufacturing of such Work Stations does not constitute an infringement of any
patents held by these manufacturers. However, there can be no assurance that
infringement claims will not be asserted against the Company. If such claims
were asserted, the Company would incur significant costs and diversion of
resources defending such claims and, in the event the Company did not prevail in
its defense, the Company could incur substantial damages that could have a
material adverse effect on the Company's financial condition and results of
operations.
The Company from time to time manufactures new component parts that it
cannot purchase through the used Work Station market. In addition, the Company
expects to introduce newly manufactured private label Work Stations to be sold
through a national office products retailer. The Company intends to review
existing patents applicable to Work Stations in the ordinary course of
manufacturing new component parts and developing its own product line. See "Risk
Factors-Risk of Patent Infringement Claims."
SEASONALITY AND BACKLOG
Historically, the Company's sales volume has been lower in the spring and
summer months and higher in the fall and winter months. The Company believes
that this seasonal increase in sales volume, which generally coincides with the
first and fourth quarters of the Company's fiscal year, is due to the tendency
of customers to expend funds budgeted for office furniture either early in the
calendar year or after the summer vacation season. Because the Company
recognizes revenues upon shipment and typically ships Work Stations within three
weeks of an order, a substantial portion of the Company's revenue in each
quarter results from orders placed by customers during that quarter. As a
result, the Company's revenues and profits are difficult to predict and may
fluctuate from quarter to quarter. The Company typically does not have a
significant backlog of customer orders because it generally ships products
within three weeks of receipt of an order. See "Risk Factors-Potential
Fluctuations in Quarterly Results; Seasonality."
EMPLOYEES
As of March 31, 1996, the Company had 154 full-time employees, of whom 76
are manufacturing and remanufacturing personnel, six are sales managers, 27 are
salespersons, 15 are installers, 25 are office administrators, telemarketers and
designers and five are management employees. The Company also had nine part-time
employees consisting of five telemarketers, two office administrators and two
manufacturing and remanufacturing employees. The Company believes that its
continued success depends on its ability to attract and retain highly qualified
personnel. None of the Company's employees are covered by a collective
bargaining agreement with the Company. The executive officers and substantially
all of the salespersons of the Company have agreed that they will not disclose
certain proprietary information of the Company, and upon termination, will not
solicit any customer of the Company for two years and will not compete with the
Company for one year. The Company has never suffered a work stoppage and
considers its relations with employees to be good.
GOVERNMENT REGULATION
The Company's operations are subject to a variety of federal, state and
local environmental laws and regulations including those which limit the
discharge, storage, handling and disposal of hazardous materials. The Company's
principal environmental concerns relate to the handling and disposal of paints
and solvents. Management believes that the Company is in material compliance
with applicable federal, state and local environmental regulations. Compliance
with these regulations has not in the past had any material effect on the
Company's earnings, capital expenditures or competitive position; however, the
effect of such compliance in the future cannot be determined. Regulations
currently proposed under the Clean Air Act Amendments of 1990 may require
reduced emissions of volatile organic compounds including emissions from paints
and
25
<PAGE>
solvents used by the Company in the remanufacturing process. As a result, the
Company may be required to institute changes in its remanufacturing processes in
order to comply with these reduced emission standards. The furniture industry
and its suppliers are attempting to develop water-based paint and finishing
materials to replace commonly-used organic-based paints and finishes which are a
major source of regulated emissions. The Company cannot at this time estimate
the impact of these new standards on the Company's operations and future capital
expenditure requirements, or the cost of compliance.
The Company's operations are also governed by laws and regulations relating
to work-place safety and worker health, principally the Occupational Safety and
Health Act and accompanying regulations and various state laws and regulations.
The Company does not believe that future compliance with such current laws and
regulations will have a material adverse effect on its financial condition or
results of operations.
INSURANCE
The Company maintains liability insurance policies covering a number of
risks, including business interruption, property, commercial crime,
comprehensive general liability and workers compensation and employer's
liability insurance. The Company believes that its insurance coverage is
adequate. In addition, the Company has made application for "key-man" insurance
in the amount of $3,000,000 on the life of Mr. Fischer naming the Company as
sole beneficiary. See "Risk
Factors-Dependence Upon Key Personnel."
PROPERTIES
The Company leases 157,720 square feet of space at its remanufacturing
facility in Richmond, Virginia and 43,250 square feet of space at its finishing
plant in Atlanta, Georgia. Effective June 1, 1996, the Company will begin
leasing an additional 22,280 square feet of space at its Richmond facility for a
total of 180,000 square feet. The Richmond lease expires in July 1999, subject
to an option to renew for an additional three-year term. The Atlanta lease
expires in April 1999. The Company's two manufacturing facilities are encumbered
under existing credit arrangements. The Company also has numerous other leases
for its sales offices throughout the states in which it operates. The Company
owns substantially all of its equipment, including office and manufacturing
equipment. The Company believes that its properties are maintained in good
operating condition and are suitable for its purposes.
LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, or any proceedings known to be
contemplated by governmental authorities, to which Open Plan is a party or of
which any of its property is the subject.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company have been elected to
serve one year terms expiring at the 1997 annual meeting of shareholders. The
Company's Articles of Incorporation and Bylaws will both be amended and restated
immediately prior to the closing of the offering to provide for three classes of
directors and staggered terms of three years each commencing with the 1997
annual meeting of shareholders. See "Description of Capital Stock-Certain
Provisions of the Company's Articles and Bylaws." Class I directors will hold
office until the annual meeting of shareholders in 1998, Class II directors will
hold office until the annual meeting of shareholders in 1999, and Class III
directors will hold office until the annual meeting of shareholders in 2000,
with the members of each class to hold office until their successors are elected
and qualify.
The following table sets forth certain information concerning the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
DIRECTOR OR
NAME AGE POSITION OFFICER SINCE
<S> <C> <C> <C>
Stan A. Fischer (1)......................................... 55 President and Director 1989
Gary M. Farrell (1)......................................... 36 Chief Financial Officer, Secretary 1993
and Director
Gregory P. Campbell......................................... 38 Executive Vice President-Sales 1990
Elizabeth C. Connolly....................................... 39 Vice President-Marketing 1993
David J. Morrison........................................... 35 Vice President-Operations 1995
Troy A. Peery, Jr. (2), (3)................................. 50 Director 1989
Anthony F. Markel (1), (3).................................. 54 Director 1989
Theodore L. Chandler, Jr. (2), (3).......................... 44 Director 1996
Robert F. Mizell (1), (2), (3).............................. 39 Director 1996
C.T. Hill (1), (2).......................................... 45 Director 1996
</TABLE>
(1) To become a member of the Executive Committee of the Board of Directors upon
completion of the offering.
(2) To become a member of the Audit Committee of the Board of Directors upon
completion of the offering.
(3) To become a member of the Compensation Committee of the Board of Directors
upon the completion of the offering.
BUSINESS EXPERIENCE OF MANAGEMENT
Set forth below is a brief summary of the recent business experience and
background of each director and executive officer and certain other key managers
of the Company.
DIRECTORS AND EXECUTIVE OFFICERS
STAN A. FISCHER has been President and a director of the Company since
founding the Company in 1989. From 1986 to 1989, Mr. Fischer was Sales Manager
of Chasen's Business Interiors, Inc., a marketer of new office furniture and
furnishings in Richmond, Virginia. Prior to this, Mr. Fischer was employed by
Xerox Corporation for over ten years in a variety of sales and management
positions. Mr. Fischer is a graduate of the University of Virginia and has been
involved in the office furniture industry for over 10 years.
GARY M. FARRELL has been Chief Financial Officer of the Company since June
1993 and Secretary and a member of the Board of Directors since January 1994.
Prior to his employment by the Company, Mr. Farrell was Vice President and
Corporate Audit Manager at Virginia Beach Federal Savings Bank from April 1992
to May 1993. Mr. Farrell was also employed by NationsBank Corporation from 1984
to 1992 where he held several positions, including Vice President and EDP Audit
Manager. Mr. Farrell is a graduate of Virginia Commonwealth University and is a
Certified Public Accountant.
GREGORY P. CAMPBELL has been Executive Vice President-Sales since August
1993. Mr. Campbell was Vice President of Sales from 1990 to 1994. Previously,
Mr. Campbell was the Sales Manager at Morton Marks & Sons, Inc., a contract
furniture dealer in Richmond, Virginia, from 1980 to 1989. Mr. Campbell is a
graduate of Virginia Polytechnic Institute and State University and has been
involved in the office furniture industry for 17 years.
ELIZABETH C. CONNOLLY has been Vice President-Marketing since August 1994.
Prior to her employment with the Company as Sales Manager in August 1993, Mrs.
Connolly had been Sales Manager at Chasen's Business Interiors, Inc., since
1986. Mrs. Connolly is a graduate of Rutgers University and has been involved in
the office furniture industry for 10 years.
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<PAGE>
DAVID J. MORRISON has been Vice President-Operations since September 1995.
Previously, he was an account manager with a subsidiary of Herman Miller from
1992 to 1995 and President of Halmor Associates, Inc., a Michigan-based office
furniture manufacturer, from 1990 to 1992. Mr. Morrison is a graduate of North
Central Michigan College and has been involved in the office furniture industry
for 13 years.
TROY A. PEERY, JR. is President and Chief Operating Officer and a director
of Heilig-Meyers Company, a national retailer of home furniture and furnishings
headquartered in Richmond, Virginia and traded on the New York Stock Exchange.
Mr. Peery has held this position since 1985. Mr. Peery currently serves on the
Board of Directors of Galeski Optical Co. and S&K Famous Brands, Inc., and
serves on the Board of Trustees for Randolph Macon College and the Medical
College of Virginia.
ANTHONY F. MARKEL is President, Chief Operating Officer and a director of
Markel Corporation, a Richmond, Virginia based publicly held insurance brokerage
company. Mr. Markel has held these positions since 1992. Prior to 1992, Mr.
Markel was employed in various other capacities with Markel Corporation.
THEODORE L. CHANDLER, JR. is a member and a director of the law firm of
Williams, Mullen, Christian & Dobbins in Richmond, Virginia. Mr. Chandler is a
director of Lawyers Title Corporation, a national title insurance underwriter
traded on the New York Stock Exchange. Mr. Chandler is also a director of Hilb,
Rogal & Hamilton Company, a national insurance intermediary traded on the New
York Stock Exchange.
ROBERT F. MIZELL is a Senior Vice President and a director of Davenport &
Co. of Virginia, Inc., where he manages the firm's Corporate Finance Department.
Prior to joining Davenport in 1988, Mr. Mizell was a partner with the accounting
firm of KPMG Peat Marwick. Mr. Mizell is also a director of Manorhouse
Retirement Centers, Inc. and Security Filter Products Co., Inc.
C.T. HILL is President/Capital Region of Crestar Bank, the Virginia banking
subsidiary of Crestar Financial Corporation. Prior to his appointment as
President/Capital Region in 1994, Mr. Hill had been Executive Vice President of
Crestar Bank.
OTHER KEY MANAGERS
RANDY L. ALDERSON has been Regional Vice President since 1994 and was
Regional Manager from 1992 to 1994. Prior to his employment by the Company, he
had been a Sales Representative for American Furniture and Fixture Co., Inc. Mr.
Alderson is a graduate of James Madison University and has been involved in the
office furniture industry for 14 years.
DAVID K. DENSON has been a Regional Manager of the Company since 1993. From
1992 to 1993, he was Vice President-Sales for Environmental Interiors, Inc., a
contract office furniture dealer in Harrisburg, Pennsylvania. Mr. Denson is a
graduate of the United States Naval Academy, is a former naval aviator, and has
been involved in the office furniture industry for 17 years.
DAVID E. GREEN has been Director of Procurement since 1994. Mr. Green was
Operations Manager at Chasen's Business Interiors, Inc. from 1985 to 1994 and
has been involved in the office furniture industry for 10 years.
STEPHEN P. HINDLE has been a Marketing Manager since March, 1996. Mr.
Hindle was Vice President of Sales for Creative Office Environments, LLC, a
contract office furniture dealer, from 1992 to 1996, and District Manager of the
Harbinger Company from 1990 to 1992. Mr. Hindle is a graduate of the University
of Maryland, and has been involved in the office furniture industry for 12
years.
LORI M. KERR has been Director of Design since 1990. Mrs. Kerr was Director
of Design at Chasen's Business Interiors, Inc. from 1986 to 1990. Mrs. Kerr is a
graduate of West Virginia University and has been involved in the office
furniture industry for 10 years.
DENNIS E. LAMBERT has been a Regional Manager since 1992. Mr. Lambert was
Vice President-Sales for Joyce Office Products from 1987 to 1992. Mr. Lambert is
a graduate of the University of Richmond and has been involved in the office
furniture industry for 12 years.
DAVID C. SPANNAUS has been a Regional Manager since 1994. Mr. Spannaus was
a principal in Modular Office Design, Inc., a contract furniture dealer in
Raleigh, North Carolina, from 1992 to 1994, and Director of Sales and Marketing
for Storr Office Environments in Raleigh, North Carolina, from 1990 to 1992. Mr.
Spannaus is a graduate of Elmira College and has been involved in the office
furniture industry for 12 years.
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<PAGE>
KERRY M. WASHAY has been a Regional Manager since 1994. Mr. Washay was
President of Encore, Inc., an independent office furniture sales representative
company, from 1989 to 1994, Vice President of Sales for International Contract
Furniture, Inc., a New York-based contract furniture dealer, from 1987 to 1988.
From 1975 to 1987, he held a variety of positions in the office furniture
industry, including six years as Eastern Region Manager for Herman Miller. Mr.
Washay is a graduate of Western Illinois University and has been involved in the
office furniture industry for 21 years.
FAMILY RELATIONSHIPS
No family relationships exist among any of the directors or between any of
the directors and executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
EXECUTIVE COMMITTEE. The Company will establish an Executive Committee,
comprised of a majority of non-employee directors, after completion of this
offering, which may exercise, subject to applicable provisions of law, all the
powers of the Board in the management of the business and affairs of the Company
when the Board is not in session.
AUDIT COMMITTEE. The Company will establish an Audit Committee, comprised
exclusively of non-employee directors, after completion of this offering to make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plans and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls.
COMPENSATION COMMITTEE. The Company will establish a Compensation Committee
after completion of this offering consisting exclusively of non-employee
directors to determine compensation for the Company's directors and executive
officers and to administer the Company's stock option plans.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of shares of the Company's Common Stock as of March 31,
1996, as adjusted to reflect the sale of the Shares offered hereby, by each
director of the Company, by those executive officers named in the Summary
Compensation Table set forth under the caption "Executive Compensation" below,
and by all of the directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF CLASS
BENEFICIALLY OWNED (2)
NUMBER OF SHARES PRIOR TO AFTER
NAME BENEFICIALLY OWNED (1) OFFERING OFFERING (3)
<S> <C> <C> <C>
Stan A. Fischer............................................................ 1,062,042 43.71% 25.72%
Gary M. Farrell (4)........................................................ 15,082 * *
Gregory P. Campbell........................................................ 100,545 4.14 2.43
Elizabeth C. Connolly (4).................................................. 15,000 * *
David J. Morrison.......................................................... - - -
Troy A. Peery, Jr.......................................................... 69,376 2.86 1.68
Anthony F. Markel.......................................................... 133,131 5.48 3.22
Theodore L. Chandler, Jr................................................... - - -
Robert F. Mizell........................................................... - - -
C.T. Hill.................................................................. - - -
All directors and executive officers as a group (10 persons)............... 1,395,176 57.42% 33.78%
</TABLE>
* Percentage of ownership is less than 1% of the outstanding shares of Common
Stock of the Company.
(1) Beneficial ownership has been determined in accordance with the provisions
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, under
which, in general, a person is deemed to be a beneficial owner of a security
if he has or shares the power to vote or direct the voting of the security
or the power to dispose or direct the disposition of the security, or if he
has the right to acquire beneficial ownership of the security within 60
days. Each shareholder identified in the table possesses sole voting and
investment power with respect to his shares.
(2) Percentages for shares beneficially owned prior to the offering are based on
2,429,933 shares of Common Stock issued and outstanding at March 31, 1996.
Percentages for shares beneficially owned after the offering assume the sale
of all 1,700,000 of the Shares offered hereby and 4,129,933 shares of Common
Stock issued and outstanding upon completion of the offering.
(3) Does not include Shares that may be purchased in the offering by the persons
named in the table.
(4) Includes 15,000 shares pledged to a commercial bank as security for a loan
to acquire such shares.
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<PAGE>
The Company and the Underwriters have agreed to reserve up to 10% of the
offering, or 170,000 shares, for sale to existing shareholders, including
directors and executive officers of the Company. None of these persons have any
obligation to purchase Shares in the offering.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The persons, groups or other entities known by the Company to be beneficial
owners of more than 5% of the outstanding Common Stock of the Company as of
March 31, 1996, as adjusted to reflect the sale of the Shares offered hereby,
are set forth in the following table:
<TABLE>
<CAPTION>
PERCENT OF CLASS
BENEFICIALLY OWNED (2)
NAME AND ADDRESS NUMBER OF SHARES PRIOR TO AFTER
OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OFFERING OFFERING (3)
<S> <C> <C> <C>
Stan A. Fischer............................................................ 1,062,042 43.71% 25.72%
c/o Open Plan Systems, Inc.
4299 Carolina Avenue
Building C
Richmond, Virginia 23222
P. D. Brooks, Jr........................................................... 151,822 6.25 3.68
8 Redfox Road
Manakin-Sabot, Virginia 23103
Gary L. Markel............................................................. 145,000 5.97 3.51
9700 9th Street North
Suite 400
St. Petersburg, Florida 33702
Edwin W. Mugford........................................................... 141,000 5.80 3.41
c/o Royal Oldsmobile-Isuzu, Inc.
8200 West Broad Street
Richmond, Virginia 23294
Anthony F. Markel.......................................................... 133,131 5.48 3.22
c/o Markel Corporation
4551 Cox Road
Richmond, Virginia 23060
A. G. Bertozzi............................................................. 121,658 5.01 2.95
3006 Impala Place
Richmond, Virginia 23228
</TABLE>
(1) Beneficial ownership has been determined in accordance with the provisions
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, under
which, in general, a person is deemed to be a beneficial owner of a security
if he has or shares the power to vote or direct the voting of the security
or the power to dispose or direct the disposition of the security, or if he
has the right to acquire beneficial ownership of the security within 60
days. Each shareholder identified in the table possesses sole voting and
investment power with respect to his shares.
(2) Percentages for shares beneficially owned prior to the offering are based on
2,429,933 shares of Common Stock issued and outstanding at March 31, 1996.
Percentages for shares beneficially owned after the offering assume the sale
of all 1,700,000 of the Shares offered hereby and 4,129,933 shares of Common
Stock issued and outstanding upon completion of the offering.
(3) Does not include Shares that may be purchased in the offering by the persons
named in the table.
DIRECTOR COMPENSATION
Prior to December 31, 1995, directors received no compensation for serving
in such capacity. After completion of this offering, each non-employee director
of the Company will receive an annual retainer of $5,000 payable quarterly, a
fee of $1,000 for each Board meeting attended and a fee of $500 for each
committee meeting attended. Each director will also be reimbursed for certain
expenses incurred in connection with attendance at Board and committee meetings.
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<PAGE>
On March 27, 1996, the Company's shareholders adopted the 1996 Stock Option
Plan for Non-Employee Directors (the "Outside Directors' Plan") to become
effective upon the closing of the offering. The maximum aggregate number of
shares of Common Stock that may be issued pursuant to the Outside Directors'
Plan is 25,000. The Outside Directors' Plan will be administered by the
Compensation Committee of the Board of Directors of the Company, and will
terminate following the annual meeting of shareholders in 2000.
Under the Outside Directors' Plan, each non-employee director of the
Company serving on the Board of Directors on July 1, 1996 shall be granted an
option to purchase 1,000 shares of Common Stock of the Company. Thereafter, each
non-employee director serving on the Board of Directors shall receive an option
to purchase 1,000 shares of Common Stock on the first business day following
each annual meeting of shareholders. The exercise price of stock options granted
under the Outside Directors' Plan must be equal to the fair market value of the
Common Stock on the date of grant. Each option is first exercisable on the date
which is six months from the date of grant of the option and shall continue to
be exercisable for a term of ten years, subject to certain exceptions. Options
granted under the Outside Directors' Plan may be exercised in whole or in part
at any time upon payment by the optionee of the exercise price in cash or by
surrendering previously-owned shares of Common Stock to the Company with a fair
market value not less than the exercise price. In addition, the Company will
cooperate in a cashless exercise of an option upon the request of a participant.
No options have been granted under the Outside Directors' Plan.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended December 31,
1993, 1994 and 1995, the compensation paid by the Company to the Company's
President and each of its four other most highly paid executive officers in all
capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) COMPENSATION
<S> <C> <C> <C> <C> <C>
Stan A. Fischer............................... 1995 $125,000 $40,000 - $116,348(2)
President 1994 125,000 50,000 $ 18,686(3) 52,169
1993 95,435 30,000 - 22,046
Gary M. Farrell (4)........................... 1995 65,000 20,000 - 1,950(5)
Chief Financial Officer 1994 64,946 15,000 - -
1993 35,138 5,000 - -
Gregory P. Campbell........................... 1995 85,000 20,000 - 10,982(6)
Executive Vice President-Sales 1994 84,752 25,000 - 8,432
1993 66,319 15,000 - 8,432
Elizabeth C. Connolly (7)..................... 1995 60,000 20,000 - 1,662(5)
Vice President-Marketing 1994 42,792 12,000 - -
1993 19,510 2,000 - -
David J. Morrison (8)......................... 1995 11,750 5,000 7,521(9) -
Vice President-Operations 1994 - - - -
1993 - - - -
</TABLE>
(1) Except as otherwise indicated, the dollar value of perquisites and other
personal benefits did not exceed the lesser of $50,000 or 10% of the total
amount of salary and bonus reported for each officer during the years shown.
(2) Represents $1,875 contributed to the Company's Section 401(k) plan on behalf
of Mr. Fischer and $114,473 in premiums paid by the Company on life
insurance policies to fund certain stock purchase obligations to Mr.
Fischer. See
"-Transactions With Management."
(3) Includes a $16,186 payment to Mr. Fischer for interest expense associated
with an outstanding loan to the Company and $2,500 relating to an automobile
allowance.
(4) Mr. Farrell was employed by the Company commencing in June 1993. Amounts
shown for 1993 are for the period from June 1993 to December 31, 1993.
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<PAGE>
(5) Represents amounts contributed to the Company's Section 401(k) plan on
behalf of the named officer. See
"-Employee Benefit Plans-401(k) Thrift Plan."
(6) Represents $2,550 contributed to the Company's Section 401(k) plan on behalf
of Mr. Campbell and $8,432 in premiums paid by the Company on life insurance
policies to fund certain stock purchase obligations to Mr. Campbell. See
"-Transactions With Management."
(7) Mrs. Connolly was employed by the Company commencing in August 1993. Amounts
shown for 1993 are for the period from August 1993 to December 31, 1993.
(8) Mr. Morrison was employed by the Company commencing in September 1995.
Amounts shown for 1995 are for the period from September 1995 to December
31, 1995.
(9) Represents moving expenses paid by the Company to Mr. Morrison.
The executive officers of the Company participate in other benefit plans
provided to all full-time employees of the Company who meet eligibility
requirements, including group health, dental, disability and life insurance.
EMPLOYMENT AND SEVERANCE CONTRACTS
Each executive officer of the Company and substantially all of the
Company's salespersons have agreed not to disclose certain proprietary
information of the Company, and upon termination of employment, not to solicit
the Company's customers for a period of two years or compete with the Company
for a period of one year following termination of employment.
EMPLOYEE BENEFIT PLANS
1996 STOCK INCENTIVE PLAN. The Company's 1996 Stock Incentive Plan (the
"Incentive Plan") was adopted by the Board of Directors and the current
shareholders on March 27, 1996 and will become effective upon the closing of the
offering. The maximum aggregate number of shares of Common Stock that may be
issued pursuant to the Incentive Plan is 400,000. The Incentive Plan provides
for grants of incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock and/or phantom stock to any officer,
director or key employee of the Company. The Incentive Plan will be administered
by the Compensation Committee consisting of non-employee directors of the
Company, which determines the optionees and the terms of the options granted,
including the exercise price, number of shares subject to the option, and the
exercisability thereof. The Incentive Plan will terminate on March 26, 2006.
The exercise price of incentive stock options granted under the Incentive
Plan must be equal to at least the fair market value of the Common Stock on the
date of grant. The exercise price for non-statutory stock options will be
established by the Compensation Committee. The terms of all other options
granted under the Incentive Plan will be determined by the Compensation
Committee. The aggregate fair market value of Common Stock (determined as of the
date of the option grant) for which an incentive stock option, or related stock
appreciation rights may for the first time become exercisable in any calendar
year may not exceed $100,000.
There are no outstanding options to purchase shares of the Company's Common
Stock.
401(K) THRIFT PLAN. The Company has adopted a thrift savings plan qualified
under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). Employees
who have attained the age of 21 years and completed 12 months of service with
the Company are eligible to participate in the 401(k) Plan. Eligible employees
who elect to participate may contribute up to 15% of their annual salary to the
401(k) Plan. The Company will match 50% of employee contributions up to 6% of
the employee's compensation. Employees become fully vested in their
contributions immediately at the time of contribution and in employer-matching
contributions after six years of employment.
TRANSACTIONS WITH MANAGEMENT
In June 1994, the Company advanced $200,000 to Stan A. Fischer, President
of the Company, in connection with the purchase by Mr. Fischer of certain real
estate. Interest on the outstanding principal balance was computed at the same
interest rate incurred by the Company on its working capital Line of Credit with
Crestar Bank. On March 31, 1996, the entire outstanding balance of the loan,
including certain advances made to Mr. Fischer during the term of the loan, was
repaid in full. The largest aggregate amount outstanding under the loan from
June 1994 to March 1996 was $268,808.
The Company has been taxed as an S Corporation for federal income tax
purposes since its organization. As a consequence, the taxable net earnings of
the Company are taxed to the individual shareholders in proportion to their
individual stockholdings, and the federal income taxes thereon are the personal
liability of the shareholders. Commencing in 1992, the
32
<PAGE>
Company has distributed to shareholders a portion of the Company's S Corporation
earnings taxable to such shareholders. The Company will make a final S
Corporation distribution to current shareholders from the proceeds of this
offering. As part of the consideration for the final S Corporation distribution,
each current shareholder of the Company has agreed to pay his pro rata portion
of any additional taxes, interest, penalties and expenses which may be imposed
against or incurred by the Company based upon or in connection with a
determination by a taxing authority that the Company's S Corporation status was
invalid for any taxable periods up to the date immediately preceding the closing
of the offering. See "Prior S Corporation Status."
In connection with the Company's status as an S Corporation for federal
income tax purposes, the Company has made individual loans in quarterly advances
to Stan A. Fischer, commencing in 1992, and to Gregory P. Campbell, the
Executive Vice President - Sales of the Company, commencing in 1995, in sums
sufficient to allow each to pay his estimated quarterly federal income taxes.
Interest on the outstanding balances owed by Mr. Fischer and Mr. Campbell accrue
in accordance with the Annual Federal Blended Rate. Partial repayments on each
loan are made by Mr. Fischer and Mr. Campbell in April of each year following
receipt of their S Corporation distribution for the previous year. The largest
aggregate amount outstanding on Mr. Fischer's loan during 1995 was $283,536. The
largest aggregate amount outstanding on Mr. Campbell's loan during 1995 was
$17,384. As of March 31, 1996, the outstanding principal balance under each loan
had been repaid in full. Accrued interest in the amount of $19,603 for Mr.
Fischer and $1,213 for Mr. Campbell remained unpaid at April 30, 1996.
Additional advances of $110,485 and $10,000 were made under these loans to Mr.
Fischer and Mr. Campbell, respectively, as of April 1, 1996 to allow each of
them to pay 1996 quarterly estimated federal income taxes. These additional
advances are expected to be repaid upon completion of the offering from the
final distribution made to shareholders in connection with the termination of
the Company's S Corporation status. See "Prior S Corporation Status."
The Company currently guarantees indebtedness of five shareholders of the
Company to Crestar Bank in connection with certain purchases of the Company's
Common Stock by such shareholders. Each loan is secured by the shareholder's
Common Stock. The principal amount of each loan is paid in annual installments
with interest payable monthly. The aggregate outstanding principal indebtedness
of the five shareholders under these loans was $251,984 at March 31, 1996. Two
of the shareholders for whom loans were guaranteed in full by the Company are
Gary M. Farrell, Chief Financial Officer of the Company, and Elizabeth C.
Connolly, Vice President - Marketing of the Company, each of whom borrowed
$75,000 from Crestar Bank as of January 1, 1994. As of April 30, 1996, the
outstanding principal balances due on the loans to Mr. Farrell and Mrs. Connolly
were each $56,250.
On May 15, 1996, the Company entered into separate agreements with Stan A.
Fischer and Gregory P. Campbell to purchase that number of shares of Common
Stock owned by each at the time of his death which the Company will be able to
purchase with the proceeds of certain life insurance policies in aggregate face
amounts of $3,100,000 and $500,000 on the lives of Mr. Fischer and Mr. Campbell,
respectively. The purchase price for the shares will be the fair market value of
the shares on the date immediately preceding the date of payment of the policy
proceeds to the Company. The Company's purchase obligations under the agreements
are limited to the face amounts of the policies. In 1995, the Company paid
premiums of $114,473 and $8,432 on the policies for Mr. Fischer and Mr.
Campbell, respectively. The agreements replace prior agreements with Mr. Fischer
and Mr. Campbell.
CERTAIN BUSINESS RELATIONSHIPS
Robert F. Mizell, a Senior Vice President of Davenport & Co. of Virginia,
Inc., was elected to serve on the Company's Board of Directors effective March
27, 1996. Davenport & Co. of Virginia, Inc. has provided financial advisory
services to the Company during the past twelve months at fees that are customary
for such services and is one of two firms serving as managing underwriters for
the sale of the Shares offered hereby.
Theodore L. Chandler, Jr., a principal of the firm of Williams, Mullen,
Christian & Dobbins, was elected to serve on the Company's Board of Directors
effective March 27, 1996. Williams, Mullen, Christian & Dobbins serves as
counsel to the Company.
C. T. Hill, the President/Capital Region of Crestar Bank, was elected to
serve on the Company's Board of Directors effective March 27, 1996. The Company
maintains a general banking relationship with Crestar Bank, including depository
services and a $5.0 million working capital Line of Credit that is scheduled to
expire on April 30, 1997. At April 30, 1996, there were $3,952,000 in borrowings
under the Crestar Bank Line of Credit.
33
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company is
qualified in its entirety by reference to applicable provisions of Virginia law
and the Amended and Restated Articles of Incorporation of the Company (the
"Articles") and the Amended and Restated Bylaws of the Company (the "Bylaws"),
which are exhibits to the Registration Statement on file with the Commission.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Immediately prior to the closing of this offering, the Company's Articles
of Incorporation will be amended and restated such that the authorized capital
stock of the Company will consist of 50,000,000 shares of Common Stock, no par
value, and 5,000,000 shares of Preferred Stock, no par value. Immediately
following the closing of the offering, the Company estimates that there will be
an aggregate of 4,129,933 shares of Common Stock issued and outstanding and no
shares of Preferred Stock issued and outstanding. As of March 31, 1996, there
were 2,429,933 shares of Common Stock issued and outstanding held by nineteen
holders of record.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters voted on by shareholders, including elections of directors, and possess
exclusively all voting power except as otherwise required by law or provided in
any resolution adopted by the Company's Board of Directors with respect to any
class or series of Preferred Stock. The Articles do not provide for cumulative
voting for the election of directors. Subject to any preferential rights of any
outstanding class or series of Preferred Stock designated by the Company's Board
of Directors from time to time, the holders of Common Stock are entitled to such
dividends as may be declared from time to time by the Company's Board of
Directors from funds available therefore, and upon liquidation, dissolution or
winding up will be entitled to receive pro rata all assets of the Company
available for distribution to such holders after payment, or provision for, all
liabilities of the Company. The holders of Common Stock have no preemptive or
other subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to the Common Stock.
PREFERRED STOCK
The Company's Board of Directors is authorized, without further action of
the shareholders of the Company, to provide for the issuance of shares of
Preferred Stock, in one or more classes or series, and to fix for each such
class or series such designations, rights and preferences as are stated in the
resolution adopted by the Company's Board of Directors providing for the
issuance of such class or series and as are not prohibited by law. Such
Preferred Stock may rank prior to the Common Stock as to dividend rights,
liquidation preferences or both, may have full or limited voting rights and may
be convertible into shares of Common Stock. In addition, the issuance of
Preferred Stock by the Board of Directors could be utilized, under certain
circumstances, as a method of preventing or discouraging a takeover of the
Company in which some shareholders may have received a premium for their shares
of Common Stock over the then current market price of such Common Stock. There
are no shares of Preferred Stock outstanding and the Company has no present plan
or agreement to issue shares of Preferred Stock, although it may determine to do
so in the future.
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
The Articles and Bylaws contain provisions which may have the effect of
delaying or preventing a change in control of the Company. The Articles and
Bylaws provide, subject to the rights of any holders of Preferred Stock: (i)
that at the 1997 annual meeting of shareholders, the Board of Directors shall be
divided into three classes and at each annual meeting of shareholders thereafter
one class shall be elected each year to serve a three-year term, (ii) that
directors may be removed only for cause, (iii) that a vacancy on the Board shall
be filled by the remaining directors, and (iv) that special meetings of the
shareholders may be called only by the President or by the Board of Directors
and may not be called by the shareholders. The Bylaws require advance
notification for a shareholder to bring business before a shareholders' meeting
or to nominate a person for election as a director.
The Articles also contain an "affiliated transaction provision" which
provides that the affirmative vote of the holders of at least 70% of the votes
entitled to be cast by the outstanding shares of capital stock entitled to vote
(the "Voting Stock") shall be required for the approval of transactions with
certain interested shareholders. Such supermajority approval would be required
for (i) a merger or consolidation involving any person or entity who directly or
indirectly owns or controls 10% or more of the votes entitled to be cast by the
Voting Stock (an "Interested Shareholder") at the record date for determining
34
<PAGE>
shareholders entitled to vote on such merger or consolidation and (ii) a sale,
lease or exchange of substantially all of the Company's assets and property to
or with an Interested Shareholder, or for the approval of a sale, lease or
exchange of substantially all of the assets and property of an Interested
Shareholder to or with the Company. In addition, the Articles provide that the
same 70% vote shall be required for the approval of certain transactions,
including a reclassification of securities, recapitalization, share exchange or
other transaction designed to decrease the number of holders of Common Stock
remaining after any person or entity has become an Interested Shareholder.
Notwithstanding the foregoing, the supermajority shareholder approval
requirement will not apply to any transaction that is approved by the Board of
Directors prior to the time that the Interested Shareholder becomes an
Interested Shareholder.
For purposes of the affiliated transaction provision, a person or entity
shall not be deemed to be an Interested Shareholder if (i) on March 27, 1996,
such person or entity was the beneficial owner of shares representing 10% or
more of the votes entitled to be cast by the Voting Stock or (ii) such person or
entity became the beneficial owner of such shares as a result of acquiring
shares from a person or entity specified in (i) above by gift, testamentary
bequest or the laws of descent and distribution and who has continued thereafter
to be the beneficial owner of shares representing 10% or more of the votes
entitled to be cast by the Voting Stock, or who would have so continued but for
the unilateral action of the Company.
The Articles and Bylaws provide that the affirmative vote of the holders of
at least 70% of the Voting Stock is required to alter, amend or repeal the
foregoing provisions.
The foregoing provisions of the Articles and Bylaws are intended to prevent
inequitable shareholder treatment in a two-tier takeover and to reduce the
possibility that a third party could effect a sudden or surprise change in
majority control of the Board of Directors without the support of the incumbent
Board, even if such a change were desired by, or would be beneficial to, a
majority of the Company's shareholders. Such provisions therefore may have the
effect of discouraging certain unsolicited offers for the Company's capital
stock.
VIRGINIA STOCK CORPORATION ACT
AFFILIATED TRANSACTIONS. The Virginia Stock Corporation Act (the "Virginia
Act") contains provisions governing "Affiliated Transactions" designed to deter
certain coercive two-tier takeovers of Virginia corporations. Affiliated
Transactions include, without limitation, certain mergers and share exchanges,
material dispositions of corporate assets not in the ordinary course of
business, any dissolution of the corporation proposed by or on behalf of an
"Interested Shareholder" (as defined below), or reclassifications, including
reverse stock splits, recapitalizations or mergers of the corporation with its
subsidiaries which have the effect of increasing the percentage of voting shares
beneficially owned by an Interested Shareholder by more than 5%. For purposes of
the Virginia Act, an "Interested Shareholder" is defined as any beneficial owner
of more than 10% of any class of the voting securities of a Virginia
corporation.
Subject to certain exceptions discussed below, the provisions governing
Affiliated Transactions require that, for three years following the date upon
which any shareholder becomes an Interested Shareholder, a Virginia corporation
cannot engage in an Affiliated Transaction with such Interested Shareholder
unless approved by the affirmative vote of the holders of two-thirds of the
outstanding shares of the corporation entitled to vote, other than the shares
beneficially owned by the Interested Shareholder, and by a majority (but not
less than two) of the "Disinterested Directors." A "Disinterested Director"
means, with respect to a particular Interested Shareholder, a member of a
corporation's board of directors who (i) was a member before the date on which
an Interested Shareholder became an Interested Shareholder and (ii) was
recommended for election by, or was elected to fill a vacancy and received the
affirmative vote of, a majority of the Disinterested Directors then on the
corporation's board of directors. At the expiration of the three year period,
these provisions require approval of Affiliated Transactions by the affirmative
vote of the holders of two-thirds of the outstanding shares of the corporation
entitled to vote, other than those beneficially owned by the Interested
Shareholder.
The principal exceptions to the special voting requirement apply to
Affiliated Transactions occurring after the three-year period has expired and
require either that the transaction be approved by a majority of the
Disinterested Directors or that the transaction satisfy certain fair price
requirements of the statute. In general, the fair price requirements provide
that the shareholders must receive the highest per share price for their shares
as was paid by the Interested Shareholder for his shares or the fair market
value of their shares, whichever is higher. The fair price requirements also
require that, during the three years preceding the announcement of the proposed
Affiliated Transaction, all required dividends have been paid and no special
financial accommodations have been accorded the Interested Shareholder, unless
approved by a majority of the Disinterested Directors.
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<PAGE>
None of the foregoing limitations and special voting requirements applies
to an Affiliated Transaction with an Interested Shareholder (i) who was an
Interested Shareholder on the date the corporation first became subject to the
provisions of the Virginia Act governing Affiliated Transactions by virtue of
its having 300 shareholders of record or (ii) whose acquisition of shares making
such a person an Interested Shareholder was approved by a majority of the
corporation's Disinterested Directors.
The Affiliated Transactions provisions provide that, by affirmative vote of
a majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation may adopt, by meeting certain voting requirements, an
amendment to its articles of incorporation or bylaws providing that the
Affiliated Transactions provisions shall not apply to the corporation. The
Company has not adopted such an amendment.
CONTROL SHARE ACQUISITIONS. The Virginia Act contains provisions regulating
certain "control share acquisitions," which are transactions causing the voting
strength of any person acquiring beneficial ownership of shares of a public
corporation in Virginia to meet or exceed certain threshold percentages (20%,
33 1/3% or 50%) of the total votes entitled to be cast for the election of
directors. Shares acquired in a control share acquisition have no voting rights
unless granted by a majority vote of all outstanding shares other than those
held by the acquiring person or any officer or employee director of the
corporation. The acquiring person may require that a special meeting of the
shareholders be held to consider the grant of voting rights to the shares
acquired in the control share acquisition. If the acquiring person's shares are
not accorded voting rights (or if no request for a special meeting is made by an
acquiror), the corporation may, if authorized by its charter and bylaws prior to
the control share acquisition, purchase the acquiring person's shares at their
cost to the acquiring person. The Articles authorize the repurchase of any
acquiring person's shares that are not accorded voting rights under the control
share provisions of the Virginia Act. If voting rights are approved and the
acquiring person controls 50% or more of the voting power, all shareholders
other than the acquiring person have dissenters' rights which enable them to
receive the "fair value" of their shares. "Fair value" is not less than the
highest price paid in the control share acquisition. The Virginia Act permits
corporations to opt-out of its provisions by adopting a bylaw or charter
provision prior to a control share acquisition stating that the control share
provisions of the Virginia Act shall not apply. The Articles and Bylaws do not
contain a provision opting-out of the control share provisions of the Virginia
Act.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Virginia Act, the Articles contain provisions which
indemnify directors and officers of the Company to the full extent permitted by
Virginia law and eliminate the personal liability of directors and officers for
monetary damages to the Company or its shareholders for breach of their
fiduciary duties, except to the extent such indemnification or elimination of
liability is prohibited by the Virginia Act. These provisions do not limit or
eliminate the rights of the Company or any shareholder to seek an injunction or
any other non-monetary relief in the event of a breach of a director's or
officer's fiduciary duty. In addition, these provisions apply only to claims
against a director or officer arising out of his role as a director or officer
and do not relieve a director or officer from liability if he engaged in willful
misconduct or a knowing violation of the criminal law or any federal or state
securities law.
In addition, the Articles provide for the indemnification of both directors
and officers for expenses incurred by them in connection with the defense or
settlement of claims asserted against them in their capacities as directors and
officers. In certain cases, this right of indemnification extends to judgments
or penalties assessed against them. To date, the Company has not limited its
exposure to liability for indemnification of directors and officers by
purchasing directors and officers liability insurance coverage.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company will serve as transfer agent and
registrar for the Common Stock.
36
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have issued and
outstanding 4,129,933 shares of Common Stock. Of these shares, the 1,700,000
shares sold in this offering will be freely tradable without restriction under
the Securities Act, unless such shares are held by "affiliates" of the Company,
as that term is defined in Rule 144 under the Securities Act. The remaining
2,429,933 shares of Common Stock outstanding upon completion of this offering
will be "restricted securities" as that term is defined in Rule 144 ("Restricted
Shares"). Restricted Shares may be sold in the public market only if registered
or if the sale transaction qualifies for an exemption from registration, such as
that provided by Rule 144 under the Securities Act, which is summarized below.
Sales of Restricted Shares in the public market, or the availability of such
shares for sale, could adversely affect the market price of the Common Stock.
All officers, directors, and current shareholders of the Company have
entered into contractual "lock-up" agreements providing that they will not
offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of the shares of Common Stock, any options or warrants to acquire shares
of Common Stock or any securities exercisable for or convertible into the
Company's Common Stock owned by them or acquired in the offering for a period of
180 days from the date of this Prospectus, without the prior written consent of
the Underwriters. As a result of these contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rule 144, shares
subject to lock-up agreements will not be saleable until such agreements expire
or are waived by the Underwriters. All of the Restricted Shares will be
available for sale in the public market 180 days after the date of this
Prospectus.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years (including the holding period of any prior owner except an
affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of Common Stock or (ii) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. Under Rule 144(k), a person who is
not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least three years (including the holding period of any prior owner
except an affiliate of the Company), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Unless otherwise restricted, such "144(k) shares"
may therefore be sold immediately upon the completion of this offering.
Prior to the offering, there has been no public market for the Common Stock
of the Company and no predictions can be made as to the effect, if any, that
future sales of shares of Common Stock will have on the market price of the
Common Stock prevailing from time to time. Nevertheless, sales of significant
numbers of shares of the Common Stock in the public market could adversely
affect the market price of the Common Stock and could impair the Company's
future ability to raise capital through an offering of its equity securities.
37
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting
Agreement, the underwriters named below (the "Underwriters"), for whom Davenport
& Co. of Virginia, Inc. and Scott & Stringfellow, Inc. are acting as
representatives (the "Representatives"), have severally agreed to purchase from
the Company, and the Company has agreed to sell to the Underwriters named below,
the respective number of Shares set forth opposite each Underwriter's name
below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
<S> <C>
Davenport & Co. of Virginia, Inc. ..........................................................................
Scott & Stringfellow, Inc. .................................................................................
Total................................................................................................ 1,700,000
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all the
Shares if any are purchased.
The Underwriters propose to offer 1,530,000 Shares directly to the public
at the public offering price set forth on the cover page of this Prospectus and
to certain securities dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow, and such selected dealers may
reallow, a concession not in excess of $ per share to certain brokers and
dealers. After the offering, the price to public, concession, allowance and
reallowance may be changed by the Representatives. In addition, the Underwriters
have agreed with the Company to reserve not more than 170,000 Shares,
representing 10% of the total offering, for sale to existing shareholders of the
Company at an underwriting discount of 3.0%, as compared to an underwriting
discount of 7.5% on the remainder of the Shares sold to the public.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 255,000
additional Shares to cover over-allotments, if any, at the same price per share
as the initial shares to be purchased by the Underwriters from the Company (at a
7.5% underwriting discount). To the extent the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments, if any, made in connection with this
offering.
The executive officers, directors, and all current shareholders of the
Company have agreed that they will not offer, sell, contract to sell or grant an
option to purchase or otherwise dispose of any shares of the Company's Common
Stock, options or warrants to acquire shares of Common Stock or any securities
exercisable for or convertible into Common Stock owned by them or acquired in
the offering, in the open market or otherwise, for a period of 180 days from the
date of this Prospectus,
38
<PAGE>
without the prior written consent of the Underwriters. The Company has agreed
not to offer, sell or issue any shares of Common Stock, options or warrants to
acquire Common Stock or securities exercisable for or convertible into shares of
Common Stock for a period of 180 days after the date of this Prospectus, without
the prior written consent of the Underwriters, except that the Company may issue
securities pursuant to the Company's stock option plans.
Prior to this offering, there has been no public trading market for the
Company's Common Stock. The Common Stock has been approved for listing on the
Nasdaq National Market; however, there can be no assurance that an active
trading market for the Company's Common Stock will develop after the offering,
or if developed, that such a market will be sustained. See "Risk Factors-No
Prior Public Market; Determination of Offering Price."
The initial public offering price for the Common Stock has been determined
by negotiations between the Company and the Representatives. Among the factors
considered in determining the initial public offering price were prevailing
market conditions, revenue and earnings of the Company, estimates of the
business potential and prospects of the Company, the present state of the
Company's business operations, an assessment of the Company's management and the
consideration of the above factors in relation to the market valuation of
certain publicly traded companies.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Williams, Mullen, Christian & Dobbins, Richmond, Virginia. Certain
legal matters in connection with the offering will be passed upon for the
Underwriters by Hunton & Williams, Richmond, Virginia.
CHANGE OF ACCOUNTANTS
In March, 1996 the Board of Directors of the Company engaged Ernst & Young
LLP as outside auditors and notified Martin, Dolan & Holton, Ltd. that the
Company elected not to engage that firm to perform the 1995 audit. The reports
of Martin, Dolan & Holton, Ltd. on the Company's financial statements for 1994
and 1993 contained no disclaimers, adverse opinions, or qualifications or
modifications as to uncertainty, audit scope or accounting principles. During
the period of those audits and through the Company's decision in March, 1996 to
change auditors, there were no disagreements between the Company and Martin,
Dolan & Holton, Ltd.
EXPERTS
The financial statements of Open Plan Systems, Inc. at December 31, 1995,
and for the year then ended, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, and at
December 31, 1994, and for each of the two years in the period ended December
31, 1994, by Martin, Dolan & Holton, Ltd., independent auditors, as set forth in
their respective reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2 (the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Shares offered hereby. For further information with respect to
the Company and the Shares offered by this Prospectus, reference is made to the
Registration Statement and the exhibits filed as a part thereof. The
Registration Statement, including exhibits, may be inspected without charge at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 5th Street, N.W., Washington, D.C. 20549, and at its regional offices
located at CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of all or part of the Registration Statement may be obtained from the
Commission's principal office in Washington, D.C. upon payment of the prescribed
fees. Statements contained in this Prospectus as to the contents of any contract
or other document
39
<PAGE>
referred to are not necessarily complete, and in each instance reference is made
to the copy of the contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
Prior to this offering, the Company has not been subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and accordingly has not filed reports and other
information pursuant thereto with the Commission. As a result of the offering,
however, the Company will become subject to the informational requirements of
the Exchange Act and will furnish the reports and other information required
thereby to the Commission. The Company also will furnish annual reports to its
shareholders containing audited financial statements of the Company, as well as
quarterly reports containing unaudited financial information.
40
<PAGE>
OPEN PLAN SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Reports of Independent Auditors........................................................................................ F-2
Balance Sheets at December 31, 1994 and 1995 and March 31, 1996 (unaudited)............................................ F-4
Statements of Income for the Years Ended December 31, 1993, 1994 and 1995
and for the Three Month Periods Ended March 31, 1995 and 1996 (unaudited)............................................ F-5
Statement of Stockholders' Equity for the Years Ended December 31, 1993, 1994 and 1995
and for the Three Month Period Ended March 31, 1996 (unaudited)...................................................... F-6
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995
and for the Three Month Periods Ended March 31, 1995 and 1996 (unaudited)............................................ F-7
Notes to Financial Statements.......................................................................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
OPEN PLAN SYSTEMS, INC.
We have audited the accompanying balance sheet of Open Plan Systems, Inc.
as of December 31, 1995 and the related statements of income, stockholders'
equity, and cash flows for the year then ended. 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 audit. The financial
statements of Open Plan Systems, Inc. as of December 31, 1994 and for each of
the two years then ended were audited by other auditors whose report dated March
27, 1995 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present
fairly, in all material respects, the financial position of Open Plan Systems,
Inc. at December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
March 27, 1996
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
OPEN PLAN SYSTEMS, INC.
Richmond, Virginia
We have audited the accompanying balance sheet of Open Plan Systems, Inc.
as of December 31, 1994, and the related statements of income, stockholders'
equity and cash flows for each of the two years in the period then ended. These
financial statements are the responsibility of the management of Open Plan
Systems, Inc. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Open Plan Systems, Inc. as
of December 31, 1994, and the results of its operations and its cash flows for
each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
MARTIN, DOLAN & HOLTON, LTD.
Glen Allen, Virginia
March 27, 1995
F-3
<PAGE>
OPEN PLAN SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31,
DECEMBER 31, MARCH 31, 1996
1994 1995 1996 (NOTE 9)
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash............................................................... $ 206,136 $ 241,564 $ 74,896 $ 74,896
Trade accounts receivable, less allowance of $60,000 at December
31, 1995 and $82,000 at March 31, 1996, ........................ 1,552,134 3,091,607 3,993,345 3,993,345
Inventories (Note 2)............................................... 3,141,630 4,045,144 4,337,728 4,337,728
Prepaids and other................................................. 99,217 360,345 337,542 337,542
Deferred income taxes (Note 9)..................................... - - - 48,260
TOTAL CURRENT ASSETS............................................ 4,999,117 7,738,660 8,743,511 8,791,771
PROPERTY AND EQUIPMENT:
Production and warehouse equipment................................. 294,960 595,886 651,057 651,057
Office equipment................................................... 187,460 322,924 366,886 366,886
Vehicles........................................................... 56,860 137,705 188,252 188,252
Leasehold improvements............................................. 31,134 106,146 161,186 161,186
570,414 1,162,661 1,367,381 1,367,381
Accumulated depreciation and amortization.......................... (285,294) (409,086) (458,820) (458,820)
285,120 753,575 908,561 908,561
Advances to stockholders (Note 3).................................... 395,183 377,663 20,277 20,277
Cash surrender value of life insurance............................... 47,135 89,782 120,915 120,915
Deposits and other................................................... 56,270 49,805 55,853 55,853
TOTAL ASSETS......................................................... $5,782,825 $9,009,485 $9,849,117 $9,897,377
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit (Note 4).................................. $1,342,000 $2,706,000 $4,000,000 $4,000,000
Trade accounts payable............................................. 145,625 733,997 800,166 800,166
Distributions payable (Note 9)..................................... - - - 2,943,462
Accrued compensation and related costs............................. 19,234 355,843 207,008 207,008
Other accrued liabilities.......................................... 41,671 45,825 41,137 41,137
Customer deposits.................................................. 463,133 336,634 247,353 247,353
Current portion of long-term debt (Note 4)......................... 56,000 164,333 156,000 156,000
Current portion of capital lease obligations (Note 6).............. - 18,333 18,746 18,746
Current portion of deferred rent................................... 36,492 17,598 8,319 8,319
TOTAL CURRENT LIABILITIES....................................... 2,104,155 4,378,563 5,478,729 8,422,191
LONG-TERM DEBT, less current portion (Note 4)........................ 112,540 248,207 209,207 209,207
CAPITAL LEASE OBLIGATIONS, less current portion (Note 6)............. - 55,526 50,680 50,680
DEFERRED RENT, less current portion.................................. 18,774 - - -
TOTAL LIABILITIES............................................... 2,235,469 4,682,296 5,738,616 8,682,078
STOCKHOLDERS' EQUITY (Note 5, 10):
Common stock, no par value:
Authorized shares-5,000,000
Issued and outstanding shares-2,457,000 at December 31, 1994;
2,429,933 at December 31, 1995; and 2,429,933
at March 31, 1996............................................. 1,286,000 1,215,299 1,215,299 1,215,299
Retained earnings.................................................. 2,261,356 3,111,890 2,895,202 -
TOTAL STOCKHOLDERS' EQUITY...................................... 3,547,356 4,327,189 4,110,501 1,215,299
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $5,782,825 $9,009,485 $9,849,117 $9,897,377
</TABLE>
See accompanying notes.
F-4
<PAGE>
OPEN PLAN SYSTEMS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
NET SALES............................................ $7,842,749 $12,217,571 $15,478,116 $4,574,325 $5,580,049
COST OF SALES........................................ 5,440,906 8,014,563 10,434,610 3,083,851 3,595,097
GROSS PROFIT......................................... 2,401,843 4,203,008 5,043,506 1,490,474 1,984,952
OPERATING EXPENSES:
Selling and marketing.............................. 767,998 1,489,873 2,056,653 498,149 680,351
General and administrative......................... 733,066 909,408 974,892 254,398 341,989
1,501,064 2,399,281 3,031,545 752,547 1,022,340
OPERATING INCOME..................................... 900,779 1,803,727 2,011,961 737,927 962,612
OTHER (INCOME) EXPENSE:
Interest........................................... 50,251 104,862 163,450 29,852 63,456
Other, net......................................... (18,801) 11,530 (36,497) (6,198) (15,161)
31,450 116,392 126,953 23,654 48,295
NET INCOME........................................... $ 869,329 $ 1,687,335 $ 1,885,008 $ 714,273 $ 914,317
PRO FORMA INCOME DATA (UNAUDITED) (NOTE 9):
Pro forma income before income taxes............... $ 869,329 $ 1,687,335 $ 1,885,008 $ 714,273 $ 914,317
Pro forma provision for income taxes............... 343,733 673,183 746,430 282,839 356,584
Pro forma net income............................... $ 525,596 $ 1,014,152 $ 1,138,578 $ 431,434 $ 557,733
Pro forma earnings per common share (Note 9)....... $ 0.19 0.37 0.42 0.16 0.21
Weighted average common shares outstanding (Note
9).............................................. 2,700,615 2,745,615 2,734,635 2,745,615 2,718,548
</TABLE>
See accompanying notes.
F-5
<PAGE>
OPEN PLAN SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992........................................................ $ 875,000 $ 477,193 $1,352,193
Issuance of 62,000 shares of common stock for cash.................................. 186,000 - 186,000
Cash distributions to stockholders.................................................. - (303,100) (303,100)
Net income.......................................................................... - 869,329 869,329
BALANCE AT DECEMBER 31, 1993........................................................ 1,061,000 1,043,422 2,104,422
Issuance of 45,000 shares of common stock for cash.................................. 225,000 - 225,000
Cash distributions to stockholders.................................................. - (469,401) (469,401)
Net income.......................................................................... - 1,687,335 1,687,335
BALANCE AT DECEMBER 31, 1994........................................................ 1,286,000 2,261,356 3,547,356
Purchase of 27,067 shares of common stock........................................... (70,701) (86,701) (157,402)
Distributions to stockholders:
Cash.............................................................................. - (791,477) (791,477)
Offset against advances to stockholders........................................... - (156,296) (156,296)
Net income.......................................................................... - 1,885,008 1,885,008
BALANCE AT DECEMBER 31, 1995........................................................ 1,215,299 3,111,890 4,327,189
Distributions to stockholders (unaudited):
Cash.............................................................................. - (723,436) (723,436)
Offset against advances to stockholders........................................... - (407,569) (407,569)
Net income (unaudited).............................................................. - 914,317 914,317
BALANCE AT MARCH 31, 1996 (unaudited)............................................... $1,215,299 $2,895,202 $4,110,501
</TABLE>
See accompanying notes.
F-6
<PAGE>
OPEN PLAN SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Net income......................................... $ 869,329 $ 1,687,335 $ 1,885,008 $ 714,273 $ 914,317
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for losses on receivables........... 156,811 14,392 64,919 8,412 22,572
Depreciation and amortization................. 88,040 128,444 134,023 26,472 49,734
Deferred rent................................. 36,566 (49,716) (37,668) (9,418) (9,279)
Loss on disposition of equipment.............. - 2,635 3,115 - -
Increase in cash surrender value of life
insurance.................................. (15,653) (28,823) (42,647) (10,662) (31,133)
Changes in operating assets and liabilities:
Trade accounts receivable.................. (1,051,166) (230,706) (1,604,392) (1,242,266) (924,310)
Inventories................................ (594,712) (1,242,193) (903,514) 185,220 (292,584)
Prepaids and other......................... (58,079) (60,296) (289,703) (26,000) 31,103
Trade accounts payable..................... 218,680 (301,909) 588,372 1,256,351 66,169
Customer deposits.......................... (49,846) 404,248 (126,499) (269,819) (89,281)
Accrued and other liabilities.............. 66,234 (37,965) 340,763 124,739 (153,523)
Net cash provided (used) by operating activities... (333,796) 285,446 11,777 757,302 (416,215)
INVESTING ACTIVITIES
Purchases of property and equipment................ (237,809) (99,710) (525,360) (53,308) (204,720)
Proceeds from sale of property and equipment....... - 450 700 - -
Other.............................................. (29,848) (783) 6,465 572 (6,048)
Net cash used in investing activities.............. (267,657) (100,043) (518,195) (52,736) (210,768)
FINANCING ACTIVITIES
Advances to stockholders........................... (246,020) (320,993) (322,701) (70,525) (120,485)
Repayment of advances to stockholders.............. 92,352 171,620 200,000 - 62,002
Net borrowings on revolving line of credit......... 668,000 481,000 1,364,000 (34,000) 1,294,000
Proceeds from notes payable to bank................ 268,200 - 300,000 - -
Principal payments on long-term debt and capital
lease obligations............................... (63,979) (66,993) (63,074) (14,000) (51,766)
Proceeds from sale of common stock................. 186,000 225,000 - - -
Purchase of common stock........................... - - (144,902) - -
Distributions to stockholders...................... (303,100) (469,401) (791,477) (791,477) (723,436)
Net cash provided by financing activities.......... 601,453 20,233 541,846 (910,002) 460,315
INCREASE IN CASH..................................... - 205,636 35,428 (205,436) (166,668)
CASH AT BEGINNING OF YEAR............................ 500 500 206,136 206,136 241,564
CASH AT END OF YEAR.................................. $ 500 $ 206,136 $ 241,564 $ 700 $ 74,896
</TABLE>
See accompanying notes.
F-7
<PAGE>
OPEN PLAN SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE THREE MONTH PERIODS
ENDED
MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Open Plan Systems, Inc. (the Company) was incorporated in Virginia in
September 1989 and is a remanufacturer and marketer of modular office work
stations. The following is a description of the Company's more significant
accounting policies.
INVENTORIES
Inventories are stated at the lower of average cost or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated on the basis of cost. Depreciation of
equipment and vehicles is provided by straight-line or accelerated methods over
the estimated useful lives of the related assets, generally three to seven
years. Improvements to leased properties are amortized on a straight-line basis
over the shorter of the term of the respective lease or the estimated useful
lives of the related assets.
DEFERRED RENT
Rent expense for operating leases with initial rent abatement periods or
escalating rental payments is recognized on a straight-line basis over the term
of the lease.
REVENUE RECOGNITION
Revenues from product sales are recognized when the products are shipped
and title and risk of loss pass to the customer.
ADVERTISING
Production costs associated with advertising are expensed as incurred.
Communication costs associated with advertising are reported as advertising
expense as the related space is used. Prepaid advertising costs amounted to
$165,529 at December 31, 1995 and $163,449 at March 31, 1996. Advertising costs
charged to expense amounted to $39,134, $79,637, and $197,862 for the years
ended December 31, 1993, 1994, and 1995, respectively, and $37,380 and $88,431
for the three month periods ended March 31, 1995 and 1996, respectively.
INCOME TAXES
The Company has elected by consent of its stockholders to be taxed under
the provisions of Subchapter S of the Internal Revenue Code. Under these
provisions, the Company does not pay federal and state income taxes on its
corporate income. Instead the Corporation's income is included in the income of
its stockholders for federal and state income tax purposes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
F-8
<PAGE>
OPEN PLAN SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS-CONTINUED
BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements reflect all
adjustments of a normal recurring nature which the Company considers necessary
for a fair presentation of its financial position at March 31, 1996 and results
of its operations and its cash flows for the three month periods ended March 31,
1995 and 1996. Historically, the Company's business has been significantly
affected by seasonal factors. The Company typically has greater sales revenue
during the first and fourth quarters. The results for the three month period
ended March 31, 1996 are not necessarily indicative of the results that may be
achieved for the entire year ending December 31, 1996 or for any other interim
period.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, which requires impairment losses be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996, and such adoption
had no effect on the financial statements.
2. INVENTORIES
Inventories are in two main stages of completion and consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
<S> <C> <C> <C>
(UNAUDITED)
Components and fabric $1,796,229 $2,103,176 2,460,809
Jobs in process and finished goods 1,345,401 1,941,968 1,876,919
$3,141,630 $4,045,144 $4,337,728
</TABLE>
3. ADVANCES TO STOCKHOLDERS
From time to time the Company has advanced funds to certain stockholders.
Most of the advances were made to enable payment by stockholders of estimated
quarterly income taxes. In one instance, $200,000 was advanced to the Company's
president to enable the purchase of certain real estate. These advances, which
are reflected in the accompanying balance sheets net of repayments from the
stockholders, are not subject to any contractual repayment terms. At December
31, 1995, these advances bear interest at rates ranging from 6.58% to 8.19% per
annum. Interest income recognized on these advances amounted to $9,081, $20,075,
and $28,576, for the years ended December 31, 1993, 1994, and 1995,
respectively, and $8,486 and $7,708 for the three month periods ended March 31,
1995 and 1996, respectively.
4. INDEBTEDNESS
At December 31, 1995, the Company has a revolving line of credit from a
bank providing for short-term borrowings up to $3,000,000. These borrowings bear
interest at the lesser of the prime rate or LIBOR plus 2.25% (8.19% at December
31, 1995). Advances under the line are limited to specified percentages of trade
accounts receivable and inventories. Under the terms of the agreement, the
Company is required to maintain a defined debt to net worth ratio and to limit
annual distributions to stockholders to no more than 60% of net income for the
prior year. The Company was in compliance with all covenants of the agreement at
December 31, 1995.
F-9
<PAGE>
OPEN PLAN SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS-CONTINUED
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
<S> <C> <C> <C>
(UNAUDITED)
Note payable to bank, due $8,333 per month, plus interest
at 7.75% per annum, through November 1998 $ - $ 300,000 $ 266,667
Note payable to bank, due $4,667 per month, plus interest
at 8.25% per annum, through May 1998 168,540 112,540 98,540
168,540 412,540 365,207
Less current portion 56,000 164,333 156,000
$ 112,540 $ 248,207 $ 209,207
</TABLE>
Substantially all assets are pledged as collateral for the above
indebtedness.
Future scheduled principal payments on long-term debt at December 31, 1995
were as follows: $164,333 in 1996; $156,000 in 1997; and $92,207 in 1998.
Interest paid on all indebtedness amounted to $46,398, $133,025, and
$161,448 for the years ended December 31, 1993, 1994, and 1995, respectively,
and $29,852 and $63,456 for the three month periods ended March 31, 1995 and
1996, respectively.
On March 29, 1996, the bank lender increased the maximum amount available
under the line of credit to $4,000,000 and extended the expiration date to May
31, 1996.
5. STOCKHOLDERS' EQUITY
The Company has agreements with two officers to purchase upon the death of
each all of the shares of common stock owned at the time of his death. In order
to fund its potential purchase obligations under these agreements, the Company
owns and is the beneficiary of certain life insurance policies. The purchase
price for the shares will be the fair market value of the shares on the date of
death, except that the Company's purchase obligations under the agreements is
limited to the face amounts of the policies which total $3.6 million.
The Company and its other stockholders were parties to agreements whereby
the stockholders agreed not to sell or transfer their common stock without first
offering such shares to the Company. The agreements also gave the Company the
option to purchase such shares in the event of the termination of a stockholder
who is also an employee and required the Company to purchase such shares upon
the death of a stockholder. On March 27, 1996, the stockholders agreed that
these agreements will terminate upon the closing of an initial public offering
(see Note 10). Accordingly, the carrying value of common stock has been
classified as permanent equity for all periods presented.
In August 1995, the Company retired 27,067 shares of its common stock that
it purchased from a stockholder. The amount of the original sales price,
$70,701, was deducted from common stock, while the remainder of the $157,402
purchase price was recorded as a reduction in retained earnings.
6. COMMITMENTS AND CONTINGENCIES
During 1995, the Company entered into capital lease agreements to purchase
two trucks with an aggregate cost of $80,933. The net book value of these trucks
at December 31, 1995 was $73,350. Amortization of these trucks is included in
depreciation expense. The Company leases office space and remanufacturing and
finishing facilities in Richmond and Atlanta under operating lease agreements.
The Richmond lease expires in July 1999 and provides for an option to renew for
an additional three years. The Atlanta lease expires in April 1999. In addition,
the Company leases five sales offices under operating lease agreements expiring
in various periods through October 1999. Certain automobiles are also leased
under three-year operating leases.
F-10
<PAGE>
OPEN PLAN SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS-CONTINUED
Future minimum lease payments under the above leases were as follows at
December 31, 1995:
<TABLE>
<CAPTION>
YEAR CAPITAL OPERATING
<S> <C> <C>
1996 $ 25,790 $ 611,410
1997 25,790 602,369
1998 19,406 511,345
1999 13,022 268,874
2000 9,766 -
Total minimum lease payments 93,774 $1,993,998
Amounts representing interest (19,916)
Present value of total minimum lease payments $ 73,858
</TABLE>
Rent expense amounted to $354,133, $522,828, and $596,336 for the years
ended December 31, 1993, 1994, and 1995, respectively, and $153,957 and $162,602
for the three month periods ended March 31, 1995 and 1996, respectively.
The Company guarantees certain bank borrowings of five stockholders
aggregating $269,998 at December 31, 1995 and $251,984 at March 31, 1996. The
loans were made to enable the individuals to purchase shares of the Company's
common stock. These loans bear interest at the prime rate plus 1.50% and are
scheduled to be fully paid by April 1999. The 75,000 shares of common stock held
by these stockholders serve as collateral for the loans.
7. EMPLOYEE BENEFIT PLAN
In January 1995, the Company adopted a defined contribution plan covering
substantially all employees meeting eligibility requirements. Under the plan,
participants may elect to contribute a specified portion of their compensation
to the plan on a tax deferred basis. The Company will match one-half of the
participant's contributions up to six percent of compensation. The Company may
make additional contributions at its discretion. The Company recorded expense
related to the Plan of $53,322 for the year ended December 31, 1995 and $18,589
for the three month period ended March 31, 1996.
8. CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
The Company markets its products and services to customers located
primarily in the mid-Atlantic and southeastern regions of the United States.
Production is primarily in response to customer orders and larger jobs typically
require advance deposits. The Company performs credit evaluations of its
customers prior to delivery or commencement of services and normally does not
require collateral. Payments are typically due within thirty days of billing.
The Company maintains an allowance for potential credit losses and losses have
historically been within management's expectations.
The carrying values of amounts classified as current assets or current
liabilities approximate fair value due to the short-term maturities of these
instruments. The carrying value of long-term debt approximates fair value as the
current rates approximate market rates.
F-11
<PAGE>
OPEN PLAN SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS-CONTINUED
9. PRO FORMA INFORMATION (UNAUDITED)
Certain pro forma financial information is presented in connection with a
planned initial public offering by the Company (see Note 10).
The accompanying unaudited pro forma balance sheet at March 31, 1996 has
been adjusted to reflect the following items:
(Bullet) the recognition of a net deferred tax asset of $48,260 which would
have been required if the Company had terminated its Subchapter S
status at March 31, 1996;
(Bullet) the payment of an expected distribution of $345,924 to the
Company's stockholders to enable them to pay federal and state
income taxes on the Company's estimated taxable income for the
three month period ended March 31, 1996; and
(Bullet) the payment of an expected distribution of $2,597,538 to the
Company's stockholders equal to the Company's undistributed
retained earnings as an S-Corporation.
The accompanying unaudited pro forma income data for the years ended
December 31, 1993, 1994, and 1995 and the three month periods ended March 31,
1995 and 1996 reflects a provision for income taxes as if the Company's earnings
had been subject to federal and state income taxes as a regular corporation for
all periods presented.
Pro forma earnings per common share are based on the weighted average
common shares outstanding during each period presented increased by 288,615
shares of common stock deemed to be outstanding, which represents the
approximate number of common shares deemed sold by the Company at a price of
$9.00 per share in its planned initial public offering to fund the assumed
distribution of $2,597,538 to the Company's stockholders.
10. SUBSEQUENT EVENTS
On March 27, 1996, the Company's stockholders voted to authorize an initial
public offering of common stock. Subject to closing of this offering, the
stockholders approved the following:
(Bullet) the amendment and restatement of the articles of incorporation to
increase the authorized shares of common stock to 50,000,000 and
authorize 5,000,000 shares of preferred stock;
(Bullet) adoption of the 1996 Stock Incentive Plan providing for issuance
of up to 400,000 shares of common stock by the Company to
officers, directors, and other key employees; and
(Bullet) adoption of the 1996 Stock Option Plan for Non-Employee Directors
providing for issuance of up to 25,000 shares of common stock by
the Company.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. With respect to accounting for
its stock options, as permitted under Statement 123, the Company intends to use
the intrinsic value method as prescribed by Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The Company will provide
disclosures in accordance with Statement 123.
F-12
<PAGE>
[PHOTOGRAPH]
The photograph depicts a woman sitting in a chair at an
office Work Station reviewing a computer-assisted design
layout for Work Stations.
[PHOTOGRAPH]
The photograph depicts two employees of the Company
engaged in laminating work surfaces for office Work Stations.
[PHOTOGRAPH]
The photograph depicts two employees of the Company securing
fabric to a panel as part of the remanufacturing process.
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 5
The Company.......................................... 9
Use of Proceeds...................................... 9
Prior S Corporation Status........................... 10
Dividend Policy...................................... 10
Capitalization....................................... 11
Dilution............................................. 11
Selected Financial Data.............................. 12
Management's Discussion and Analysis
of Financial Condition and Results of
Operations......................................... 13
Business............................................. 18
Management........................................... 27
Description of Capital Stock......................... 34
Shares Eligible for Future Sale...................... 37
Underwriting......................................... 38
Legal Matters........................................ 39
Change of Accountants................................ 39
Experts.............................................. 39
Additional Information............................... 39
Index to Financial Statements........................ F-1
</TABLE>
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN
THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1,700,000 SHARES
COMMON STOCK
PROSPECTUS
DAVENPORT & CO.
OF VIRGINIA, INC.
SCOTT & STRINGFELLOW, INC.
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 27. EXHIBITS
The following exhibits are filed on behalf of the Registrant as part of
this Registration Statement:
<TABLE>
<S> <C>
1 Form of Underwriting Agreement
3(i) Amended and Restated Articles of Incorporation
4 Form of Stock Certificate
10.3 Commercial Note made by Open Plan Systems, Inc. in favor of Crestar Bank as of May 9, 1996
10.4 Security Agreement, dated May 7, 1996, between Crestar Bank and Open Plan Systems, Inc.
10.7 Buy-Sell Agreement, dated May 15, 1996, between the Company and Stan A. Fischer
10.8 Buy-Sell Agreement, dated May 15, 1996, between the Company and Gregory P. Campbell
10.9 Tax Sharing Agreement, dated May 1, 1996, between the Company and each of the shareholders named therein
16 Letter from Martin, Dolan & Holton, Ltd. regarding change in accountants
23.2 Consent of Ernst & Young LLP
23.3 Consent of Martin, Dolan & Holton, Ltd.
27 Financial Data Schedule
</TABLE>
II-1
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant, Open Plan Systems, Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-2 and has
authorized this amendment to Registration Statement to be signed on its behalf
by the undersigned, in the City of Richmond, Commonwealth of Virginia, on May
16, 1996.
OPEN PLAN SYSTEMS, INC.
By: /s/ STAN A. FISCHER
STAN A. FISCHER
PRESIDENT
In accordance with the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ STAN A. FISCHER President and Director (principal executive May 16, 1996
STAN A. FISCHER officer)
/s/ GARY M. FARRELL Chief Financial Officer and Secretary (principal May 16, 1996
GARY M. FARRELL financial and accounting officer)
* Director May 16, 1996
TROY A. PEERY, JR.
* Director May 16, 1996
ANTHONY F. MARKEL
* Director May 16, 1996
THEODORE L. CHANDLER, JR.
Director May 16, 1996
ROBERT F. MIZELL
* Director May 16, 1996
C. T. HILL
</TABLE>
* Gary M. Farrell, by signing his name hereto, signs this document on behalf of
each of the persons indicated by an asterisk above pursuant to powers of
attorney duly executed by such persons and previously filed as exhibits to
this Registration Statement.
/s/ GARY M. FARRELL
GARY M. FARRELL
ATTORNEY-IN-FACT
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
<S> <C>
1 Form of Underwriting Agreement
3(i) Amended and Restated Articles of Incorporation
4 Form of Stock Certificate
10.3 Commercial Note made by Open Plan Systems, Inc. in favor of Crestar Bank as of May 9, 1996
10.4 Security Agreement, dated May 7, 1996, between Crestar Bank and Open Plan Systems, Inc.
10.7 Buy-Sell Agreement, dated May 15, 1996, between the Company and Stan A. Fischer
10.8 Buy-Sell Agreement, dated May 15, 1996, between the Company and Gregory P. Campbell
10.9 Tax Sharing Agreement, dated May 1, 1996, between the Company and each of the shareholders named therein
16 Letter from Martin, Dolan & Holton, Ltd. regarding change of accountants
23.2 Consent of Ernst & Young LLP
23.3 Consent of Martin, Dolan & Holton, Ltd.
27 Financial Data Schedule
</TABLE>
EXHIBIT 1
1,700,000 SHARES
OPEN PLAN SYSTEMS, INC.
COMMON STOCK
------------
UNDERWRITING AGREEMENT
------------
DAVENPORT & CO. OF VIRGINIA, INC.
SCOTT & STRINGFELLOW, INC.
As Representatives of the Several
Underwriters Named in Schedule I
hereto
c/o Davenport & Co. of Virginia, Inc.
901 E. Cary Street, 11th Floor
Richmond, Virginia 23219-4057 May __, 1996
Dear Sirs:
Open Plan Systems, Inc., a Virginia corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 1,700,000 shares of common stock, no par value, of the Company (the "Common
Stock"), and at the election of the Underwriters, an aggregate of 255,000
additional shares of Common Stock as set forth in Schedule I. The aggregate of
1,700,000 shares of Common Stock to be sold by the Company are herein called the
"Firm Securities," and the aggregate of 255,000 additional shares of Common
Stock to be sold by the Company are herein called the "Optional Securities." The
Firm Securities and the Optional Securities that the Underwriters elect to
purchase pursuant to Section 2 hereof are collectively called the "Securities."
1. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to, and agrees with, the
Underwriters that:
(i) A registration statement in respect of the Securities on Form
SB-2 (File No. 333 - 3188) under the Securities Act of 1933, as amended
(the "Act"), and as a part
<PAGE>
thereof a preliminary prospectus, in respect of the Securities has been
filed with the Securities and Exchange Commission (the "Commission") in
the form heretofore delivered to you and, excluding exhibits thereto,
to each of the other Underwriters; such registration statement, as
amended, has been declared effective by the Commission; no other
document with respect to such registration statement has heretofore been
filed with the Commission; and no stop order suspending the
effectiveness of such registration statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission (any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424 of the rules
and regulations of the Commission under the Act, being hereinafter
called a "Preliminary Prospectus", the various parts of such
registration statement, including all exhibits thereto, and including
the information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) of this Agreement and deemed by virtue of Rule 430A under
the Act to be part of the registration statement at the time it was
declared effective, being herein called collectively the "Registration
Statement," and the final prospectus, in the form first filed pursuant
to Rule 424(b), being hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Underwriters for
use therein;
(iii) The Registration Statement conforms, and the Prospectus and
any amendments or supplements thereto will conform, in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder and do not and will not as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply
to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by the Underwriters
through you expressly for use therein;
(iv) The Company does not own more than 5% of the equity
interests of any other business entities other than shares of
publicly-held companies held solely for investment;
-2-
<PAGE>
(v) The Company has not sustained since the date of the latest
audited financial statements included in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than
as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
outstanding capital stock or long-term debt of the Company or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company, otherwise than as set forth or contemplated
in the Prospectus;
(vi) The Company does not own any real property and has good
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property
by the Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings
by the Company;
(vii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Virginia
with power and authority (corporate and other) to own or lease its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, except where the failure
to so qualify would not result in a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company;
(viii) The Company has an authorized capitalization as set forth
in the Prospectus under the caption "Capitalization" and otherwise; all
of the issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable and
conform to the description of the capital stock of the Company contained
in the Prospectus; there are no preemptive or other similar rights to
subscribe for or to purchase any securities of the Company; except as
described in the Prospectus, there are no warrants, options or other
rights to purchase any securities of the Company; neither the filing of
the Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any rights for or relating
to the registration of any securities of the Company with respect to
such filing, offering or sale, other than rights which have been waived
or satisfied;
(ix) The Securities have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein,
will be duly and validly issued and fully paid and nonassessable and
will conform to the description of the Securities contained in the
Prospectus as amended or supplemented;
-3-
<PAGE>
(x) The issuance and sale of the Securities by the Company and
the performance of this Agreement and the consummation by the Company of
the other transactions herein contemplated will not conflict with or
result in a breach or violation of any terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the Company
is a party or by which any of the property or assets of the Company is
bound or to which any of the property or assets of the Company is
subject, nor will such action result in any violation of the provisions
of the Amended and Restated Articles of Incorporation or Amended and
Restated Bylaws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the
issuance and sale of the Securities or the consummation by the Company
of the transactions contemplated by this Agreement, except such
consents, approvals, authorizations, registrations or qualifications as
may be required under the Act and under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities
by the Underwriters;
(xi) There are no legal or governmental proceedings pending to
which the Company is a party or of which any property of the Company is
the subject, other than as set forth or contemplated in the Prospectus,
which, if determined adversely to the Company, would individually or in
the aggregate have a material adverse effect on the financial position,
stockholders' equity or results of operations of the Company and, to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or by others;
(xii) Ernst & Young LLP, and Martin, Dolan & Holton, Ltd., each
of whom has certified certain financial statements of the Company, are
each independent public accountants as required by the Act and the rules
and regulations of the Commission thereunder;
(xiii) All employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) established, maintained or contributed to by the Company
comply in all material respects with the requirements of ERISA and no
employee pension benefit plan (as defined in Section 3(2) of ERISA) has
incurred or assumed an "accumulated funding deficiency" within the
meaning of Section 302 of ERISA or has incurred or assumed any material
liability (other than for the payment of premiums) to the Pension
Benefit Guaranty Corporation;
(xiv) The financial statements of the Company, together with
related notes, as set forth in the Registration Statement present fairly
the financial position and the results of operations of the Company at
the indicated dates and for the indicated periods; such financial
statements have been prepared in accordance with generally accepted
accounting principles, consistently applied throughout the periods
presented except as noted in the notes thereon, and all adjustments
necessary for a fair presentation of results for such periods have been
made; and the selected financial information included in the Prospectus
-4-
<PAGE>
presents fairly the information shown therein and has been compiled on a
basis consistent with the financial statements presented therein;
(xv) The Company has timely filed all necessary federal, state
and foreign income, franchise and excise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been
or, to the best knowledge of the Company, might be asserted against the
Company that might have a material adverse effect on the business,
properties, business prospects, condition (financial or otherwise),
earnings or results of operations of the Company, and all tax
liabilities are adequately provided for on the books of the Company
taken as a whole;
(xvi) The Company is not in violation of any federal or state
law, regulation, or treaty relating to the storage, handling,
transportation, treatment or disposal of hazardous substances (as
defined in 42 U.S.C. Section 9601) or hazardous materials (as defined by
any federal or state law or regulation) or other waste products, which
violation may have a material adverse effect on the financial condition
or business operations or properties of the Company; the Company has
received all permits, licenses or other approvals as may be required of
it under applicable international, federal and state environmental laws
and regulations to conduct its business as described in the Prospectus,
and the Company is in compliance in all material respects with the terms
and conditions of any such permit, license or approval; the Company has
not received any notices or claims that it is a responsible party or a
potentially responsible party in connection with any claim or notice
asserted pursuant to 42 U.S.C. Section 9601 et seq. or any state
superfund law; and the disposal of all of the Company's hazardous
substances, hazardous materials and other waste products has been
lawful;
(xvii) No relationship, direct or indirect, exists between or
among the Company, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
that is required by the Act, or by the rules and regulations under such
Act to be described in the Registration Statement and the Prospectus
that is not so described;
(xviii) The Company has not taken and will not take, directly or
indirectly, any action that is designed to or that has constituted or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities;
(xix) The Company owns or possesses, or can acquire on reasonable
terms, adequate licenses, copyrights, trademarks, service marks and
trade names (collectively, "intellectual property") necessary to carry
on its business as presently operated by it, and the Company has not
received any notice nor is it otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any intellectual
property or of any facts which would render any intellectual property
invalid or inadequate to protect the interest of the Company therein and
which infringement or conflict could have a material adverse effect on
the Company; the statements in the Registration Statement and the
Prospectus under the captions "Risk Factors--Risk of Patent Infringement
Claims"
-5-
<PAGE>
and "Business--Legal Proceedings", are accurate and complete statements
or summaries of the matters therein set forth and do not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and there are no legal or governmental proceedings
pending to which the Company is a party, or, to the knowledge of the
Company, any other legal or governmental proceedings, in either case
relating to patent rights, trade secrets, trademarks, service marks or
other proprietary information or materials used by the Company, and, to
the knowledge of the Company, no such proceedings are threatened or
contemplated by governmental authorities or others;
(xx) The Company holds and is operating in compliance, in all
material respects, with all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates and orders of any
governmental or self-regulatory body required for the conduct of its
business as presently being conducted ("licenses") and all licenses are
valid and in full force and effect; and the Company is in compliance, in
all material respects, with all laws, regulations, orders and decrees
applicable to it;
(xxi) The Company maintains insurance of the types and in the
amounts that are reasonable or required for the business operated by it,
all of which insurance is in full force and effect;
(xxii) The Securities have been approved for inclusion in the
Nasdaq National Market, subject to official notice of issuance;
(xxiii) This Agreement has been duly authorized, executed and
delivered by the Company;
(xxiv) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences;
(xxv) There is no document or contract of a character required to
be described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement which is not described
or filed as required. All such contracts to which the Company is a party
constitute valid and binding agreements of the Company and are
enforceable against the Company in accordance with the terms thereof,
except as may be limited by bankruptcy, insolvency, fraudulent transfer
or other similar laws affecting the rights and remedies of creditors
generally and subject to general principles
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or equity, and except to the extent that any such contract contains
provisions for indemnification for liabilities under the Act.
2. PURCHASE AND SALE.
Subject to the terms and conditions herein set forth, (a) the Company
agrees to sell to the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company at a purchase price per
share of $ , the number of Firm Securities to be purchased by such Underwriter
as set forth opposite the name of such Underwriter in Schedule I hereto and (b)
in the event and to the extent that the Underwriters shall exercise the election
to purchase Optional Securities as provided below, the Company agrees, as set
forth in Schedule I hereto, to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company at
the purchase price set forth in clause (a) of this Section 2, that portion of
the number of Optional Securities as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional securities)
determined by multiplying such number of Optional Securities by a fraction, the
numerator of which is the maximum number of Optional Securities that such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto, and the denominator of which is the maximum
number of the Optional Securities that all of the Underwriters are entitled to
purchase.
Additionally, subject to the terms and conditions herein set forth, the
Company agrees to sell to each of the Underwriters listed on Schedule II hereto
and each of such Underwriters agrees, severally and not jointly, to purchase
from the Company at a purchase price per share of $ , the number of Firm
Securities (the "Directed Firm Securities") to be purchased by such Underwriter
as set forth opposite the name of such Underwriter in Schedule II hereto.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 255,000 Optional Securities, as more particularly set forth
in Schedule I hereto, at the purchase price per share set forth in the paragraph
above, for the sole purpose of covering over-allotments in the sale of the Firm
Securities. Any such election to purchase Optional Securities may be exercised
not more than once by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate amount of Optional Securities to be purchased and the date on which
such Optional Securities are to be delivered, as determined by you but in no
event earlier than the First Delivery Date (as defined in Section 4 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than 10 business days after the date of such notice.
3. OFFERING BY THE UNDERWRITERS.
Upon the authorization by you of the release of the Firm Securities, the
several Underwriters propose to offer the Firm Securities for sale upon the
terms and conditions set forth in the Prospectus.
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4. DELIVERY AND PAYMENT.
Certificates in definitive form for the Securities to be purchased by
each Underwriter hereunder, in such denominations and registered in such names
as the Representatives may request upon at least two business days' prior notice
to the Company, shall be delivered by or on behalf of the Company to the
Representatives, for the account of each Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor. Payment of the
purchase price for the Securities shall be made by certified or official bank
check in next day funds or, at the option of the Company, by wire transfer of
immediately available funds, all at the offices of Scott & Stringfellow, Inc.,
909 E. Main Street, Richmond, Virginia. If payment is made in immediately
available funds, the Company shall reimburse Scott & Stringfellow, Inc. for its
cost of delivering immediately available funds, such cost to be computed at a
daily rate equal to Scott & Stringfellow, Inc.'s cost of overnight borrowings
for each day from the Delivery Date to the immediately following business day.
The time and date of such delivery and payment shall be, with respect to the
Firm Securities, 10:00 a.m., Richmond, Virginia time, on May __, 1996 or at such
other time and date as you and the Company may agree upon in writing, and, with
respect to the Optional Securities, 10:00 a.m., Richmond, Virginia time, on the
date specified by you in the written notice given by you of the Underwriters'
election to purchase such Optional Securities, or at such other time and date as
you and the Company may agree upon in writing. Such time and date for delivery
of the Firm Securities is herein called the "First Delivery Date," such time and
date for delivery of the Optional Securities, if not the First Delivery Date, is
herein called the "Second Delivery Date," and each such time and date for
delivery is herein called a "Delivery Date." Such certificates will be made
available for checking and packaging at least twenty-four hours prior to each
Delivery Date at the offices of Scott & Stringfellow, Inc. at the address set
forth above or such other location designated by the Representatives to the
Company.
5. AGREEMENTS OF THE COMPANY.
The Company agrees with the Underwriters:
(a) To prepare the Prospectus in a form reasonably approved by you and
to file such Prospectus (or a term sheet as permitted by Rule 434(c)) pursuant
to Rule 424(b) under the Act not later than the Commission's close of business
on the second business day following the execution and delivery of this
Agreement or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Act; to make no amendment or supplement to the Registration
Statement or Prospectus prior to any Delivery Date which shall be reasonably
disapproved by you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
subsequent to the date of the Prospectus and for so long as the delivery of a
Prospectus is required in connection with the offering or sale of the
Securities; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of the
suspension of the
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<PAGE>
qualification of the Securities for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, of any request
by the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information and, in the event of the
issuance of any stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such actions as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Registration
Statement and the Prospectus in such quantities as you may from time to time
reasonably request during such period following the date hereof that a
prospectus is required to be delivered in connection with offers or sales of
Securities, and, if the delivery of a prospectus is required during this period
and if at such time any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such period to amend or supplement the
Prospectus to comply with the Act, to notify you and upon your request to file
such document and to prepare and furnish without charge to you and to any dealer
in securities as many copies as you may from time to time reasonably request of
an amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance;
(d) As soon as practicable after the effective date of the Registration
Statement, to make generally available to its stockholders and to deliver to
you, an earnings statement of the Company, conforming with the requirements of
Section 11(a) of the Act and Rule 158 under the Act, covering a period of at
least 12 months beginning after the effective date of the Registration
Statement;
(e) For a period of 180 days from the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of any shares of the
Company's Common Stock or securities exercisable for or convertible into shares
of Common Stock (other than the Securities or pursuant to employee stock option
plans or pursuant to options, warrants or rights outstanding on the date of this
Agreement or pursuant to bona fide gifts to persons who agree in writing with
the donor to be bound by this restriction), without your prior written consent;
and
(f) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
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<PAGE>
securities exchange on which any class of securities of the Company is listed;
and (ii), such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably request.
6. PAYMENT OF EXPENSES.
The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of reproducing any Agreement Among
Underwriters, this Agreement, the Blue Sky Survey and any other documents in
connection with the offering, purchase, sale and delivery of the Securities;
(iii) all expenses in connection with the qualification of the Securities for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky Survey;
(iv) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (v) the cost of preparing stock certificates; (vi) the costs or
expenses of any transfer agent or registrar; and (vii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that except as provided in Section 8 and Section 11 hereof, the Underwriters
will pay all their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Securities by them and any
advertising expenses connected with any offers they may make.
7. CONDITIONS TO OBLIGATIONS OF UNDERWRITERS.
The obligations of the Underwriters hereunder, as to the Securities to
be delivered at each Delivery Date, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Delivery Date, true and correct, and
the condition that the Company shall have performed all of their respective
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) under the Act within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with Section
5(a) of this Agreement; no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) Hunton & Williams, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Delivery Date, with
respect to the incorporation of the Company, the validity of the Securities
being issued at such Delivery Date, the Registration
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Statement, the Prospectus, and other related matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(c) Williams, Mullen, Christian & Dobbins, counsel for the Company,
shall have furnished to you their written opinion, dated such Delivery Date, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Virginia, with corporate power and authority to own or
lease its properties and conduct its business as described in the
Prospectus;
(ii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, except where the
failure to so qualify will not result in a material adverse effect on
the Company (such counsel being entitled to rely in respect of the
opinion in this clause upon certificates of appropriate governmental
authorities in such jurisdictions, opinions of local counsel and, in
respect of matters of fact, upon certificates of officers of the
Company);
(iii) The Company has an authorized capitalization as set forth
in the Prospectus under the caption "Capitalization," and all of the
issued shares of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable and conform to
the description of the capital stock contained in the Prospectus; there
are no preemptive or other similar rights to subscribe for or to
purchase any securities of the Company; to such counsel's knowledge,
except as described in the Prospectus, there are no warrants or options
to purchase any securities of the Company; to such counsel's knowledge,
neither the filing of the Registration Statement nor the offering or
sale of the Securities as contemplated by this Agreement gives rise to
any rights for or relating to the registration of any securities of the
Company with respect to such filing, offering or sale, other than rights
which have been waived or satisfied; and the form of the certificates
evidencing the Securities complies with all formal requirements of
Virginia law;
(iv) The Securities have been duly and, when issued and delivered
against payment therefor, will be duly and validly authorized and
issued, fully paid and nonassessable, and the Securities conform to the
description of the Securities contained in the Prospectus as amended or
supplemented;
(v) To such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company is a party or of
which any property of the Company is the subject, other than as set
forth or contemplated in the Prospectus, which, if determined adversely
to the Company, would individually or in the aggregate have a material
adverse effect on the financial position, stockholders' equity or
results of
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<PAGE>
operations of the Company, and, to such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(vi) The issuance and sale of the Securities being issued at such
Delivery Date by the Company and the performance of this Agreement by
the Company and the consummation by the Company of the other
transactions herein contemplated will not conflict with or result in a
breach or violation of any terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument known to such counsel to which
the Company is a party or by which the Company is bound or to which any
of the property or assets of the Company is subject nor will such
actions result in any violation of the provisions of the Amended and
Restated Articles of Incorporation, as amended, or the Amended and
Restated Bylaws, as amended, of the Company or of any statute or any
order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any
of their properties;
(vii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issuance and sale of the Securities by the Company
or the consummation by the Company of the other transactions
contemplated by this Agreement, except such as have been obtained under
the Act and such as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities
by the Underwriters;
(viii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Delivery Date (other than the financial statements and related
schedules and such other financial and statistical data included therein
as to which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the rules and
regulations thereunder; such counsel does not know of any contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as
required;
(ix) The descriptions in the Registration Statement and
Prospectus under the captions "Business--Government Regulation" and
"Description of Capital Stock" and any further amendments or supplements
thereto, insofar as such descriptions constitute a summary of documents
referred to therein or matters of law, are accurate and fairly present
the information required to be shown;
(x) To such counsel's knowledge, the Company holds and is
operating in compliance, in all material respects, with all franchises,
grants, authorizations, licenses, permits, easements, consents,
certificates and orders of any governmental or self-regulatory body
required for the conduct of its business as presently being conducted
("permits"), except for such permits, which the failure to so hold or be
in compliance with, would not result in a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company; and to such counsel's knowledge, all
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such permits are valid and in full force and effect, and the Company is
in compliance, in all material respects, with all laws, regulations,
orders and decrees material to its business; and
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that such counsel participated in conferences
with officers and other representatives of the Company, representatives of the
independent public accountants of the Company and representatives of the
Underwriters at which the contents of the Registration Statement and Prospectus
were discussed and, although such counsel is not passing upon and does not
assume responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or Prospectus (except as and
to the extent stated in subparagraphs (iii), (iv) and (ix) above with respect to
certain descriptions contained therein), on the basis of the foregoing (relying
as to materiality where appropriate upon the opinions of officers and other
representatives of the Company) nothing has come to the attention of such
counsel that causes them to believe that the Registration Statement or any
amendment thereto at the time such Registration Statement or amendment became
effective contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus, at the date of such Prospectus,
and at all times up to and including the date of such counsel's opinion,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
(d) At 10:00 a.m., Richmond, Virginia, time, on the date of this
Agreement and the effective date of the most recently filed post-effective
amendment to the Registration Statement and also at each Delivery Date, Ernst &
Young LLP shall have furnished to you a letter or letters, dated the respective
date of delivery thereof, in form and substance satisfactory to you, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements and
certain financial information relating to the Company contained in the
Registration Statement and the Prospectus;
(e) (i) The Company shall not have sustained, since the date of the
latest audited financial statements included in the Prospectus, any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any change in
the outstanding capital stock or long-term debt of the Company or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i) or
(ii) is in your
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reasonable judgment so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities being delivered at such Delivery Date on the terms and in the manner
contemplated by the Prospectus;
(f) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading of any of the
equity securities of the Company on the Nasdaq National Market; (ii) any United
States federal or state statute, regulation, rule or order of any court,
legislative body, agency or other governmental authority shall have been
enacted, published, decreed or promulgated or any proceeding or investigation
shall have been commenced which, in your reasonable judgment, materially and
adversely affects the business or operations of the Company; (iii) a suspension
or material limitation in trading in securities generally on the New York Stock
Exchange or the Nasdaq Stock Market; (iv) a general moratorium on commercial
banking activities in New York State declared by either federal or New York
State authorities; (v) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war, if any such event specified in this clause (v) would have such a materially
adverse effect, in your judgment, as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities being
delivered at such Delivery Date on the terms and in the manner contemplated in
the Prospectus; or (vi) such a material adverse change in general economic,
political, financial or international conditions affecting financial markets in
the United States having a material adverse impact on trading prices of
securities in general, as, in your reasonable judgment, makes it inadvisable to
proceed with the payment for and delivery of the Securities;
(g) The Company shall have furnished to you copies of agreements between
the Company and the directors and officers of the Company, and certain other
stockholders specified by you, in form and content satisfactory to you, pursuant
to which such persons agree not to offer, sell, or contract to sell, or
otherwise dispose of, any shares of Common Stock beneficially owned by them or
any securities convertible into, or exchangeable for, Common Stock, on or before
the 180th day after the date of this Agreement without your prior written
consent; and
(h) The Company shall have furnished or caused to be furnished to you at
such Delivery Date certificates of officers of the Company reasonably
satisfactory to you as to the accuracy of the respective representations and
warranties of the Company herein at and as of such Delivery Date, as to the
performance by the Company of all of their obligations hereunder to be performed
at or prior to such Delivery Date, as to the matters set forth in subsections
(a) and (f) of this Section and as to such other matters as you may reasonably
request.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or
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necessary to make the statements therein not misleading, and will promptly
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating, preparing to defend or
defending, or appearing as a third-party witness in connection with, any such
action or claim; provided, however, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Underwriters through you expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you expressly
for use therein; and will promptly reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating,
preparing to defend or defending, or appearing as a third-party witness in
connection with, any such action or claim. The Company acknowledges that the
statements set forth in the last paragraph of the cover page, the last paragraph
on the inside front cover page and the first (including the tabular information
presented), second, third, fourth, seventh and eighth paragraphs under the
heading "Underwriting" in the Preliminary Prospectus and the Prospectus
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in the Preliminary Prospectus or the
Prospectus, and you, as the Representatives, confirm that such statements are
correct.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by counsel
that representation of such indemnified party and the indemnifying party may be
inappropriate under applicable standards of professional conduct due to actual
or potential differing interests between them, the indemnified party or parties
shall have
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the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. It is understood that the indemnifying party
shall, in connection with any such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
only one separate firm of attorneys together with appropriate local counsel at
any time for all indemnified parties unless such firm of attorneys shall have
reasonably concluded that one or more indemnified parties has actual differing
interests with other indemnified parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to appoint
counsel to defend such action and approval by the indemnified party of such
counsel, the indemnifying party will not be liable for any settlement entered
into without its consent and will not be liable to such indemnified party under
this Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence, (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party; and except that, if clause (i) or (iii) is applicable, such
liability shall be only in respect of the counsel referred to in such clause (i)
or (iii). Notwithstanding the immediately preceding sentence and the first
sentence of this paragraph, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Securities. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (after deducting the total underwriting discount, but before deducting
offering expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table
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<PAGE>
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations under this subsection (d) are
several in proportion to their respective underwriting obligations and not
joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. DEFAULT OF UNDERWRITERS.
(a) If any Underwriter shall default in its obligation to purchase the
Securities that it has agreed to purchase hereunder at a Delivery Date, you may
in your discretion arrange for you or another party or other parties to purchase
such Securities on the terms contained herein. If within 36 hours after such
default by any Underwriter you do not arrange for the purchase of such
Securities, then the Company shall be entitled to a further period of 36 hours
within which to procure another party or other parties satisfactory to you to
purchase such Securities on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Securities, or the Company notifies you that it has so arranged
for the purchase of such Securities, you or the Company shall have the right to
postpone such Delivery Date for a period of not more than seven days, in order
to effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion
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<PAGE>
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities that
remains unpurchased does not exceed one- eleventh of the aggregate number of all
the Securities to be purchased at such Delivery Date, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of Securities that such Underwriter agreed to purchase hereunder at such
Delivery Date and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Securities that such
Underwriter agreed to purchase hereunder at such Delivery Date) of the number of
Securities of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Securities that
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Securities to be purchased at such Delivery Date, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Securities of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase and the Company to sell the Optional
Securities) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriters or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE.
The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement or any investigation (or any statement as to
the results thereof) made by or on behalf of the Underwriters or any controlling
person of any Underwriter, or the Company, or any officer or director or
controlling person of the Company and shall survive delivery of and payment for
the Securities.
11. TERMINATION AND PAYMENT OF EXPENSES.
If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Section 6 and Section 8 hereof; but if for any other reason any
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through you for all out-of-pocket
expenses, including fees and disbursements of counsel, reasonably incurred by
the
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<PAGE>
Underwriters in making preparations for the purchase, sale and delivery of the
Securities not so delivered, but the Company shall then be under no further
liability to any Underwriter except as provided in Section 6 and Section 8
hereof.
12. NOTICES.
In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing or by telegram if promptly confirmed in writing, and if to the
Underwriters shall be sufficient in all respects if delivered or sent by
reliable courier, first class mail, telex or facsimile transmission to Davenport
& Co. of Virginia, Inc., Richmond, Virginia 23219, Attention: Corporate Finance
Department, and Scott & Stringfellow, Inc., Richmond, Virginia 23219, Attention:
Corporate Finance Department; if to the Company shall be sufficient in all
respects if delivered or sent by reliable courier, first class mail, telex, or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Mr. Stan A. Fischer; provided, however, that
any notice to any Underwriter pursuant to Section 8 hereof shall be delivered or
sent by reliable courier, first class mail, telex or facsimile transmission to
such Underwriter at its address set forth in the Underwriters' Questionnaire,
which address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. SUCCESSORS.
This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters and the Company and, to the extent provided in Sections 8
and 10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. TIME OF THE ESSENCE.
Time shall be of the essence in this Agreement.
15. BUSINESS DAY.
As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
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<PAGE>
16. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Virginia.
17. CAPTIONS.
The captions included in this Agreement are included solely for
convenience of reference and shall not be deemed to be a part of this Agreement.
18. COUNTERPARTS.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us four counterparts hereof, and upon the acceptance hereof by
you, this letter and such acceptance hereof shall constitute a binding agreement
among each of the Underwriters and the Company. It is understood that your
acceptance of this Agreement on behalf of each of the Underwriters is pursuant
to the authority set forth in a form of Agreement Among Underwriters, the form
of which will be submitted to the Company for examination, upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
OPEN PLAN SYSTEMS, INC.
By:
---------------------------
Name: Stan A. Fischer
Title: Chief Executive Officer
Accepted as of the date hereof
at Richmond, Virginia:
DAVENPORT & CO. OF VIRGINIA, INC.
SCOTT & STRINGFELLOW, INC.
Representatives of the Underwriters
By: DAVENPORT & CO. OF VIRGINIA, INC.
By: ---------------------------------
Name: Robert F. Mizell
Title: Senior Vice President
SCOTT & STRINGFELLOW, INC.
By:
--------------------------------
Name: G. Jacob Savage, III
Title: First Vice President
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<PAGE>
SCHEDULE I
Optional
Securities
to be
Firm Purchased
Securities if Maximum
to be Option
Underwriter Purchased Exercised
-22-
<PAGE>
SCHEDULE II
Directed Firm
Securities
to be
Underwriter Purchased
-23-
<PAGE>
EXHIBIT 3(i)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
OPEN PLAN SYSTEMS, INC.
* * * * * *
ARTICLE I
Name
The name of the Corporation is Open Plan Systems, Inc.
ARTICLE II
Registered Office and Registered Agent
The address of the registered office of the Corporation, which is
located in the City of Richmond, Virginia, is Williams, Mullen, Christian &
Dobbins, 1021 E. Cary Street, Richmond, Virginia 23219. The registered agent of
the Corporation is Theodore L. Chandler, Jr., who is a resident of Virginia and
a member of the Virginia State Bar, and whose business address is identical with
the registered office.
ARTICLE III
Purpose
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be incorporated under the Virginia Stock
Corporation Act, as amended from time to time (the "VSCA").
ARTICLE IV
Authorized Shares
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 55,000,000, of which 50,000,000
shares shall be Common Stock, no par value (the "Common Stock"), and 5,000,000
shares shall be Preferred Stock, no par value (the "Preferred Stock").
<PAGE>
A. Common Stock. Except as otherwise provided in the VSCA or in these
Articles of Incorporation as they may be hereafter amended (these
"Articles"), each share of Common Stock shall be entitled to one vote on all
matters submitted to a vote at any meeting of shareholders, and the exclusive
general voting power of shareholders for all purposes shall be vested therein.
B. Preferred Stock.
1. The Preferred Stock may be issued from time to time in one or
more classes or series, with such designations, rights and preferences as shall
be stated and expressed herein or in the resolution or resolutions authorizing
the issue of shares of a particular class or series. The Board of Directors, by
adoption of an amendment to these Articles, is expressly authorized to fix:
(a) The annual or other periodic dividend rate for such
class or series, the dividend payment dates, the date from which dividends on
all shares of such class or series issued shall be cumulative, and the extent of
participation rights, if any;
(b) The redemption price or prices, if any, for such class
or series and other terms and conditions on which such class or series may or
shall be retired and redeemed;
(c) The designation and maximum number of shares of such
class or series issuable;
(d) The right to vote, if any, with holders of shares of any
other class or series and the right to vote, if any, as a separate voting group,
either generally or as a condition to specified corporate action;
(e) The amounts payable upon shares in the event of
voluntary or involuntary liquidation;
(f) The rights, if any, of the holders of shares of such
class or series to convert such shares into other classes or series and the
terms and conditions of any such conversion; and
(g) Such other rights and/or preferences as may be specified
by the Board of Directors and not prohibited by law.
C. No Preemptive Rights. No holder of shares of the Corporation of any
class, now or hereafter authorized, shall as such holder have any preemptive
right to subscribe to, purchase, or receive any shares of the Corporation of any
class, now or hereafter authorized, or any rights or options to subscribe to or
purchase any such shares or other securities convertible into or exchangeable
for or carrying rights or options to purchase shares of any class or other
securities,
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<PAGE>
which may at any time be issued, sold, or offered for sale by the Corporation or
subjected to rights or options to purchase granted by the Corporation.
D. Voting Requirements.
1. Except as otherwise provided in the VSCA or in these Articles,
the outstanding shares of all classes and series of capital stock of the
Corporation entitled to vote on a matter (the "Voting Stock") shall be counted
together to determine if a quorum of such shares exists and shall vote together
as a single voting group.
2. Except as otherwise provided in Article 14 (Affiliated
Transactions) of the VSCA or in these Articles, any corporate action, except the
election of directors, shall for each voting group entitled to vote on the
matter be approved at a meeting of shareholders at which a quorum of the voting
group is present if the votes cast in favor of the action exceed the votes cast
against the action.
3. Except as otherwise provided in these Articles, directors
shall be elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting of shareholders at which a quorum is present.
4. Except as is otherwise provided in Article 14 (Affiliated
Transactions) of the VSCA or in these Articles, if a shareholder vote is
required under the VSCA, any (i) amendment of the Articles, (ii) merger or share
exchange to which the Corporation is a party, (iii) sale, lease, or exchange of
all or substantially all of the Corporation's assets and property other than in
the usual and regular course of business, or (iv) reclassification of securities
or recapitalization of the Corporation, shall be approved by the affirmative
vote of the holders of a majority of the votes entitled to be cast by each
voting group entitled to vote thereon at a meeting of shareholders duly called
for such purpose.
ARTICLE V
Board of Directors
A. Number, Election and Term of Directors. The business and affairs of
the Corporation shall be managed by or under the direction of a Board of
Directors consisting of not less than three nor more than eleven directors, the
exact number of directors to be determined from time to time by resolution
adopted by a majority of the total number of directors which the Corporation
would have if there were no vacancies (the "Whole Board") or by the affirmative
vote of the holders of at least seventy percent (70%) of the votes entitled to
be cast by the Voting Stock. Commencing with the 1997 annual meeting of
shareholders, the directors, other than those who may be elected by the holders
of any class or series of Preferred Stock under specified circumstances, shall
be divided, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as reasonably possible, with the term
of office of the first class to expire at the 1998 annual meeting of
shareholders, the
3
<PAGE>
term of office of the second class to expire at the 1999 annual meeting of
shareholders, and the term of office of the third class to expire at the 2000
annual meeting of shareholders, with each director to hold office until his
successor shall have been duly elected and qualified. At each annual meeting of
shareholders, commencing with the 1998 annual meeting, (i) directors elected to
succeed those directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of shareholders after
their election, with each director to hold office until his successor shall have
been duly elected and qualified, and (ii) if authorized by a resolution of the
Board of Directors, directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created.
B. Shareholder Nomination of Director Candidates; Introduction of
Business. Advance notice of shareholder nominations for the election of
directors and of business to be brought by shareholders before any meeting of
the shareholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
C. Newly Created Directorships and Vacancies. Subject to applicable
law and to the rights of the holders of any class or series of Preferred Stock
with respect to such class or series of Preferred Stock, and unless the Board of
Directors otherwise determines, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies on the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled only by a majority vote of
the directors then in office, though less than a quorum, and a director so
chosen shall hold office for a term expiring at the next meeting of shareholders
at which directors are elected and until his successor shall have been duly
elected and qualified. No decrease in the number of authorized directors
constituting the entire Board of Directors shall shorten the term of any
incumbent director.
D. Removal. Subject to the rights of the holders of any class or
series of Preferred Stock with respect to such class or series of Preferred
Stock, any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause.
E. Amendment, Repeal or Alteration. Notwithstanding any other provision
of these Articles or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock required by law or these
Articles, the affirmative vote of the holders of at least seventy percent (70%)
of the votes entitled to be cast by the Voting Stock shall be required to alter,
amend or repeal this Article V.
ARTICLE VI
Amendment, Repeal or Alteration of Bylaws
In furtherance and not in limitation of the powers conferred by law,
the Board of Directors is expressly authorized to make, alter, amend and repeal
the Bylaws of the Corporation, subject to the power of the holders of the
capital stock of the Corporation to alter,
4
<PAGE>
amend or repeal the Bylaws; provided, however, that, with respect to the powers
of the holders of capital stock to alter, amend and repeal the Bylaws of the
Corporation, notwithstanding any other provision of these Articles or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or these
Articles, the affirmative vote of the holders of at least seventy percent (70%)
of the votes entitled to be cast by the Voting Stock shall be required to (i)
alter, amend or repeal any provision of the Bylaws, or (ii) alter, amend or
repeal any provision of this Article VI.
ARTICLE VII
Special Meetings of Shareholders
Subject to the rights of the holders of any class or series of
Preferred Stock with respect to such class or series of Preferred Stock, special
meetings of shareholders of the Corporation may be called only by the President
or by the Board of Directors pursuant to a resolution adopted by a majority of
the Whole Board. Notwithstanding any other provision of these Articles or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or these
Articles, the affirmative vote of the holders of at least seventy percent (70%)
of the votes entitled to be cast by the Voting Stock shall be required to alter,
amend or repeal this Article VII.
ARTICLE VIII
Interested Shareholder Transactions
In the event that the holders of the capital stock of the Corporation
are entitled to vote on (i) a merger or consolidation with any Person (as
hereinafter defined) or on a proposal that the Corporation sell, lease or
exchange substantially all of its assets and property to or with any Person or
that any Person sell, lease or exchange substantially all of its assets and
property to or with the Corporation, and such Person is the Beneficial Owner (as
hereinafter defined) of shares representing ten percent (10%) or more of the
votes entitled to be cast by the Voting Stock (an "Interested Shareholder") at
the record date for determining shareholders entitled to vote or (ii) any
reclassification of securities, recapitalization, share exchange or other
transaction (except redemptions permitted by the terms of the security redeemed
or repurchases of the securities for cancellation or the Corporation's treasury)
designed to decrease the number of holders of the Corporation's Common Stock
remaining after any Person has become an Interested Shareholder, the affirmative
vote of the holders of at least seventy percent (70%) of the votes entitled to
be cast by the Voting Stock shall be required for the approval of any such
action, in addition to any other approval that may be required by law or these
Articles, provided, however, that the foregoing shall not apply to any such
merger, consolidation, sale, lease or exchange of assets and property or such
reclassification, recapitalization, share exchange or other transaction which
was approved by resolutions of the Board of Directors of the Corporation prior
5
<PAGE>
to the time that any Person becomes an Interested Shareholder or, in the case of
any merger, consolidation, sale, lease or exchange involving a particular
Interested Shareholder, prior to the time such Interested Shareholder became an
Interested Shareholder.
For the purpose hereof, a Person shall be deemed not to be an
Interested Shareholder if (i) on March 27, 1996, such Person was the Beneficial
Owner of shares representing ten percent (10%) or more of the votes entitled to
be cast by the Voting Stock, or (ii) such Person became the Beneficial Owner of
such shares as a result of acquiring shares from a Person specified in (i) by
gift, testamentary bequest or the laws of descent and distribution or in a
transaction in which consideration was not exchanged and who has continued
thereafter to be the Beneficial Owner of shares representing ten percent (10%)
or more of the votes entitled to be cast by the Voting Stock, or who would have
so continued but for the unilateral action of the Corporation.
A "Person" shall mean any corporation, partnership, association, trust
(other than any trust holding stock of the employees of the Corporation pursuant
to any stock purchase, ownership or employee benefit plan of the Corporation),
business entity, estate or individual or any Affiliate (as hereinafter defined)
of any of the foregoing. An "Affiliate" shall mean any corporation, partnership,
association, trust, business entity, estate or individual who, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, a Person. "Control" shall mean the possession,
directly or indirectly, of power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
A Person shall be deemed to be the "Beneficial Owner" of shares if such
Person has the sole or shared power to dispose or direct the disposition of such
shares, or the sole or shared power to vote or direct the voting of such shares,
or the sole or shared power to acquire such shares, including any such power
which is not immediately exercisable, whether such power is direct or indirect
or through any contract, arrangement, understanding, relationship or otherwise.
A Person shall not be deemed to be a Beneficial Owner of shares tendered
pursuant to a tender or exchange offer made by such Person until the tendered
shares are accepted for purchase or exchange. A Person shall not be deemed to be
a Beneficial Owner of shares as to which such person may exercise voting power
solely by virtue of a revocable proxy conferring the right to vote. A member of
a national securities exchange shall not be deemed to be a Beneficial Owner of
shares held directly by it on behalf of another person solely because such
member is the record holder of such shares and, pursuant to the rules of such
exchange, may direct the vote of such shares, without instructions, on other
than contested matters or matters that may affect substantially the rights or
privileges of the holders of the shares to be voted but is otherwise precluded
by the rules of such exchange from voting without instructions.
Notwithstanding any other provisions of these Articles or any provision
of law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of the
Voting Stock required by law or these Articles, the affirmative vote of the
holders of at least seventy percent (70%) of the votes entitled to be cast by
the Voting Stock shall be required to alter, amend or repeal this Article VIII.
6
<PAGE>
ARTICLE IX
Control Share Acquisitions
In the event that any acquiring person (an "Acquiring Person") as
defined in Section 13.1-728.1 of the VSCA, either (i) fails to comply with the
provisions of Section 13.1-728.4 of the VSCA or (ii) fails to obtain the
approval of the shareholders of the Corporation at any meeting held pursuant to
Section 13.1-728.5 of the VSCA, then the Corporation shall have authority, upon
approval by resolution of the Board of Directors, to call for redemption, at
anytime within sixty (60) days after the last acquisition of any such shares by
such Acquiring Person or the date of such meeting, as the case may be, and
thereafter to redeem on such date within such 60-day period as may be specified
in such resolution (the "Redemption Date") all shares of Voting Stock of the
Corporation theretofore acquired by the Acquiring Person in a control share
acquisition (as defined in Section 13.1-728.1 of the VSCA) and then owned
beneficially by such Acquiring Person, as such number of shares may be either
(i) shown on any control share acquisition statement or any statement or report
filed by the Acquiring Person with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended, or (ii) otherwise determined by
the Board of Directors. The redemption price shall be paid in cash on the
Redemption Date against delivery at the principal office of the Corporation of
certificates evidencing the shares so redeemed.
All determinations by the Board of Directors as to (i) the status of
any person as an Acquiring Person under the VSCA, (ii) the number of shares of
the Corporation owned by such Acquiring Person, (iii) the timeliness of
compliance by an Acquiring Person within Section 13.1- 728.4 of the VSCA, or
(iv) the interpretation of the VSCA or this Article IX if made in good faith,
shall be conclusive and binding on all persons.
ARTICLE X
Limitation of Liability and Indemnification
A. Limitation of Liability. To the full extent that the VSCA permits
the limitation or elimination of the liability of directors or officers, a
director or officer of the Corporation shall not be liable to the Corporation or
its shareholders for any monetary damages.
B. Mandatory Indemnification. The Corporation shall indemnify a
director or officer of the Corporation who is or was a party to any proceeding
by reason of the fact that he is or was such a director or officer or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other profit or nonprofit enterprise against all liabilities and
expenses incurred in the proceeding, except such liabilities and expenses as are
incurred because of his willful misconduct or knowing violation of the criminal
law. Unless a determination has been made that indemnification is not
permissible, the Corporation shall make advances and reimbursements for expenses
incurred by a director or officer in a proceeding upon receipt of
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<PAGE>
an undertaking from him to repay the same if it is ultimately determined that he
is not entitled to indemnification. Such undertaking shall be an unlimited,
unsecured general obligation of the director or officer and shall be accepted
without reference to his ability to make repayment. The Board of Directors is
hereby empowered, by majority vote of a quorum of disinterested directors, to
contract in advance to indemnify and advance the expenses of any director or
officer.
C. Permissive Indemnification. The Board of Directors is hereby
empowered, by majority vote of a quorum of disinterested directors, to cause the
Corporation to indemnify or contract in advance to indemnify any person not
specified in Section B of this Article X who was or is a party to any
proceeding, by reason of the fact that he is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other profit or nonprofit enterprise,
to the same extent as if such person was specified as one to whom
indemnification is granted in Section B.
D. Insurance. The Corporation may purchase and maintain insurance to
indemnify it against the whole or any portion of the liability assumed by it in
accordance with this Article X and may also procure insurance, in such amounts
as the Board of Directors may determine, on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other profit or non-profit enterprise, against any liability asserted against or
incurred by such person in any such capacity or arising from his status as such,
whether or not the Corporation would have power to indemnify him against such
liability under the provisions of this Article X.
E. Special Legal Counsel. In the event there has been a change in the
composition of a majority of the Board of Directors after the date of the
alleged act or omission with respect to which indemnification is claimed, any
determination as to indemnification and advancement of expenses with respect to
any claim for indemnification made pursuant to Section B of this Article X shall
be made by special legal counsel agreed upon by the Board of Directors and the
proposed indemnitee. If the Board of Directors and the proposed indemnitee are
unable to agree upon such special legal counsel, the Board of Directors and the
proposed indemnitee each shall select a nominee, and the nominees shall select
such special legal counsel.
F. Indemnitee's Rights. The provisions of this Article X shall be
applicable to all actions, claims, suits or proceedings commenced after the
adoption hereof, whether arising from any action taken or failure to act before
or after such adoption. No amendment, modification or repeal of this Article X
shall diminish the rights provided hereby or diminish the right to
indemnification with respect to any claim, issue or matter in any other pending
or subsequent proceeding that is based in any material respect on any alleged
action or failure to act prior to such amendment, modification or repeal.
8
<PAGE>
G. Additional Indemnitees. Reference herein to directors, officers,
employees or agents shall include former directors, officers, employees and
agents and their respective heirs, executors and administrators.
ARTICLE XI
Reservation of Rights
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles, and any other provisions authorized
by the laws of the Commonwealth of Virginia at the time in force may be added or
inserted, in the manner now or hereafter provided herein or by statute. All
rights, preferences and privileges of whatsoever nature conferred upon
shareholders, directors or any other persons whomsoever by these Articles in
their present form, or as amended, are granted subject to the rights reserved in
this Article XI.
9
EXHIBIT 4
STOCK CERTIFICATE
[FRONT]
OPEN PLAN SYSTEMS(SM)
[LOGO]
CUSIP 683709 10 9
Incorporated Under The Laws Of The Commonwealth Of Virginia
THIS CERTIFIES THAT IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, WITHOUT PAR
VALUE, OF OPEN PLAN SYSTEMS, INC. TRANSFERABLE ON THE BOOKS OF THE CORPORATION
BY THE OWNER HEREOF IN PERSON OR BY ATTORNEY DULY AUTHORIZED IN WRITING UPON
SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE AND THE SHARES
REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO ALL THE PROVISIONS OF
THE CORPORATION'S ARTICLES OF INCORPORATION AND ANY AMENDMENTS THEREOF.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT
AND REGISTERED BY THE REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, New York)
TRANSFER AGENT AND REGISTRAR
[CORPORATE SEAL]
/s/ GARY M. FARRELL /s/ STAN A. FISCHER
Secretary President
<PAGE>
STOCK CERTIFICATE
[BACK]
OPEN PLAN SYSTEMS, INC.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST, AND
WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS
AND RELATIVE RIGHTS OF EACH CLASS OF STOCK WHICH THE COMPANY IS AUTHORIZED TO
ISSUE. REQUESTS MAY BE DIRECTED TO OPEN PLAN SYSTEMS, INC., 4299 CAROLINA
AVENUE, BUILDING C, RICHMOND, VIRGINIA 23222.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _____ Custodian ______
TEN ENT - as tenants by the entireties (Cust) (Minor)
under Uniform Gifts to Minors
Act ________________________
JT TEN - as joint tenants with right of (State)
survivorship and not as tenants
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, __________________ HEREBY SELL(S), ASSIGN(S) AND
TRANSFER(S) UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND
DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT __________________________
ATTORNEY TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ________________ X
X
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGES
WHATEVER.
SIGNATURE GUARANTEED: ________________________
Exhibit 10.3
Commercial Note - Crestar Bank Crestar [logo]
Borrower: Open Plan Systems, Inc.
Loan Amount: Five Million Dollars and no cents ($5,000,000.00)
Borrower's Address: 4299 Carolina Ave Bldg C
Richmond, VA 23222 - 1403
Officer: David S Reynolds /s/ DR (initials) Date: May 9, 1996
Account No: 04300011120229 Note No: 1001 Note Type: Renewal Loan
For Value Received, the undersigned (whether one or more) jointly and severally
promise to pay to the order of Crestar Bank (the "Bank") at any of its offices,
or at such place as the Bank may designate in writing, without offset and in
immediately available funds, the Loan Amounts shown above, including or plus
interest, and any other amounts due, upon the terms specified below.
LOAN TYPE AND REPAYMENT TERMS
LOAN TYPE: Revolving Master Borrowing Line
This is an open end revolving line of credit. You may borrow
an aggregate principal amount up to the Loan Amount shown
above outstanding at any one time.
REPAYMENT TERMS: Principal on demand, plus interest, but the undersigned shall
be liable for only so much of the Loan Amount as shall be
equal to the total advanced to or for the undersigned, or any
of them, by the Bank from time to time, less all payments made
by or for the undersigned and applied by the Bank to
principal, plus interest on each such advance, and any other
amounts due all as shown on the Bank's books and records,
which shall be prima facie evidence of the amount owed.
The Master Borrowing arrangement will terminate upon written
notice from the Bank to the undersigned, or if such notice is
not sooner given, 12 months from the date of this Note, unless
an alternate termination date is indicated in the "Agreement",
as defined below.
THE BANK SHALL HAVE THE RIGHT TO DEMAND PAYMENT AT ANY TIME
EVEN IF AN EVENT OF DEFAULT (AS INDENTIFIED IN THIS NOTE) HAS
NOT OCCURRED.
ADDITIONAL TERMS AND CONDITIONS:
This Note is governed by additional terms and conditions contained in a
Commitment Letter between the undersigned and the Bank dated May 9, 1996, and
any modifications, renewals, extensions or replacements thereof (the
"Agreement"), which is incorporated in this Note by reference. In the event of a
conflict between any term or condition contained in this Note and in the
Agreement, such term or condition of the Agreement shall control.
INTEREST
Accrued interest will be payable on the last day of each month beginning on May
31, 1996.
Interest will accrue daily on an actual/360 basis (that is, on the actual number
of days elapsed over a year of 360 days).
Each scheduled payment made on this Note will be applied to accrued interest
before it is applied to principal. Interest will accrue from the date of this
Note on the unpaid balance and will continue to accrue after maturity, whether
by acceleration or otherwise, until this Note is paid in full. If this is a
variable rate transaction, the interest rate is prospectively subject to
increase or decrease without prior notice, and if this is a Term-Variable
Payment loan, adjustments in the payment schedule will be made as necessary. If
the stated Rate (as defined below) is based on a Prime Rate of Crestar Bank, the
interest rate is subject to increase or decrease at the sole option of the Bank.
Subject to the above, interest per annum payable on this Note (the "Rate") will
be the "Prime Rate" (as defined in this Note). The "Prime Rate" shall be the
lower of the following rates: (A) the rate established from time to time by the
Bank and recorded in its Central Credit Administration Division as a reference
rate for fixing the lending rate for commercial loans or (B) 2.25% plus the one
month London Interbank Offered Rate as published in the "Money Rates" section of
the Wall Street Journal. Adjustment to the Rate shall be effective as of the
date Prime Rate changes or if Libor, the first day of each month.
IMPORTANT NOTICE
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
Page 1
This Note includes a renewal and refinance of the balance owed on note number
043000111202291001 dated September 27, 1995, in the original principal amount of
$2,500,000.00.
COLLATERAL
Any collateral pledged to the Bank to secure any of the undersigned's existing
or future liabilities to the Bank shall secure this Note. To the extent
permitted by law, each of the undersigned grants to the Bank a security interest
in and a lien upon all deposits or investments maintained by the undersigned
with, and all indebtedness owed to the undersigned by, the Bank or any of its
affiliates.
This Note is also secured by the following collateral and proceeds thereof.
All accounts, inventory, furniture, fixtures and equipment, general intangibles,
instruments, documents and chattel paper now existing or hereafter acquired and
all proceeds and products thereof owned by, and as more particularly described
in a Security Agreement by, Open Plan Systems, Inc. dated January 19, 1990.
All of this security is referred to collectively as the "Collateral." The
Collateral is security for the payment of this Note and any other liability
(including overdrafts and future advances) of the undersigned to the Bank,
however evidenced, now existing or hereafter incurred, matured or unmatured,
direct or indirect, absolute or contingent, several, joint, or joint and
several, including any extensions, modifications or renewals. The proceeds of
any Collateral may be applied against the liabilities of the undersigned to the
Bank in any order at the option of the Bank.
LOAN PURPOSE AND UPDATED FINANCIAL INFORMATION REQUIRED
The undersigned warrant and represent that the loan evidenced by this Note is
being made solely for the purpose of acquiring or carrying on a business,
professional or commercial activity acquiring real or personal property as an
investment (other than a personal investment) or for carrying on an investment
activity (other than a personal investment activity). The undersigned agree to
provide to the Bank updated financial information, including, but not limited
to, tax returns, current financial statements in form satisfactory to the Bank,
as well as additional information, reports or schedules (financial or
otherwise), all as the Bank may from time to time request.
DEFAULT, ACCELERATION AND SETOFF
Any one of the following will constitute an event of default under the terms of
this Note: (1) the failure to make when due any instalment or other payment,
whether of principal, interest, late charges or other authorized charges due
under this Note, or the failure to pay the amount demanded by the Bank if this
Note is payable on demand; (2) the death, dissolution, merger, acquisition,
consolidation or termination of existence of the undersigned, any quarantor of
the indebtedness of any of the undersigned to the Bank, any endorser, or any
other party to this Note (collectively called a "Party"); (3) the insolvency or
inability to pay debts as they mature of any Party, or the application for the
appointment of a receiver for any Party or the filing of a petition under any
provision of the Bankruptcy Code or other insolvency law, statute or proceeding
by or against any Party or any assignment for the benefit of creditors by or
against any Party; (4) the entry of a judgment against any Party or the issuance
or service of any attachment, levy or garnishment against any Party or the
property of any Party, or the repossession or seizure of property of any Party;
(5) a determination by the Bank that it deems itself insecure or that a material
adverse change in the financial condition of any Party or decline or
depreciation in the value or market value of any Collateral has occurred since
the date of this Note or is reasonably anticipated; (6) the failure of any Party
to perform any other obligation to the Bank under this Note or under any other
agreement with the Bank; (7) the occurrence of an event of default with respect
to any existing or future indebtedness of any Party to the Bank or any other
creditor of the Party; (8) a material change in the ownership, control or
management of any Party that is an entity, unless such change is approved by the
Bank in its sole discretion; (9) if any Party gives notice to the Bank
purporting to terminate its obligations under or with respect to this Note; (10)
the sale or transfer by a Party of all or substantially all of its assets other
than in the ordinary course of business; or (11) any Party commits fraud or
makes a material misrepresentation at any time in connection with this Note. If
an event of default occurs, or in the event of non-payment of this Note in full
at maturity, the entire unpaid balance of this Note will, at the option of the
Bank, become immediately due and payable, without notice or demand. Upon the
occurrence of an event of default, the Bank will be entitled to interest on the
unpaid balance at the stated Rate plus 2.00% (the "Default Rate"), unless
otherwise required by law, until paid in full. To the extent permitted by law,
upon deault, the Bank will have the right, in addition to all other remedies
permitted by law, to set off the amount due under this Note or due under any
other obligation to the Bank against any and all accounts, whether checking or
savings or otherwise, credits, money, stocks, bonds or other security or
property of any nature on deposit with, held by, owed by, or in the possession
of, the Bank or any of its affiliates to the credit of or for the account of any
Party, without notice to or consent by any Party. The remedies provided in this
Note and any other agreement between the Bank and any Party are cumulative and
not exclusive of any remedies provided by law.
CAPITAL ADEQUACY
Should the Bank, after the date of this Note, determine that the adoption of any
law or regulation regarding capital adequacy, or any change in its
interpretation or administration, has or would have the effect of reducing the
Bank's rate of return under this Note to a level below that which the Bank could
have achieved but for the adoption or change, by an amount which the Bank
considers to be material, then, from time to time, 30 days after written demand
by the Bank, the undersigned shall pay to the Bank such additional amounts as
will compensate the Bank for the reduction. Each demand by the Bank will be made
in good faith and accompanied by a certificate claiming compensation under this
paragraph and stating the amounts to be paid to it and the basis for the
payment.
Page 2
LATE CHARGES AND OTHER AUTHORIZED CHARGES
If any portion of a payment is at least ten (10) days past due, the undersigned
agree to pay a late charge of 5.00% of the amount which is past due. Unless
prohibited by applicable law, the undersigned agree to pay the fee established
by the Bank from time to time for returned checks if a payment is made on this
Note with a check and the check is dishonored for any reason after the second
presentment. In addition, as permitted by applicable law, the undersigned agree
to pay the following: (1) all expenses, including, without limitation, all court
or collection costs, and attorneys' fees of 25% of the unpaid balance of this
Note, or actual attorneys' fees if in excess of such amount, whether suit be
brought or not, incurred in collecting this Note; (2) all costs incurred in
evaluating, preserving or disposing of any Collateral granted as security for
the payment of this Note, including the cost of any audits, appraisals,
appraisal updates, reappraisals or environmental inspections which the Bank from
time to time in its sole discretion may deem necessary; (3) any premiums for
property insurance purchased on behalf of the undersigned or on behalf of the
owner(s) of the Collateral pursuant to any security instrument relating to the
Collateral; (4) any expenses or costs incurred in defending any claim arising
out of the execution of this Note or the obligation which it evidences, or
otherwise involving the employment by the Bank of attorneys with respect to this
Note and the obligations it evidences; and (5) any other charges permitted by
applicable law. The undersigned agree to pay these authorized charges on demand
or, at the Bank's option, the charges may be added to the unpaid balance of the
Note and will accrue interest at the stated Rate. Upon the occurrence of an
event of default, interest will accrue at the Default Rate.
WAIVERS
The undersigned and each other Party waive presentment, demand, protest, notice
of protest and notice of dishonor and waive all exemptions, whether homestead or
otherwise, as to the obligations evidenced by this Note. The undersigned and
each other Party waive any rights to require the Bank to proceed against any
other Party or person or any Collateral before proceeding against the
undersigned or any of them, or any other Party, and agree that without notice to
any Party and without affecting any Party's liability, the Bank, at any time or
times, may grant extensions of the time for payment or other indulgences to any
Party or permit the renewal or modification of this Note, or permit the
substitution, exchange or release of any Collateral for this Note and may add or
release any Party primarily or secondarily liable. The undersigned and each
other Party agree that the Bank may apply all monies made available to it from
any part of the proceeds of the disposition of any Collateral or by exercise of
the right of setoff either to the obligations under this Note or to any other
obligations of any Party to the Bank, as the Bank may elect from time to time.
The undersigned also waive any rights afforded to them by Sections 49-25 and
49-26 of the Code of Virginia of 1950 as amended.
TO THE EXTENT LEGALLY PERMISSIBLE, THE UNDERSIGNED WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY LITIGATION RELATING TO TRANSACTIONS UNDER THIS NOTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
JUDGMENT BY CONFESSION
The undersigned hereby duly constitute and appoint Joel W. Maddock or Virginia
L. Riddle as the true and lawful attorney-in-fact for them in any or all of
their names, place and stead, and upon the occurrence of an event of default, to
confess judgment against them, or any of them, in the Circuit Court for the City
of Richmond, Virginia, upon this Note and all amounts owed hereunder, including
all costs of collection, attorneys' fees equal to 25% of the unpaid principal
balance hereof and court costs, hereby ratifying and confirming the acts of said
attorney-in-fact as if done by themselves, expressly waiving benefit of any
homestead or other exemption laws.
SEVERABILITY, AMENDMENTS AND NO WAIVER BY BANK
Any provision of this Note which is prohibited or unenforceable will be
ineffective to the extent of the prohibition or unenforceability without
invalidating the remaining provisions of this Note. No amendment, modification,
termination or waiver of any provision of this Note, nor consent to any
departure by the undersigned from any term of this Note, will in any event be
effective unless it is in writing and signed by an authorized employee of the
Bank, and then the waiver or consent will be effective only in the specific
instance and for the specific purpose for which given. If the interest Rate is
tied to an external index and the index becomes unavailable during the term of
this loan, the Bank may designate a substitute index with notice to the
Borrower. No failure or delay on the part of the Bank to exercise any right,
power or remedy under this Note may be construed as a waiver of the right to
exercise the same or any other right at any time.
LIABILITY, SUCCESSORS AND ASSIGNS AND GOVERNING LAW
Each of the undersigned shall be jointly and severally obligated and liable on
this Note. This Note shall apply to and bind each of the undersigned's heirs,
personal representatives, successors and assigns and shall incure to the benefit
of the Bank, its successors and assigns. This note shall be governed by the
internal laws of the Commonwealth of Virginia and applicable federal law.
Page 3
By signing below, the undersigned agree to the terms of this Note and
acknowledge receipt of a loan in the Loan Amount shown above.
Open Plan Systems, Inc.
By: /s/ STAN A. FISCHER (Seal)
--------------------------------
President
--------------------------------
Name and title printed or typed
Page 4
Exhibit 10.4
CRESTAR
SECURITY AGREEMENT
This Security Agreement ("Agreement") dated May 7, 1996, is made by Open Plan
Systems, Inc. (herein, whether one or more, the "Owner") for the use and benefit
of Crestar Bank, its successors and assigns (the "Bank").
SECURITY AGREEMENT. In order to induce the Bank from time to time to extend or
continue to extend credit to Open Plan Systems, Inc. whether one or more and any
combination thereof, (the "Borrower"), the Owner (which may include the
Borrower) hereby grants the Bank a security interest in the collateral and all
proceeds, products, rents and profits thereof and all revenues from the right to
use the collateral described below (the "Collateral") to secure the payment of
all present and future indebtedness of every kind and description, however
evidenced, of the Borrower to the Bank, whether such indebtedness is direct or
indirect, fixed or contingent, liquidated or unliquidated, including any
extensions, modifications or renewals thereof (the "Indebtedness") and to secure
the performance by the Owner of the agreements and warranties contained in this
Agreement.
COLLATERAL. As used in the is Agreement, the term Collateral, whether now
existing or acquired in the future, shall mean:
All accounts ("Accounts"), Inventory ("Inventory"), furniture, fixtures and
equipment ("Equipment"), general intangibles ("General Intangibles"),
instruments, documents and chattel paper, including, without limitation, all
goods represented thereby and all goods that may be reclaimed or repossessed
from or returned by account debtors and all proceeds, products, rents and
profits thereof (as all such terms are defined in the Uniform Commercial Code).
REPRESENTATIONS AND WARRANTIES. The Owner represents and warrants to the Bank as
follows:
a) Open Plan Systems, Inc. is/are and will continue to be the absolute
owner of the Collateral. There are no other owners or liens or
security interests affecting the Collateral other than the security
interest granted in this Agreement except those previously disclosed
to the Bank in writing by the Owner, if the Owner is acting in the
capacity of trustee, administrator or executor of an estate, such
fact shall be disclosed and evidence of capacity shall be provided to
the Bank;
b) The Owner will defend the Collateral against the claims and demands
of all parties. The Owner will not, without prior written consent of
the Bank, grant any security interest in the Collateral and will
keep it free from any lien, encumbrance or security interest;
c) If applicable to the Collateral pledged, the Owner represents and
warrants that the Collateral never has been, and never will be as
long as this Agreement remains a lien on the Collateral, used for the
generation, collection, manufacture, storage, treatment, disposal,
release or threatened release of any hazardous substance, as those
terms are defined in the Comprehensive Environment Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq. ("CERCLA"), SuperFund Amendments and Reauthorization
Act ("SARA"), applicable state laws, or regulations adopted pursuant
to either of the foregoing. The Owner agrees to comply with any
federal, state or local law, statute, ordinance or regulation, court
or administrative order or decree or private agreement regarding
materials which require special handling in collection, storage,
treatment or disposal because of their impact on the environment
("Environmental Requirements"). The Owner agrees to indemnify and
hold the Bank harmless against any and all claims, losses and
expenses resulting from a breach of this provision of this Agreement
and the Owner will pay or reimburse the Bank for all costs and
expenses for expert opinion or investigations required or requested
by the Bank which, in the Bank's sole discretion, are necessary to
ensure compliance with this provision of this Agreement. This
obligation to indemnify shall survive the payment of the indebtedness
and the satisfaction of the Agreement;
d) The primary use of the Collateral is and will be: business;
e) If applicable to the type of collateral pledged, the Owner warrants
and represents that all Collateral has been produced in compliance
with the Fair Labor Standards Act or other applicable wage and
employee law, rule, regulation or order, and that no existing or
future liability shall occur as a result. The Owner may contest, in
good faith, the applicability of any such law, rule, regulation or
order, including prosecuting any appeals, so long as the Bank's
interest in the Collateral, in the opinion of the Bank, is not
jeopardized thereby.
f) The Owner, if an individual, is above the age of majority and has the
legal capacity to enter into this Agreement;
g) The Owner must notify the Bank in writing at least 30 days prior to
any change of its name, corporate structure or identity;
h) The location of the principal place of business (or home address if
an individual) of Open Plan Systems, Inc. in Virginia is the County
of Henrico. Other places of businesses are located in the following
jurisdiction(s): County of Gwinnett GA. Books of accounts and records
are maintained at: 4299 Carolina Ave Bldg C, Richmond, VA 23222-1403.
i) The Collateral will be located at: 4299 Carolina Ave Bldg C,
Richmond, VA 23222-1403 and 3000 Pacific Drive, Norcross Ga. 30071
j) All information supplied and statements made to the Bank in any
financial or credit statements or applications are true, correct,
complete, valid and genuine in all material respects;
k) None of the Collateral is being acquired with funds simultaneously
advanced to the Borrower by the Bank.
l) The corporate Owner is duly organized and existing under the laws of
Virginia; is duly qualified and in good standing as a foreign
corporation in every jurisdiction where such qualification is
necessary; the execution and performance of this
Page 1
<PAGE>
Agreement have been duly authorized by action of its Board of
Directors, no action of its shareholders being necessary; the
execution and performance of this Agreement will not violate or
contravene any provisions of law or regulation or its Articles of
Incorporation, Shareholder Agreement, By-Laws or other agreements to
which it is a party or by which it is bound; and that no consent or
approval of any governmental agency or authority is required in
making or performing the obligations under this Agreement;
SECURITIES, INSTRUMENTS, CERTIFICATES OF DEPOSIT, DOCUMENTS, CHATTEL PAPER AND
GENERAL INTANGIBLES.
a) The Owner also grants the Bank a security interest in all rights to
which an owner of the Collateral is now or may become entitled by
virtue of owning such Collateral including, without limitation,
interest, cash dividends, stock dividends and stock rights, all of
which shall, when received, and upon request by the Bank, be
delivered to the Bank with written authority to sell, transfer or
rehypothecate the same.
b) If the Collateral includes all rights, title and interest in an
Estate or Trust, the security interest shall not apply to any shares
of capital stock of Crestar Financial Corporation or any of its
affiliates, or to any units of participation in the Bank's Common
Trust Fund held by the Estate or Trust, but shall apply to any
proceeds from the sale of such stocks and units or cash dividends
thereof.
c) The owner represents and warrants, as may be applicable, that:
(i) The Owner has good and marketable title to the Collateral. The
Collateral is valid and genuine and represents a bona fide,
binding, legal obligation of the maker, issuer, or grantor, and
all signatures are genuine;
(ii) The Collateral is full force and effect and is not in default
and no prepayments have been made;
(iii) The Collateral is not represented by a judgment or any other
document not provided to the Bank;
(iv) The Collateral is not subject to any assignment, claim, lien,
right of setoff or security interest of any other party;
(v) Unless otherwise stated, the face amount on the Collateral is
the correct amount actually and unconditionally due or to
become due according to the terms of the Collateral, and such
amount is not disputed or subject to any setoff, credit,
deduction or counterclaim;
(vi) With respect to any security on the Collateral, the lien or
security interest represented thereby is not subject to
prior claim, lien, or security interest of any other party,
unless otherwise stated herein, or in the document
evidencing such security;
(vii) With respect to the security on the Collateral, it has been
properly perfected by the filing or recording of all
necessary financing statements, deeds of trust or other
documents and the payment of all recording, transfer and
other taxes and fees made in the appropriate public offices.
d) At any time, and from time to time, whether before or after default,
without notice, and at the expense of the Owner, the Bank in its
name or in the name of its nominee or of the Owner, may, but
shall not be obligated to:
(i) Notify the obligors on any Collateral to make payment to the
Bank of any or all dividends, interest, principal payments
and other sums now or hereafter payable upon or on account
of the Collateral, may collect the same by legal proceedings
or otherwise, and may perform any contract or endorse in the
name of the Owner any checks, drafts, notes, instruments or
other documents which constitute the Collateral;
(ii) Enter into any extension, reorganization, deposit, merger or
consolidation agreement or any agreement in any way relating
to or affecting the Collateral and in connection therewith
may deposit or surrender control of the Collateral, accept
other property in exchange for the Collateral and do and
perform such acts and things as it may deem proper, and
any money or property received in exchange for the Collateral
may be either applied to any indebtedness or may be held by
the Bank pursuant to the provisions of this Agreement;
(iii) Make any compromise or settlement it deems desirable or
proper with reference to the Collateral;
(iv) Insure, process and preserve the Collateral;
(v) Cause the Collateral to be transferred to its name or the
name of its nominee;
(vi) Exercise as to the Collateral all the rights, powers and
remedies of an owner.
INVENTORY.
a) The Owner agrees to maintain books and records pertaining to the
Inventory in such detail, form and scope as the Bank shall require.
The Owner shall promptly advise the Bank of any substantial changes
relating to the type, quality or quantity of the Inventory or any
event which would have a material effect on the value of the Inventory
or on the security interest granted to the Bank. Upon reasonable
notice by the Bank, the Owner shall assemble and make readily
available for inspection and examination all of the Inventory and all
books and records pertaining to the Inventory at any time;
b) If the Inventory remains in the possession or control of any of the
Owner's agents or processors, the Owner shall notify such agents or
processors of the Bank's security interest, and upon request,
instruct them to hold such Inventory for the Bank's account and
subject to the Bank's instructions;
c) The Owner will prepare and deliver to the Bank, at the Bank's request,
a listing of all inventory and such information regarding the
Inventory as the Bank may require.
ACCOUNTS.
a) The owner warrants that each and every Account, now owned or hereafter
acquired is a bonafied existing obligation, valid and enforceable
against the account debt, for goods sold or leased and delivered or
services rendered in the ordinary course of business; it is subject to
no dispute, defense or offset; the Owner has good title to the Account
and has full right and power to grant the Bank's security interest in
the Collateral;
b) The Owner will immediately notify the Bank of any Account to which the
above warranties are or become untrue;
Page 2
<PAGE>
c) The Owner will prepare and deliver to the Bank, at the Bank's request,
a listing and aging of all Accounts and any further schedules or
information that the Bank may require.
d) The Bank shall have the right at any time to notify account debtors of
its security interest in the Accounts and require payments to be made
directly to the Bank. The Owner appoints the Bank and any officer or
employee of the Bank, as the Bank may from time to time designate, as
its attorneys-in-fact for the Owner, to sign and endorse in the name of
the Owner, to give notice in the name of the Owner, and to perform all
other actions necessary or desirable at the reasonable discretion of
the Bank to effect these provisions and carry out the intent of this
Agreement, all at the cost and expense of the Owner. The Owner ratifies
and approves all acts of such attorneys-in-fact and neither the Bank
nor any other such attorneys-in-fact will be liable for any acts of
commission or omission nor for any error or judgment or mistake of fact
of law. This power being coupled with an interest is irrevocable so
long as any Account or General intangible assigned to the Bank remains
unpaid and the Borrower has any indebtedness to the Bank. The costs of
such collection and enforcement, including attorneys' fees and
out-of-pocket expenses, shall be borne solely by the Owner whether the
same are incurred by the Bank or the Owner;
e) At the option of the Bank, all payments on the Accounts received by
the owner shall be remitted to the Bank in their original form on the
day of receipt; all notes, checks, drafts and other instruments so
received shall be duly endorsed to the order of the Bank. At the Bank's
election, the payments shall be deposited into a special deposit
account ("Special Account") maintained with the Bank. The Bank may
designate with each such deposit the particular Account upon which
payment was made. The Special Account shall be held by the Bank as
security for the indebtedness. Prior to depositing payments on the
Accounts into the Special Account, the Owner agrees that it will not
commingle such payments with any of the Owner's funds or property, but
will hold them separate and apart and in trust for the Bank. The Bank
will have the power to withdraw from the Special Account. The Bank may
at any time and from time to time, in its sole discretion, apply any
part of the funds in the Special Account to the Indebtedness whether or
not the same is due. Upon full and final satisfaction of the
Indebtedness plus termination of any commitment to extend additional
funds, the Bank will pay to the Owner any excess funds, whether
received by the Bank as a deposit in the Special Account or as a direct
payment on any of the Indebtedness.
f) If any of the Owner's Accounts arise out of contracts with the United
States or any department, agency or instrumentality thereof, the Owner
will immediately notify the Bank in writing and execute any instruments
and take any steps required by the Bank in order that all monies due
and to become due under such contracts shall be assigned to the Bank
and in order that proper notice be given under the Federal Assignment
of Claims Act.
g) The Bank shall not be liable and shall suffer no loss on account of
loss or deprivation of any Account due to acts of omissions of the
Banks unless the Bank's conduct is willful and malicious, and the Bank
shall have no duly to take any action to preserve the Collateral or
collect Accounts.
COVENANTS.
a) The Owner shall maintain complete and accurate books of account and
records, and its principal books of account and records, including all
records concerning Accounts and contract rights, shall be kept and
maintained at the place(s) specified above. The Owner shall not move
such books of account and records without giving the Bank at least 30
days prior written notice and executing the delivering to the Bank
financing statements satisfactory to the Bank prior to any such move.
All accounting records and financial reports furnished to the Bank shall
be maintained and prepared in accordance with generally accepted
accounting principles consistently applied. It is specifically agreed
that the Bank shall have and the Owner grants to the Bank a security
interest in all books of account and records of the Owner and the Bank
shall have access to them at any time for inspection, verification,
examination and audit;
b) The Owner shall furnish to the Bank financial and business information
and reports in form and content satisfactory to the Bank as and when the
Bank may from time to time require;
c) The Owner, if a corporation, shall maintain its corporate existence in
good standing and shall not consolidate or merge with or acquire the
stock of any other corporation without the prior written consent of the
Bank. If the Owner is a corporation, the Owner shall, at the request of
the Bank, qualify as a foreign corporation and obtain all requisite
licenses and permits in each jurisdiction where the Owner does business.
The Owner shall not discontinue business, liquidate, sell, transfer,
assign or otherwise dispose of any of its assets, except with the prior
written permission of the Bank, however, that it may sell in the
ordinary course of business and for full consideration, any product,
merchandise or service produced or marketed by it. The Bank's security
interest shall attach to all proceeds of all sales or dispositions of
the Collateral;
d) The Owner shall maintain all of the Collateral in good condition and
repair. The Bank shall have the right to inspect the Collateral at any
reasonable time and shall have the right to obtain such appraisals,
reappraisals, appraisal updates or environment inspections as the Bank,
in its sole discretion, may deem necessary from time to time;
e) The Owner shall at all times keep insurable Collateral insured against
any and all risks, including, without limitation, fire and other
insurance as may be required by the Bank from time to time; and in
amounts as may be satisfactory to the Bank. The Bank shall be named as
Loss Payee on any such insurance policies. Insurance may be purchased
from an insurer of the Owner's choice, except as otherwise required by
law. The Owner shall pay and discharge all taxes, assessments and
charges of every kind prior to the date when such taxes, assessments or
charges shall become delinquent and provide proof of such payments to
the Bank, upon request. However, nothing contained in this Agreement
shall require the Owner to pay any such taxes, assessments and charges
so long as it shall contest its validity in good faith and shall post
any bond or security required by the Bank against the payment. Upon the
failure of the Owner to pay such required amounts, the Bank, at its
option, and at the Owner's expense, may obtain such insurance or pay
such taxes, assessments or charges with the costs or premiums becoming
part of the indebtedness at the option of the Bank, such amounts may be
payable on demand. Any insurance obtained by the Bank, at its option,
may be single or dual interest, protecting its rights, rights of the
Owner or joint
Page 3
<PAGE>
rights. Any insurance obtained by the Bank may provide, at its option,
that such insurance will pay the lesser of the unpaid balance of the
indebtedness or the repair or replacement value of the Collateral. The
Owner authorizes the Bank to give effect to any of these options without
prior notice to Owner or further consent from Owner. No matter which
insurance coverage or repayment options the Bank chooses, the Collateral
will secure payment of these amounts. The Bank may use the proceeds of
any insurance obtained by Owner or by the Bank to repair or replace the
Collateral or, if the Bank elects to do so, to repay part or all of the
Indebtedness, and the Borrowers will still be responsible to repay any
remaining unpaid balance of the Indebtedness. Owner assigns to the Bank
all amounts payable under the insurance, include unearned premiums,
directing the insurer to make payment to the Bank, and Owner appoints us
attorney-in-fact to endorse any draft;
f) The Owner will not pledge or grant any interest in any of the Collateral
to anyone except the Bank, or permit any lien or encumbrance to attach
to any of the Collateral, or any levy to be made on the Collateral, or
any financing statement (except financing statements in favor or the
Bank) to be on file against the Collateral;
g) The Owner agrees that it will not permit any return of merchandise, the
sale of which gave rise to any of the Accounts, except in the usual and
regular course of business.
DEFAULT. In addition to any right which the Bank may have to demand payment of
the Indebtedness under any other agreement, upon the occurrence of any of the
following events of default, the Bank, at its option, may declare any or all of
the Indebtedness immediately due and payable and may exercise any and all of the
rights and remedies of default of a secured party under the Uniform Commercial
Code and other applicable law and all rights provided herein, all of which
rights and remedies shall, to the full extent permitted by law, be cumulative.
a) If the Borrower fails to pay when due any Indebtedness or shall
otherwise be in default under any agreement of the Borrower with the
Bank or with Crestar Financial Corporation, or any subsidiary or
affiliate of Crestar Financial Corporation, or any subsidiary or
affiliate of such subsidiary or affiliate (whether now existing or
hereafter organized or acquired); or
b) The failure of the Owner to observe or perform any of the terms or
provisions of this Agreement, or any such default by the Borrower, any
endorser, or any guarantor of any Indebtedness of the Borrower to the
Bank (a "Party"); or
c) The breach of any of the Owner's representations or warranties in this
Agreement or any other agreement with the Bank; or
d) The death, dissolution, merger, consolidation or termination of
existence of the Owner or any Party; or
e) The insolvency or inability to pay debts as they mature of the Owner or
any Party, or the application for the appointment of a receiver for any
of them, or the filing of a petition under any provision of the
Bankruptcy Code or other insolvency law, statute or proceeding by or
against any of them, or any assignment for the benefit of creditors by
or against any of them; or
f) The entry of a judgment against the Owner or any Party or the issuance
or service of any attachment, levy or garnishment against the Owner or
any Party or the property of any of them or the repossession or seizure
of property of the Owner or any Party; or
g) Any deterioration or impairment of the Collateral or any part of the
Collateral or any decline or depreciation in the value or market value
of the Collateral (whether actual or reasonable anticipated), which
causes the Collateral, in the judgment of the Bank, to become
unsatisfactory as to character or value; or
h) A determination by the Bank that a material adverse change in the
financial condition of the Owner or any Party has occurred since the
date of this Agreement; or
i) The Owner or any Party commits fraud or makes a material
misrepresentation at any time in connection with this Agreement.
The Bank may require the Owner to assemble the Collateral and make available to
the Bank at a place to be designated by the Bank which is reasonable convenient
to the Bank and the Owner. The Bank may take possession of the Collateral
without a court order. The Owner shall pay to the Bank on demand all legal
expenses and reasonable attorneys' fees (not to exceed 15% of Indebtedness then
owned if the Bank is Crestar Bank, N.A. or Crestar Bank MD or 25% of
Indebtedness then owed if the Bank is Crestar Bank) if the Bank refers this
Agreement to an attorney who is not a salaried employee of the Bank; appraisal
fees and all expenses incurred or paid by the Bank in protecting and enforcing
the rights of the Bank under this Agreement, including the Bank's right to take
possession of the Collateral and its proceeds, and to hold, prepare for sale,
sell and dispose of the Collateral. Any required notice by the Bank of sale or
other disposition on default, when placed in the mail and addressed to or left
at the premises of the Owner, at the address specified next to the Owner's
signature below or such other address of the Owner as may from time to time be
shown on the Bank's records, at least ten days prior to such action shall
constitute reasonable notice to the Owner.
TERM. This Agreement shall be a continuing agreement and shall remain in full
force and effect irrespective of any interruptions in the business relations of
the Borrower with the Bank and shall apply to any ultimate balance which shall
remain due by the Borrower to the Bank; provided, however, that the Owner may by
written notice terminate this Agreement with respect to all Indebtedness of the
Borrower incurred or contracted by the Borrower or acquired by the Bank after
the date on which the notice is personally delivered to or mailed by registered
mail and accepted by the Borrower's lending officer.
EXECUTION BY MORE THAN ONE PARTY. The term "Owner" as used in this Agreement
shall, if this instrument is signed by more than one Party, mean the "Owner and
each of them" and each shall be jointly and severally obligated and liable. If
any Party shall be a partnership, the agreements and obligations on the part of
the Owner shall remain in force and applicable regardless of any charges in the
individuals composing the partnership and the term "Owner" shall include any
altered or successive partnerships and the predecessor partnerships and their
partners shall not be released from any obligation or liability.
WAIVERS BY THE OWNER. The Owner hereby waives (a) notice of acceptance of this
Agreement and of any extensions, modifications or renewals of credit by the Bank
to the Borrower; (b) presentment and demand for payment of the Indebtedness; (c)
protest and
Page 4
<PAGE>
notice of dishonor or default to the Owner or to any other Party with
respect to the Indebtedness; (c) all other notices to which the
Owner might otherwise be entitled; and (d) if for business purposes,
the benefit of the Homestead Exemption. The Owner further waives
any right to require that any action be brought against the Borrower
or any other Party, to require that resort be had to any security
or to any balance of any deposit account or credit on the books of the
Bank in favor of the Borrower or any other Party. The Owner further
agrees that it shall not be subrogated and will not enforce on its
part or behalf any right of action which the Bank may have against the
Borrower until every indebtedness secured under this Agreement is
paid in full.
NO OBLIGATIONS TO EXTEND CREDIT. This Agreement shall not be construed
to impose any obligation on the Bank to extend or continue to extend
any credit at any time.
INDEMNIFY. The Owner agrees to indemnify and hold harmless the Bank
and its subsidiaries, affiliates, successors, parents and assigns and
their respective agents, directors, employees, and officers from and
against any and all complaints, claims, defense, demands, actions, bills,
causes of action (including, without limitations, costs and attorneys'
fees), and losses of every nature and kind whatsoever, which may be
raised or sustained by any directors, officers, employees, shareholders,
creditors, regulators, successors in interest, or receivers of the
Borrower or any third party as a result of or arising out of, directly or
indirectly, the Bank extending credit as evidenced by the indebtedness
to the Borrower, and taking the Collateral as security for the
indebtedness, and the Owner further agrees to be liable for any and all
judgments which may be recovered in any such action, claim, proceeding,
suit, or bill, including any compromise or settlement, and defray any and
all expenses, including, without limitation, costs and attorneys' fees,
that may be incurred in or by reason of any actions, claims, proceedings,
suits, or bills.
FINANCING STATEMENTS. The Owner will deliver any instruments of further
assignment or assurance that the Bank may from time to time request to
carry out the intent of this Agreement, and will join with the Bank in
executing financing statements and other documents in form satisfactory
to the Bank and pay the cost of filing the same, including all recordation,
transfer and other taxes and fees, continuation statements and any other
documents in any public office deemed advisable by the Bank. The Owner
agrees that a carbon, photographic or other reproduction of a financing
statement or this Agreement shall be sufficient as a financing
statement.
SUCCESSOR IN INTEREST. This Agreement shall be binding upon the Owner,
its successors and assigns, and the benefits hereof shall inure to the
Bank, its successors and assigns.
WAIVER BY THE BANK. The Bank may waive any default or remedy any default
without waiving the default remedied or any other prior or subsequent
default. The Bank's failure to exercise any right or take any action under
this Agreement shall not constitute a waiver of that or any other right
or action.
WAIVER OF JURY TRIAL. To the extent legally permissible, the Owner waives
all right to trial by jury in any litigation relating to transactions under
this Agreement, whether sounding is contract, tort or otherwise.
GOVERNING LAW. The laws of the jurisdiction in which the Bank is located shall
govern the construction of this Agreement and the rights and duties of the Owner
and Parties.
The undersigned has/have executed or caused this Agreement to be executed
under seal as of the above date.
Open Plan Systems, Inc. OPEN PLAN SYSTEMS, INC.
4299 Carolina Avenue Bldg C
Richmond, VA 23222-1403 By: /s/ STAN A. FISCHER (SEAL)
President
Name and title printed or typed
Page 5
EXHIBIT 10.7
BUY-SELL AGREEMENT
THIS BUY-SELL AGREEMENT is made as of the 15th day of May, 1996,
between OPEN PLAN SYSTEMS, INC., a Virginia corporation (the "Corporation"), and
STAN A. FISCHER (the "Shareholder").
RECITALS
A. The Shareholder owns as of the date hereof 1,062,042 shares of
common stock, no par value, of the Corporation (the "Shares"). The Shares
presently outstanding, as well as any shares or interest in shares of common
stock of the Corporation which may hereafter be issued to the Shareholder, are
referred to herein as the "Shares."
B. The parties believe that it is in their best interest to
provide for the disposition of the Shares upon the Shareholder's death in the
manner set forth below.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the parties agree as follows:
1. Termination of Prior Agreements. This Agreement supersedes any
and all other agreements, either oral or in writing, among the parties hereto
with respect to the subject matter hereof, including, without limitation, that
certain Buy-Sell Agreement, dated June 1, 1992, and contains all of the
covenants and agreements among the parties with respect to such subject matter.
<PAGE>
2. Purchase of Shares Upon Death of Shareholder. Unless otherwise
mutually agreed by the Board of Directors of the Corporation and the estate of
the deceased Shareholder, upon the Shareholder's death, the Corporation shall
purchase from the estate of the deceased Shareholder or, if applicable, such
beneficiaries of the estate who may have received such Shares, and the estate of
the deceased Shareholder or the beneficiaries of such estate shall sell to the
Corporation, at the price determined in accordance with Section 3 hereof, that
number of Shares (rounded down to the nearest whole number of Shares if such
number includes a fractional number of Shares) directly or indirectly owned by
the deceased Shareholder as of the date of his death, in trust or otherwise, up
to, and including all of the Shares, as the case may be, equal to the aggregate
amount of life insurance proceeds (the "Proceeds") received by the Corporation
as beneficiary under the life insurance policies set forth on Schedule A hereto
on account of the death of the Shareholder, divided by the Fair Market Value (as
defined below) of the Shares. In the event that it is determined following the
application of the aforementioned formula, that the Corporation is not required
to purchase all of the Shares, the Corporation shall have no further obligation
whatsoever hereunder to purchase the remaining Shares, and the remaining Shares
shall not be subject to any limitations hereunder. If all of the Shares are
purchased hereunder, any Proceeds remaining following such purchase shall be
retained by the Corporation.
3. Purchase Price. Subject to the limitations set forth in
Section 2 hereunder, the purchase price for any Shares purchased pursuant to
Section 2 of this Agreement shall be the amount equal to the fair market value
per share of common stock of the Corporation (the "Fair Market Value")
multiplied by the number of Shares the Corporation is obligated to
2
<PAGE>
purchase hereunder. "Fair Market Value" shall mean, the mean between the highest
and lowest reported sales prices of the common stock of the Corporation as
reported on the NASDAQ National Market or other public trading market as of the
date preceding settlement of the purchase in accordance with Section 4
hereunder. If there is no regular public trading market for the common stock,
the Fair Market Value shall be determined in good faith by the Compensation
Committee of the Board of Directors.
4. Terms of Sale. Settlement for any purchase made pursuant to
Section 2 of this Agreement shall be on such date as may be mutually agreed upon
by the parties but in no event shall it be later than sixty (60) days after the
Corporation has become obligated to make the purchase, which shall not occur
until the Corporation receives the Proceeds. At any such settlement (i) the
seller shall deliver to the Corporation the certificate(s) for the Shares being
sold, free and clear of all encumbrances, which certificate(s) shall be duly
endorsed for transfer to the Corporation and (ii) the Corporation shall deliver
to the seller, in cash or immediately available funds, the purchase price for
the number of Shares to be purchased hereunder.
5. Life Insurance. The Corporation shall hereafter continue to
maintain and pay the premiums on certain life insurance policies listed on
Schedule A hereto, covering the life of the Shareholder in an aggregate face
amount of $3,100,000, for the purpose of providing the proceeds necessary to
purchase the Shares of the Shareholder pursuant to the terms hereof. The
Corporation shall be the owner and named beneficiary on each such policy.
6. Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, personal
representatives and assigns.
3
<PAGE>
7. Severability. The provisions of this Agreement, whether or
not contained within the same section, are independent and severable. Should
any provision in this Agreement be determined to be invalid, such invalidity
shall have no effect upon any other provision.
8. Virginia Law to Govern. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Virginia without regard to its conflict of law provisions.
9. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient, if in writing and delivered in person or if
sent by certified mail, return receipt requested, or by a recognized guaranteed
overnight courier, with all postage or delivery fees prepaid, addressed, in the
case of the Shareholder to his last address shown on the records of the
Corporation, or in the case of the Corporation, to its President at the
principal office of the Corporation.
10. Counterparts. This Agreement may be executed in one or more
copies or counterparts, each of which shall be deemed an original but all of
which shall constitute one Agreement binding on all of the parties
notwithstanding that all of the parties may not be signatory to the original or
the same counterpart.
11. Miscellaneous. This Agreement constitutes the entire
Agreement between the parties relating to the subject matter contained herein.
Any waiver of a right under or breach of a provision of this Agreement shall not
be a waiver of any other rights or subsequent breach of the same or other
provisions of this Agreement. Unless the context otherwise requires as used
herein, words in the singular shall include words in the plural and vice
4
<PAGE>
versa, words in one gender shall include words in the other gender and the word
"person" shall include trusts, estates, partnerships, corporations, limited
liability companies and other business entities.
12. Expenses of Transfer. All expenses and costs, including,
without limitation, accounting and legal fees and costs, incurred in connection
with the transfer of the Shares pursuant to the terms of this Agreement, shall
be borne and paid by the Corporation.
WITNESS the following signatures as of the above written date.
OPEN PLAN SYSTEMS, INC.
By: /s/ STAN A. FISCHER
Stan A. Fischer, President
(CORPORATE SEAL]
ATTEST:
/s/ GARY M. FARRELL
Gary M. Farrell, Secretary
/s/ STAN A. FISCHER
Stan A. Fischer, Individually
5
<PAGE>
SCHEDULE A
TO
BUY-SELL AGREEMENT
Insurance Policies
Insured Insurance Company Policy No. Face Amount
Stan A. Fischer Life of Virginia 002657353 $1,500,000
Stan A. Fischer Northwestern Mutual 12133921 $ 600,000
Stan A. Fischer TransAmerica 92469474 $1,000,000
6
EXHIBIT 10.8
BUY-SELL AGREEMENT
THIS BUY-SELL AGREEMENT is made as of the 15th day of May, 1996,
between OPEN PLAN SYSTEMS, INC., a Virginia corporation (the "Corporation"), and
GREGORY P. CAMPBELL (the "Shareholder").
RECITALS
A. The Shareholder owns as of the date hereof 100,545 shares of
common stock, no par value, of the Corporation (the "Shares"). The Shares
presently outstanding, as well as any shares or interest in shares of common
stock of the Corporation which may hereafter be issued to the Shareholder, are
referred to herein as the "Shares."
B. The parties believe that it is in their best interest to
provide for the disposition of the Shares upon the Shareholder's death in the
manner set forth below.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the parties agree as follows:
1. Termination of Prior Agreements. This Agreement supersedes any and
all other agreements, either oral or in writing, among the parties hereto with
respect to the subject matter hereof, and contains all of the covenants and
agreements among the parties with respect to such subject matter.
2. Purchase of Shares Upon Death of Shareholder. Unless otherwise
mutually agreed by the Board of Directors of the Corporation and the estate of
the deceased
<PAGE>
Shareholder, upon the Shareholder's death, the Corporation shall purchase from
the estate of the deceased Shareholder or, if applicable, such beneficiaries of
the estate who may have received such Shares, and the estate of the deceased
Shareholder or the beneficiaries of such estate shall sell to the Corporation,
at the price determined in accordance with Section 3 hereof, that number of
Shares (rounded down to the nearest whole number of Shares if such number
includes a fractional number of Shares) directly or indirectly owned by the
deceased Shareholder as of the date of his death, in trust or otherwise, up to,
and including all of the Shares, as the case may be, equal to the aggregate
amount of life insurance proceeds (the "Proceeds") received by the Corporation
as beneficiary under the life insurance policies set forth on Schedule A hereto
on account of the death of the Shareholder, divided by the Fair Market Value (as
defined below) of the Shares. In the event that it is determined following the
application of the aforementioned formula, that the Corporation is not required
to purchase all of the Shares, the Corporation shall have no further obligation
whatsoever hereunder to purchase the remaining Shares, and the remaining Shares
shall not be subject to any limitations hereunder. If all of the Shares are
purchased hereunder, any Proceeds remaining following such purchase shall be
retained by the Corporation.
3. Purchase Price. Subject to the limitations set forth in Section 2
hereunder, the purchase price for any Shares purchased pursuant to Section 2 of
this Agreement shall be the amount equal to the fair market value per share of
common stock of the Corporation (the "Fair Market Value") multiplied by the
number of Shares the Corporation is obligated to purchase hereunder. "Fair
Market Value" shall mean, the mean between the highest and lowest reported sales
prices of the common stock of the Corporation as reported on the
2
<PAGE>
NASDAQ National Market or other public trading market as of the date preceding
settlement of the purchase in accordance with Section 4 hereunder. If there is
no regular public trading market for the common stock, the Fair Market Value
shall be determined in good faith by the Compensation Committee of the Board of
Directors.
4. Terms of Sale. Settlement for any purchase made pursuant to Section
2 of this Agreement shall be on such date as may be mutually agreed upon by the
parties but in no event shall it be later than sixty (60) days after the
Corporation has become obligated to make the purchase, which shall not occur
until the Corporation receives the Proceeds. At any such settlement (i) the
seller shall deliver to the Corporation the certificate(s) for the Shares being
sold, free and clear of all encumbrances, which certificate(s) shall be duly
endorsed for transfer to the Corporation and (ii) the Corporation shall deliver
to the seller, in cash or immediately available funds, the purchase price for
the number of Shares to be purchased hereunder.
5. Life Insurance. The Corporation shall hereafter continue to maintain
and pay the premiums on certain life insurance policies listed on Schedule A
hereto, covering the life of the Shareholder in an aggregate face amount of
$500,000, for the purpose of providing the proceeds necessary to purchase the
Shares of the Shareholder pursuant to the terms hereof. The Corporation shall be
the owner and named beneficiary on each such policy.
6. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, personal
representatives and assigns.
7. Severability. The provisions of this Agreement, whether or not
contained within the same section, are independent and severable. Should any
provision in this
3
<PAGE>
Agreement be determined to be invalid, such invalidity shall have no effect upon
any other provision.
8. Virginia Law to Govern. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Virginia without regard to its conflict of law provisions.
9. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing and delivered in person or if sent
by certified mail, return receipt requested, or by a recognized guaranteed
overnight courier, with all postage or delivery fees prepaid, addressed, in the
case of the Shareholder to his last address shown on the records of the
Corporation, or in the case of the Corporation, to its President at the
principal office of the Corporation.
10. Counterparts. This Agreement may be executed in one or more copies
or counterparts, each of which shall be deemed an original but all of which
shall constitute one Agreement binding on all of the parties notwithstanding
that all of the parties may not be signatory to the original or the same
counterpart.
11. Miscellaneous. This Agreement constitutes the entire Agreement
between the parties relating to the subject matter contained herein. Any waiver
of a right under or breach of a provision of this Agreement shall not be a
waiver of any other rights or subsequent breach of the same or other provisions
of this Agreement. Unless the context otherwise requires as used herein, words
in the singular shall include words in the plural and vice versa, words in one
gender shall include words in the other gender and the word "person"
4
<PAGE>
shall include trusts, estates, partnerships, corporations, limited liability
companies and other business entities.
12. Expenses of Transfer. All expenses and costs, including, without
limitation, accounting and legal fees and costs, incurred in connection with the
transfer of the Shares pursuant to the terms of this Agreement, shall be borne
and paid by the Corporation.
WITNESS the following signatures as of the above written date.
OPEN PLAN SYSTEMS, INC.
By: /s/ Stan A. Fischer
---------------------------
Stan A. Fischer, President
(CORPORATE SEAL]
ATTEST:
/s/ Gary M. Farrell
- --------------------------
Gary M. Farrell, Secretary
/s/ Gregory P. Campbell
---------------------------------
Gregory P. Campbell, Individually
5
<PAGE>
SCHEDULE A
TO
BUY-SELL AGREEMENT
Insurance Policies
Insured Insurance Company Policy No. Face Amount
Gregory P. Campbell Guardian 3540639 $ 500,000
6
<PAGE>
EXHIBIT 10.9
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT (the "Agreement") is made and entered into
as of May 1, 1996, between OPEN PLAN SYSTEMS, INC., a Virginia corporation
("OPS"), and the undersigned shareholders of OPS (individually, the
"Shareholder", or collectively, the "Shareholders"), and provides as follows:
RECITALS
R-1. As evidenced by a Notice of Acceptance as an S Corporation issued
by the Internal Revenue Service, effective September 21, 1989 (the "S
Election"), OPS has elected to be taxed under Subchapter S of the Internal
Revenue Code of 1986, as amended, as an "S Corporation" for federal and state
income tax purposes since its incorporation in 1989.
R-2. The Board of Directors of OPS has authorized OPS to issue and sell
up to 1,700,000 shares of common stock, no par value, to the public (the
"Offering") through one or more underwriters.
R-3. If the Offering is successfully completed, OPS shall terminate its
S Election.
R-4. OPS intends to declare and pay from the net proceeds of the
Offering a final cash dividend in the approximate sum of $3.68 million to the
Shareholders, to be distributed on a pro rata basis in proportion to each
Shareholders' relative ownership of common stock of OPS (the "Final
Distribution").
R-5. In the event that the Internal Revenue Service should ever find
that the S Election for OPS was not effective, then OPS may be liable for taxes,
and the Shareholders should be entitled to corresponding refunds for S
Corporation taxes paid.
<PAGE>
R-6. As part of the consideration for OPS distributing the Final
Distribution to the Shareholders, and to ensure that the remote possibility of
the invalidation of OPS' S Election will not have an adverse effect on OPS'
financial condition and results of operations, the Shareholders have agreed to
indemnify OPS in the manner set forth below.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises and agreements herein set forth, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined):
(a) "Code" means the Internal Revenue Code of 1986, as
amended, and shall include corresponding provisions of any subsequently enacted
federal tax laws.
(b) "IRS" means the Internal Revenue Service.
(c) "C Corporation Taxes" means any additional Taxes becoming
due and payable by OPS, arising solely from or related to a determination by a
Taxing Authority that OPS' S Corporation status is or was invalid for any
taxable periods up to and through the Termination Date.
(d) "Relative Portion" means with respect to each Shareholder,
the sum determined by multiplying a Shareholder's percentage ownership of common
stock of OPS as of the date of this Agreement by the aggregate sum of C
Corporation Taxes declared due and payable by OPS to any Taxing Authority.
- 2 -
<PAGE>
(e) "Taxes" means all taxes, whether imposed by the IRS or any
local, municipal, governmental, state, federation or other body, together with
any related interest, penalties and additions to any such tax, or additional
amounts imposed by any Taxing Authority upon OPS.
(f) "Taxing Authority" means the IRS, or any other local,
municipal, state or federal governmental body charged with the collection of
Taxes.
(g) "Termination Date" means the date immediately preceding
the closing date of the Offering.
2. Indemnification by Shareholders. In the event that a Taxing
Authority determines that the OPS S Election is or was invalid during any
taxable period up to and through the Termination Date, and consequently, OPS is
liable for any C Corporation Taxes for any taxable period, each Shareholder
shall pay to OPS in immediately available funds his or her Relative Portion of
the aggregate C Corporation Taxes owed by OPS to any Taxing Authority plus all
reasonable fees and expenses of legal counsel and accountants incurred by OPS on
account of or relating to such determination by any Taxing Authority. The
indemnification provided hereunder shall be several and not joint.
3. Indemnification Procedure. In the event OPS is notified by a Taxing
Authority that it must pay C Corporation Taxes, OPS shall promptly notify each
Shareholder, and deliver a copy of the deficiency notice and related materials
evidencing the C Corporation Taxes. OPS may, in its sole discretion, dispute and
contest the C Corporation Taxes through available administrative proceedings,
and may, in its sole discretion, pursue any other available remedies which it
deems appropriate. All fees, costs and expenses incurred by OPS in connection
with contesting such liability for C Corporation Taxes shall be added to each
Shareholder's Relative
- 3 -
<PAGE>
Portion. OPS shall promptly notify each Shareholder at such time as all
administrative remedies have been exhausted, and if C Corporation Taxes remain
due and payable, of each Shareholder's Relative Portion. Within thirty (30) days
thereafter, each Shareholder shall deliver such Relative Portion to OPS in
accordance with Section 2 hereof. Any Relative Portion amount not received by
OPS as of the date of demand by OPS to the Shareholder shall thereafter accrue
interest at the rate equal to the prime rate announced on such date by Crestar
Bank, Richmond, Virginia, plus two percent per annum.
4. Virginia Law to Govern. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Virginia, without regard to its conflicts of laws.
5. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing and delivered in person or if sent
by certified mail, return receipt requested, or by a recognized guaranteed
overnight courier, with all postage or delivery fees prepaid, addressed, in the
case of a Shareholder to his last address shown on the records of OPS, or in the
case of OPS, to its President at the principal office of OPS.
6. Counterparts. This Agreement may be executed in one or more copies
or counterparts, each of which shall be deemed an original but all of which
shall constitute one agreement binding on all of the parties notwithstanding
that all of the parties may not be signatory to the original or the same
counterpart.
7. Amendments. All amendments hereto shall be in writing and shall be
signed by both of the parties hereto.
8. Successors. The Agreement shall be binding on the parties and their
successors.
- 4 -
<PAGE>
9. Entire Agreement. This Agreement is the entire agreement between
the Shareholders and OPS regarding the subject matter set forth herein, and may
be changed only by an agreement in writing signed by each of the parties hereto.
OPEN PLAN SYSTEMS, INC.
Dated: May 13, 1996 By: /s/ Stan A. Fischer
-------------------
Stan A. Fischer
President
Dated: May 13, 1996 /s/ Stan A. Fischer
-------------------------
STAN A. FISCHER
Dated: May 11, 1996 /s/ Paschal D. Brooks, Jr.
--------------------------
PASCHAL D. BROOKS, JR.
Dated: May 9, 1996 /s/ Gary L. Markel
--------------------------
GARY L. MARKEL
Dated: May 9, 1996 /s/ Edwin W. Mugford
--------------------------
EDWIN W. MUGFORD
Dated: May 8, 1996 /s/ Anthony F. Markel
--------------------------
ANTHONY F. MARKEL
(signatures continued on next page)
- 5 -
<PAGE>
Dated: May 10, 1996 /s/ A. G. Bertozzi
---------------------------
A. G. BERTOZZI
Dated: May 10, 1996 /s/ Charles P. Beemus
---------------------------
CHARLES P. BEEMUS
Dated: May 8, 1996 /s/ Gregory P. Campbell
---------------------------
GREGORY P. CAMPBELL
Dated: May 13, 1996 /s/ Stephen H. Catlett
----------------------------
STEPHEN H. CATLETT
Dated: May 10, 1996 /s/ Phillip E. Patton
----------------------------
PHILLIP E. PATTON
Dated: May 10, 1996 /s/ James F. Cerza, Jr.
----------------------------
JAMES F. CERZA, JR.
Dated: May 14, 1996 /s/ Troy A. Peery, Jr.
----------------------------
TROY A. PEERY, JR.
Dated: May 10, 1996 /s/ Ronald D. Wilkins
----------------------------
RONALD D. WILKINS
(signatures continued on next page)
- 6 -
<PAGE>
Dated: May 9, 1996 /s/ Randy L. Alderson
---------------------------
RANDY L. ALDERSON
Dated: May 9, 1996 /s/ Dennis E. Lambert
---------------------------
DENNIS E. LAMBERT
Dated: May 9, 1996 /s/ David K. Denson
---------------------------
DAVID K. DENSON
Dated: May 9, 1996 /s/ Lori L. Kerr
---------------------------
LORI L. KERR
Dated: May 13, 1996 /s/ Gary M. Farrell
----------------------------
GARY M. FARRELL
Dated: May 8, 1996 /s/ Elizabeth C. Connolly
-----------------------------
ELIZABETH C. CONNOLLY
- 7 -
<PAGE>
EXHIBIT 16
May 14, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the "Change of Accountants" paragraph in the Registration Statement
on Form SB-2 of Open Plan Systems, Inc. and are in agreement with the statements
contained in that paragraph.
/s/ MARTIN, DOLAN & HOLTON, LTD.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 27, 1996, in Amendment No. 1 to the Registration
Statement (Form SB-2, No. 333-3188) and related Prospectus of Open Plan Systems,
Inc. for the registration of 1,955,000 shares of its Common Stock.
Richmond, Virginia /s/ ERNST & YOUNG LLP
May 13, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 27, 1996, in Amendment No. 1 to the Registration
Statement (Form SB-2, No. 333-3188) and related Prospectus of Open Plan Systems,
Inc. for the registration of 1,955,000 shares of its Common Stock.
Glen Allen, Virginia /s/ MARTIN, DOLAN & HOLTON, LTD.
May 14, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 MAR-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 241,564 74,896
<SECURITIES> 0 0
<RECEIVABLES> 3,151,607 4,075,345
<ALLOWANCES> (60,000) (82,000)
<INVENTORY> 4,045,144 4,337,728
<CURRENT-ASSETS> 7,738,660 8,743,511
<PP&E> 1,162,661 1,367,381
<DEPRECIATION> (409,088) (458,820)
<TOTAL-ASSETS> 9,009,485 9,849,117
<CURRENT-LIABILITIES> 4,378,569 5,478,729
<BONDS> 303,733 259,887
0 0
0 0
<COMMON> 1,215,299 1,215,299
<OTHER-SE> 3,111,890 2,895,202
<TOTAL-LIABILITY-AND-EQUITY> 9,009,485 9,849,117
<SALES> 15,478,116 5,580,049
<TOTAL-REVENUES> 15,478,116 5,580,049
<CGS> 10,434,610 3,595,097
<TOTAL-COSTS> 10,434,610 3,595,097
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 64,919 22,572
<INTEREST-EXPENSE> 163,450 63,458
<INCOME-PRETAX> 1,885,008 914,317
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 1,885,008 914,317
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,885,008 914,317
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
