SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
Commission file number 0-20743
OPEN PLAN SYSTEMS, INC.
(Name of Small Business Issuer in Its Charter)
Virginia 54-1515256
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
4299 Carolina Avenue, Building C 23222
Richmond, Virginia (Zip Code)
(Address of Principal Executive Offices)
(804) 228-5600
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Act: None.
Securities registered under Section 12(g) of the Act:
Common Stock, no par value
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes_X_ No___
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for the fiscal year ended December 31, 1996 were
$22,398,000.
The aggregate market value of the Common Stock held by non-affiliates
of the Company as of March 14, 1997 was $16,994,079.
The number of shares of Common Stock outstanding as of March 14, 1997,
was 4,472,433.
Transitional Small Business Disclosure Format (check one): Yes___ No_X_
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement for its 1997
Annual Meeting of Shareholders (to be filed) is incorporated by reference into
Part III of this Form 10-KSB.
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TABLE OF CONTENTS
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PART I
Page
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Item 1 Description of Business................................................................. 1
Item 2 Description of Property................................................................. 7
Item 3. Legal Proceedings....................................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders..................................... 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters................................ 8
Item 6. Management's Discussion and Analysis or Plan of Operation............................... 9
Item 7. Financial Statements.................................................................... 14
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................................................. 29
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act....................................... 29
Item 10. Executive Compensation.................................................................. 29
Item 11. Security Ownership of Certain Beneficial Owners and Management.......................... 29
Item 12. Certain Relationships and Related Transactions.......................................... 29
Item 13. Exhibits, List and Reports on Form 8-K.................................................. 30
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PART I
Item 1. Description of Business
Open Plan Systems, Inc. (the "Company") was incorporated under the laws
of the Commonwealth of Virginia on September 11, 1989. The Company restores,
remanufactures, manufactures and markets modular office Work Stations. The
Company operates remanufacturing facilities in Richmond, Virginia and Lansing,
Michigan, and manufactures its own line of Work Stations at its Richmond,
Virginia facility.
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 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, Inc. ("Steelcase"), Herman
Miller, Inc. ("Herman Miller") and Haworth, Inc. ("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's primary business to date has been the remanufacture of
modular office Work Stations. The Company purchases used Work Stations from
end-users, brokers and dealers and transports the Work Stations to its
facilities in Richmond, Virginia and Lansing, Michigan. The Work Stations are
disassembled, inventoried by component parts and stored. The Company then
restores the used Work Stations through the remanufacturing process to meet
customers' needs. Remanufacturing usually includes sanding, painting,
laminating, reupholstering and updating electrical components. In addition to
the remanufacture of used Work Stations, the Company in 1996 began to
manufacture its own line of new Work Stations as part of its growth strategy.
See "- Products" below. As a result of its increased
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manufacturing capacity, the Company also has increased its ability to
manufacture new component parts for installation in its remanufactured Work
Stations.
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 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 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 and Lansing, Michigan facilities
include all of the equipment required to 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. The Company's own line of private label Work Stations is
manufactured in its Richmond, Virginia, facility. The Company no longer conducts
limited finishing and assembly operations at its facility in Atlanta, Georgia.
Open Plan sells Work Stations primarily through a network of twelve
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.
Products
The Company's principal product to date has been remanufactured Herman
Miller Work Stations. However, with the October 1996 acquisition of Immaculate
Eagle, Inc., d/b/a TFM Remanufactured Office Furniture ("TFM"), a privately-held
regional manufacturer of Work Stations based in Lansing, Michigan, the Company
is now able to remanufacture panel systems produced by Haworth, the nation's
third largest manufacturer of new office 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.
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
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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 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.
The Company currently offers office chairs, desks and other case goods
from various manufacturers. In addition, with the June 1996 purchase of certain
assets from Birum Corporation, a Michigan City, Indiana manufacturer of modular
office products, the Company has introduced its own newly-manufactured private
label Work Stations which it intends to market and sell through selected office
products dealers.
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.
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 strives to ship its customers' orders in three weeks or
less. The Company also has the ability to purchase or produce new parts and
accessories which are in short supply in the used furniture market, 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.
Distribution
Sales Offices. The Company currently operates twelve sales offices in
the metropolitan areas of Richmond, Washington D.C./Baltimore, Atlanta,
Charlotte, Nashville, Chicago, New York, Philadelphia, Raleigh, Norfolk, Lansing
and Detroit. 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 additional sales offices
as conditions permit.
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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 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 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 is
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 sizable quantities of quality
Work Stations at "budget" prices.
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. Each sales office advertises 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 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 remanufactured Work Stations are a recycled product, the
Company may have 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. The Company is
currently able to offer both Herman Miller and Haworth Work Stations as a
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result of the Company's recent expansion into the Haworth product line, thereby
expanding the availability and attractiveness of the program to more prospective
purchasers of Work Stations.
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 Work Stations for a minimum term of six months. Rates charged
by the Company vary with the term of the rental, with higher rates being charged
for terms of less than one year. Rent payments typically are due monthly from
customers during the term of the rental. 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 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. The rental
program has not contributed significantly to the Company's past revenues due to
the limited number of rentals which have occurred to date under the program.
Government Services Administration. The United States Government
Services Administration ("GSA") in 1996 approved the Company's inclusion on the
New Introductory Schedule as a distributor of Work Stations and other related
products and services to the federal government. This has enabled 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 1996, 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. 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 its newly manufactured, 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,
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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. 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 manufacturing
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 could 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 manufactures new component parts that it cannot purchase
through the used Work Station market. In addition, the Company has introduced
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.
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 any
significant backlog of customer orders because it generally ships products
within three weeks of receipt of an order.
Employees
As of December 31, 1996, the Company had 249 full time employees,
consisting of 121 manufacturing and remanufacturing personnel, 9 sales managers,
47 salespersons, 25 installers, 37 office administrators, telemarketers and
designers and 10 management employees. The Company also had 20 part time
employees consisting of 1 telemarketer, 3 office administrators and 16
production personnel. 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
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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 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 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 obtained "key-man" insurance in the
amount of $3,000,000 on the life of Mr. Fischer naming the Company as sole
beneficiary.
Item 2. Description of Property
The Company leases 180,000 square feet of space at its facility in
Richmond, Virginia and 107,000 square feet of space at its facility in Lansing,
Michigan. The Richmond lease expires in July 1999, subject to an option to renew
for an additional three-year term. The Lansing lease expires in December 1998.
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.
Item 3. 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.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market for Common Stock. The Company's Common Stock is listed on the
Nasdaq National Market under the symbol "PLAN." The following table shows, for
the periods indicated, the high and low sales prices per share for the Common
Stock as reported by the Nasdaq National Market.
Calendar Year High Low
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1996
Second Quarter (from May 31, 1996) (1).............$13.00 $11.13
Third Quarter......................................$12.00 $ 8.75
Fourth Quarter.....................................$10.25 $ 8.25
1997
First Quarter (through March 14, 1997).............$ 9.25 $ 5.00
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(1) The Company's Common Stock began trading on the Nasdaq National Market
on May 31, 1996, at an initial public offering price of $10.00 per
share. Prior to that date, there was no established trading market for
the Common Stock.
As of March 14, 1997, there were approximately 111 holders of record of
the Company's Common Stock.
Dividend Policy. Prior to the Company's initial public offering in May
1996, the Company elected to be treated as an S Corporation for federal and
state income tax purposes. As a result, the Company's taxable net earnings were
taxed as income to the Company's shareholders in proportion to their individual
stockholdings. 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 1995 and 1996, the Company made distributions to
shareholders in the amounts of approximately $947,000 and $4,350,000,
respectively. The amount distributed in 1996 included $1,131,000 in March 1996
and $3,219,000 as a final S Corporation distribution in June 1996, payable out
of the net proceeds of the offering.
Since the Company's initial public offering, the Company has not
declared or paid any cash dividends or distributions on its capital stock (other
than the final S Corporation distribution described above). The Company
currently intends to retain earnings of the Company to support operations and to
finance expansion and therefore does not anticipate paying cash dividends on the
Common Stock in the foreseeable future. The payment of cash dividends in the
future will depend upon such factors as earnings levels, capital requirements,
the Company's financial condition and other factors deemed relevant by the Board
of Directors.
Sales of Unregistered Securities. On October 1, 1996, the Company
acquired all of the outstanding capital stock of TFM from its two shareholders
for a purchase price consisting of $4,033,000 in cash (including transaction
costs of $125,000) and 87,500 shares of Common Stock with an agreed upon value
of $1,312,500 or $15.00 per share. The offer and sale of the 87,500 shares of
Common Stock to the two shareholders of the acquired business in connection with
the transaction was made by the Company in reliance upon Section 4(2) of the
Securities Act of 1933, as amended, and the rules and regulations thereunder.
For additional information, see the Company's Form 8-K filed October 16, 1996
reporting the acquisition and Items 1 and 13(b) of this report.
-8-
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
1996 Compared to 1995
Net Sales. Net sales for the year ended December 31, 1996 increased to
$22.4 million from $15.5 million in the year ended December 31, 1995, an
increase of 44.5%. The increase was primarily due to increased sales in the
Company's branch sales offices due to increased market share in existing markets
and additional sales in new markets. In addition, the purchase of certain assets
from the Birum Corporation ("Birum") in the second quarter of 1996 and the
purchase of TFM Remanufactured Office Furniture ("TFM") in the fourth quarter of
1996 contributed to the increase to a lesser extent.
The Company's product sales mix for 1995 and 1996 was predominantly
remanufactured Herman Miller, while the fourth quarter of 1996 was split between
remanufactured Herman Miller (68%), remanufactured Haworth (31%), and new
products (1%). The Company believes that future period product mixes will be
more similar to the fourth quarter of 1996 rather than that of earlier periods
due to the increases in products offered as a result of the acquisition of TFM,
a remanufacturer of Haworth Furniture, and the introduction of a new product
line previously manufactured by Birum. As the Company completes the integration
of TFM, remanufactured Haworth products will be offered through the Company's
sales offices and remanufactured Herman Miller products will be offered through
the former TFM sales offices. The integration process is expected to be
completed in the first six months of 1997. During the fourth quarter, 1996, a
line of new office Work Stations was introduced to all the Company's sales
offices to help capture the segment of the market that prefers new furniture
over remanufactured.
During 1996, the Company opened three new sales offices while
continuing to add resources to existing offices. Management believes that its
strategy of controlling distribution through its own sales offices 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 manufacturing profit.
Gross Margin. The Company's gross margin increased from $5.0 million
for the year ended December 31, 1995 to $7.2 million for the year ended December
31, 1996, an increase of 44.0% from prior year levels. This increase is due
primarily to the additional sales volume. The gross margin percentage decreased
slightly from 32.6% in 1995 to 32.3% in 1996. The Company's gross margin
percentage decreased from 32.6% in the fourth quarter of 1995 to 30.2% in the
fourth quarter of 1996. While annual rates stayed relatively constant, the last
two quarters of the year saw the gross margin percentage decline due to
increased costs associated with the expansion of manufacturing capability and
capacity. While management believes that the new manufacturing capacity and
capabilities will reduce overall manufacturing and remanufacturing costs in the
future, the significant learning curve negatively impacted cost of sales in the
fourth quarter of 1996, and will continue to impact the gross margin in the next
several quarters.
Operating Expenses. Selling expenses increased by 61.9% to $3.4 million
for the year ended December 31, 1996 from $2.1 million for the year ended
December 31, 1995. The increase was due to the addition of three new sales
offices during 1996 as well as new sales management to manage the sales force.
When the Company opens new sales offices, it typically takes several years to
generate enough sales to provide targeted returns. With the large increase in
sales offices, the higher initial costs of these sales offices have not yet been
offset with the increased sales volume expected from these offices.
Additionally, the Company began utilizing several new types of advertising
during the fourth quarter that it believes will increase sales volumes in future
periods.
General and administrative expenses increased by 60.0% to $1.6 million
for the year ended December 31, 1996 from $1.0 million for the year ended
December 31, 1995. The increase in 1996 was due to several causes. The Company
incurred additional compensation expenses as the result of the growth of the
Company and the addition of several new management level resources to handle the
Company's increased size and complexity. Additionally, the Company became
publicly traded in 1996 and incurred
-9-
<PAGE>
significant costs related to the increased costs of SEC and shareholder
reporting requirements. Finally, the Company dedicated significant resources in
the evaluation of potential business combination relationships and incurred
expenses related to the integration of the successful ventures. The Company
believes that it has added the appropriate resources to manage the Company's
current operations and foreseeable future growth. 1997 initiatives include
several items, such as evaluation of new information systems, continued sales
office expansion and exploring other potential business partnerships, that will
require these expenses to remain relatively high in early 1997 but to decrease
as a percentage of sales as time continues. Management believes the initiatives
indicated above will add shareholder value and allow for future profitability
gains.
Other Non-Operating Income and Expenses. Total other income and expense
changed from an expense of $.1 million for the year ended December 31, 1995 to
income of $.1 million for the year ended December 31, 1996, an increase of $.2
million. The primary reason for the increase is due to cash raised in the
Company's initial public offering. During 1996, the Company paid off its line of
credit agreement debt and invested excess cash proceeds of the offering to
maximize returns.
Income Taxes. Income taxes for the year ended December 31, 1996
increased by $.4 million. This increase was the result of the Company no longer
being treated as an S Corporation for federal and state tax purposes following
the initial public offering.
Net Income. Net income for the year ended December 31, 1996 was $ 1.9
million versus $1.9 million for the year ended December 31, 1995. The net income
level for 1996 was impacted by the increased sales volume offset by higher
operating expenses and income taxes. On a pro forma basis, net income increased
27.3% from $1.1 million in 1995 to $1.4 million in 1996.
Liquidity and Capital Resources
Cash Flows from Operating Activities. Net cash used by operations was
$1.5 million for the year ended December 31, 1996 versus $0 for the year ended
December 31, 1995. The decrease in cash from operations is due primarily to
increases in accounts receivable and inventories without corresponding increases
in accounts payable. The increase in accounts receivable is due to increased
sales volumes along with an increase in the number of days sales outstanding.
The increase in inventories is due to the new product lines manufactured, as
well as the raw materials required to build such items. The Company would
anticipate that accounts receivable growth will be tempered in 1997 by decreases
in the number of days sales outstanding.
Cash Flows from Investing Activities. Net cash used in investing
activities was $6.0 million in 1996 versus $.5 million in 1995. The increase in
investing activities was the result of the TFM acquisition which totaled $4.0
million and other capital expenditures of $1.9 million.
Cash Flows from Financing Activities. Net cash provided by financing
activities was $10.2 million in 1996 versus $.5 million in 1995. Net cash from
financing activities in 1996 was primarily related to the issuance of Common
Stock of $17.6 million. Of these proceeds, $3.8 million was distributed to prior
S Corporation shareholders to fund their tax liabilities and provide them with a
return on their investment in the Company until the initial public offering.
Additionally, the Company repaid $3.0 million of borrowings on revolving lines
of credits, including amounts acquired in the acquisition of TFM. Other
principal payments on notes payable, long-term debt and capital leases, amounted
to $.3 million in 1996.
The net cash provided by financing activities in 1995 was related to
$.8 million of distributions to S Corporation shareholders for purposes of
paying tax obligations, net proceeds of borrowings of $1.6 million, net loans to
shareholders of $.1 million and the repurchase of stock from a shareholder of
$.1 million.
Expected Future Cash Flows. Cash provided by operating activities
should increase as continued profitability growth should exceed the growth in
receivables and inventory. The Company anticipates that current cash balances
plus cash flows from operating activities and borrowings under its credit line
will be adequate to fund its capital expenditure and business acquisition
strategy.
-10-
<PAGE>
Capital expenditures are anticipated to range between $1 to $2 million
this year as the Company continues to grow its new manufacturing operations and
improves the efficiency of its remanufacturing operations.
The Company does anticipate making future strategic business
acquisitions to complement the existing business and grow the geographic range
of the business. It is anticipated that at least one strategic acquisition will
occur during 1997.
Seasonality and Impact of Inflation
Historically, the Company has experienced lower net sales levels in the
second and third quarters of the year and increased levels in the first and
fourth quarters. The Company believes that this seasonal increase in sales
volume 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.
The Company believes that its new product offerings will enable it to be
somewhat more competitive on a year-round basis. 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 revenues in each quarter
results from orders placed by customers during that quarter. As a result, the
Company's results may vary from quarter to quarter.
Inflation has not had a material impact on the Company's net sales or
income to date. However, there can be no assurances that the Company's business
will not be affected in the future by inflation.
Forward-Looking Statements
The foregoing discussion contains certain forward-looking statements,
which may be identified by phrases such as "the Company expects" or words of
similar effect. In addition, from time to time, the Company may publish
forward-looking statements relating to such matters as anticipated financial
performance, business prospects and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. The following important factors, among other things, 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 fiscal year 1997 and any interim
period to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. The Company assumes no duty to
update any of the statements in this report.
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 of the Company's financial and management
information systems, the expansion of the Company's manufacturing and
remanufacturing operations and the recruitment and retention of executive staff
and key employees. The Company also will 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.
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 and Haworth Work Stations in
its remanufacturing operations. The Company does not have any binding agreements
relating to the purchase of used Herman Miller or Haworth Work Stations for
remanufacturing and generally purchases such used Work Stations from end-
-11-
<PAGE>
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,
Haworth 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.
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. Although the Company can manufacture
many of its component parts, there can be no assurances that shortages of
certain component parts or higher prices for such parts will not occur in the
future. An inability to produce or purchase 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.
No Assurance of Expansion of Product Lines and Business. The Company
historically has concentrated its business on remanufacturing Work Stations
manufactured by Herman Miller. However, in October 1996, the Company acquired a
privately-held remanufacturer of Haworth Work Stations. The Company intends to
continue to expand its product line to include Work Stations of other
manufacturers (particularly Steelcase) through the acquisition of companies
specializing in remanufacturing products of those manufacturers or the
establishment of additional remanufacturing facilities. The Company has limited
experience in remanufacturing Work Stations of manufacturers other than Herman
Miller and Haworth. Due to the differences in and lack of interchangeability of
the various Work Stations and certain component parts produced by the major
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 Facilities. The Company
primarily remanufactures Herman Miller Work Stations at one facility in
Richmond, Virginia and Haworth Work Stations at one facility in Lansing,
Michigan. Although the Company presently maintains $3,000,000 of business
interruption insurance on the Richmond facility and $250,000 of such insurance
on the Lansing facility, a lengthy interruption of its remanufacturing
operations at the Richmond or Lansing facilities would have a material adverse
effect on the Company's results of operations and financial condition.
Tax Matters Associated with Prior S Corporation Status. Until May 31,
1996, the Company had 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
was terminated upon commencement of its initial public 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 those
individuals who were shareholders of the Company prior to the initial public
offering. Such shareholders have agreed to pay their pro rata share of any such
tax and any applicable interest, penalties and expenses in the event that the
Company's S Corporation status is denied for any taxable periods up to the date
of the termination of the Company's S Corporation status on May 31, 1996.
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
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<PAGE>
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.
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 new and 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 new and 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.
Environmental Regulations. The Company is subject to a variety of
federal, state and local governmental 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.
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 has begun to sell 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.
-13-
<PAGE>
Item 7. Financial Statements
The following audited consolidated financial statements of the Company
are included in this report:
Report of Independent Auditors
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Income for the Years Ended
December 31, 1996 and 1995
Consolidated Statement of Shareholders' Equity for the Years Ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995
Notes to Consolidated Financial Statements
-14-
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Open Plan Systems, Inc.
We have audited the accompanying consolidated balance sheets of Open Plan
Systems, Inc. as of December 31, 1996 and 1995 and the related consolidated
statements of income, shareholders' equity, and cash flows for the years 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 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 consolidated financial position of Open Plan Systems,
Inc. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Richmond, Virginia
February 13, 1997
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<PAGE>
OPEN PLAN SYSTEMS, INC.
Consolidated Balance Sheets
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,066 $ 242
Accounts receivable, net 5,252 3,136
Inventories (Note 3) 6,807 3,978
Prepaids and other 431 383
Refundable income taxes 385 -
Deferred income taxes (Note 7) 52 -
------------------------------------
TOTAL CURRENT ASSETS 15,993 7,739
Property and equipment, net (Note 4) 2,698 754
Goodwill, net (Note 2) 4,621 -
Advances to shareholders (Note 10) - 378
Other 398 138
------------------------------------
TOTAL ASSETS $23,710 $9,009
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Revolving line of credit (Note 5) $ - $2,706
Trade accounts payable 1,457 734
Accrued compensation 247 356
Other accrued liabilities 150 62
Customer deposits 655 337
Current portion of long-term debt (Note 5) 212 183
------------------------------------
TOTAL CURRENT LIABILITIES 2,721 4,378
Deferred income taxes (Note 7) 106 -
Long-term debt, less current portion (Note 5) 92 304
------------------------------------
TOTAL LIABILITIES 2,919 4,682
Shareholders' equity (Note 6):
Preferred stock, no par value:
Authorized shares - 5,000
Issued and outstanding shares - none - -
Common stock, no par value:
Authorized shares - 50,000
Issued and outstanding shares - 4,472 for 1996
and 2,430 for 1995 20,088 1,215
Additional capital (Note 7) 137 -
Retained earnings 566 3,112
------------------------------------
TOTAL SHAREHOLDERS' EQUITY 20,791 4,327
------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $23,710 $9,009
====================================
</TABLE>
See accompanying notes to consolidated financial statements
-16-
<PAGE>
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Income
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended
December 31
1996 1995
--------------------------------
<S> <C> <C>
Net sales $22,398 $15,478
Cost of sales 15,160 10,435
--------------------------------
Gross profit 7,238 5,043
Operating expenses:
Amortization of intangibles 70 -
Selling and marketing 3,410 2,056
General and administrative 1,584 975
--------------------------------
5,064 3,031
--------------------------------
Operating income 2,174 2,012
Other (income) expense:
Interest expense 141 163
Interest income (266) (30)
Other, net (18) (6)
--------------------------------
(143) 127
--------------------------------
Income before income taxes 2,317 1,885
Provision for income taxes (Note 7) 376 -
--------------------------------
Net income $ 1,941 $1,885
================================
Pro forma income data (Unaudited) (Note 12):
Pro forma income before income taxes $ 2,317 $1,885
Pro forma provision for income taxes 930 747
--------------------------------
Pro forma net income $ 1,387 $1,138
================================
Pro forma earnings per common share $.38 $.42
================================
Weighted average common shares outstanding 3,676 2,716
================================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Shareholders' Equity Years ended December 31, 1996
and 1995 (amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Common Additional Retained
Stock Capital Earnings Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 $1,286 $ - $2,261 $3,547
Purchase of 27 shares of stock from (71) - (87) (158)
shareholder
Distributions to shareholders:
Cash - - (791) (791)
Offset against advances to shareholders - - (156) (156)
Net income for 1995 - - 1,885 1,885
------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 $1,215 - $3,112 $4,327
Distributions to shareholders:
Cash - - (3,760) (3,760)
Offset against advances to shareholders - - (590) (590)
Reclassification of undistributed
S Corporation retained earnings (Note 7) 137 (137) -
Initial Public Offering (Note 6) 17,560 - - 17,560
Issuance of common stock in connection
with acquisition (Note 2) 1,313 - - 1,313
Net income for 1996 - - 1,941 1,941
------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $20,088 $137 $566 $20,791
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Cash Flows
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended
December 31
1996 1995
----------------------------------
<S> <C> <C>
Operating activities
Net income $ 1,941 $ 1,885
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Provision for losses on receivables 29 65
Depreciation expense 299 134
Amortization expense 70 -
(Gain) loss on disposal of property and equipment (3) 3
Deferred income taxes 46 -
Changes in operating assets and liabilities:
Accounts receivable (1,290) (1,604)
Inventories (2,136) (903)
Prepaids and other current assets (30) (289)
Refundable income taxes (261) -
Other non-current assets (45) (43)
Trade accounts payable 126 588
Customer deposits (23) (126)
Accrued and other liabilities (186) 302
----------------------------------
Net cash (used) provided by operating activities (1,463) 12
Investing activities
Proceeds from sale of property and equipment 80 1
Purchases of property and equipment (1,940) (525)
Acquisition (net of cash acquired) (4,033) -
Other (15) 6
----------------------------------
Net cash used in investing activities (5,908) (518)
</TABLE>
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<PAGE>
OPEN PLAN SYSTEMS, INC.
Consolidated Statements of Cash Flows (continued)
(amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended
December 31
1996 1995
-----------------------------------
<S> <C> <C>
Financing activities
Advances to shareholders $ (306) $ (323)
Repayment of advances to shareholders 84 200
Net (repayments) borrowings on revolving lines of credit (3,036) 1,364
Proceeds from notes payable to bank - 300
Principal payments on notes payable, long-term debt,
and capital lease obligations (347) (63)
Proceeds from sale of common stock 17,560 -
Purchase of common stock - (145)
Distributions to shareholders (3,760) (791)
-----------------------------------
Net cash provided by financing activities 10,195 542
-----------------------------------
Increase in cash and cash equivalents 2,824 36
Cash and cash equivalents at beginning of year 242 206
-----------------------------------
Cash and cash equivalents at end of year $ 3,066 $ 242
===================================
Supplemental disclosures
Interest paid $ 144 $ 161
===================================
Income taxes paid $ 585 $ -
===================================
Summary of noncash transactions
Equipment acquired under capital leases $ $ 81
===================================
Amounts offset against advances to shareholders:
Distributions to shareholders $ 590 $ 156
===================================
Purchase of common stock $ - $ 13
===================================
Issuance of common stock in connection with acquisition $ 1,313 $ -
===================================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
OPEN PLAN SYSTEMS, INC.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1. SUMMARY OF 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
Company principally manufactures new product and remanufactures Herman Miller
and Haworth product lines and markets them through Company sales offices located
in the East Coast and Mid-West regions of the United States. In addition, the
Company also sells new product office workstation components from other
manufacturers. The following is a description of the Company's more significant
accounting policies.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant intercompany balances
and transactions have been eliminated in consolidation.
Inventories
Inventories are stated at the lower of average cost or market. Work-in-process
inventories include both the direct and indirect costs of manufacturing such
products.
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.
Goodwill
Goodwill represents the excess of the purchase price of acquired businesses over
the fair value of net assets acquired (see Note 2) and is being amortized on the
straight-line method over a period of twenty years. The carrying value of
goodwill is periodically evaluated by management based on undiscounted cash
flows of the related business units to determine if there has been an impairment
in value. Accumulated amortization was $60,000 at December 31, 1996.
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 were $157,000
and $166,000 at December 31, 1996 and 1995, respectively. Advertising costs
charged to expense totaled $414,000 in 1996 and $198,000 in 1995.
Income Taxes
Deferred income taxes are determined based on the differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years the differences are expected to reverse.
-21-
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents.
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.
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 consolidated financial statements. Prior to the adoption of
Statement 121, the Company periodically reviewed the remaining utility of its
property and equipment, which constituted its only material long-lived assets,
and considered the ultimate net realizable value. Any situation involving what
was considered permanent impairment would have resulted in adjustment to
carrying value.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
NOTE 2. ACQUISITION
On October 1, 1996, the Company acquired all of the outstanding common stock of
Immaculate Eagle, Inc. (d/b/a TFM Remanufactured Office Furniture) ("TFM") for
an aggregate purchase price of $5,346,000, including transaction costs. TFM is
located in Lansing, Michigan and is a specialized remanufacturer of panel
systems produced by Haworth, Inc. Consideration for the acquisition consisted of
cash of $4,033,000 and 87,500 shares of common stock valued at a price of $15
per share. The 87,500 shares will be held in escrow until October 1, 1998 as
security for indemnification obligations of the former Shareholders of TFM.
Under the terms of the purchase agreement, if the closing sales price of the
Company's common stock on October 1, 1998 is less than $15 per share (subject to
certain adjustments), the Company will make a cash payment to the former
Shareholders equal to the difference between the closing sales price on that
date and $15, multiplied times the 87,500 shares of common stock.
The acquisition of TFM was recorded using the purchase method of accounting and
the excess of the purchase price over the estimated fair value of the net assets
acquired was recorded as goodwill. The results of operations have been included
in the accompanying consolidated results of operations since the date of
acquisition.
The following unaudited summarized, pro forma data for the year ended December
31, 1996 presents the combined results of the Company as if the TFM acquisition
had occurred at the beginning of 1996 (in thousands $, except per share
amounts):
Net sales $27,093
Income before income taxes $1,798
Pro forma net income $1,079
Pro forma earnings per share $.29
Results of TFM for years prior to 1996 are unavailable.
-22-
<PAGE>
NOTE 3. INVENTORIES
Inventories are in two main stages of completion and consisted of the following
(in thousands $):
December 31
1996 1995
---------------- ----------------
Components and fabric $3,355 $2,036
Jobs in process and finished goods 3,452 1,942
---------------- ----------------
$6,807 $3,978
================ ================
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment by major classification was as follows (in thousands $):
December 31
1996 1995
---------------- ----------------
Production and warehouse equipment $ 2,240 $ 596
Office equipment 758 323
Vehicles 204 138
Leasehold improvements 201 106
---------------- ----------------
3,403 1,163
Accumulated depreciation and amortization (705) (409)
---------------- ----------------
$ 2,698 $ 754
================ ================
NOTE 5. INDEBTEDNESS
At December 31, 1996, the Company has a revolving line of credit from a bank
providing for short-term borrowings up to $5,000,000 through April 1997. These
borrowings bear interest at the lesser of the prime rate or LIBOR plus 2.25%.
There were no outstanding borrowings under the line at December 31, 1996.
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 an interest coverage
ratio. The Company was in compliance with all covenants of the agreement at
December 31, 1996.
Long-term debt consisted of the following (in thousands $):
<TABLE>
<CAPTION>
December 31
1996 1995
------------------ ----------------
<S> <C> <C>
Note payable to bank, due $8 per month, plus interest
at 7.75% per annum, through November 1998 $ 191 $ 300
Note payable to bank, due $5 per month, plus interest
at 8.25% per annum, through May 1998
57 113
Capital lease obligations (see Note 8) 56 74
------------------ ----------------
304 487
Less current portion 212 183
------------------ ----------------
$ 92 $ 304
================== ================
</TABLE>
Substantially all assets are pledged as collateral for the above indebtedness.
-23-
<PAGE>
NOTE 6. SHAREHOLDERS' EQUITY
In June 1996, the Company completed an initial public offering of its common
stock, pursuant to which the Company sold 1,955,000 shares of common stock at an
initial offering price of $10 per share.
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 are limited
to the face amounts of the policies which total $4,000,000.
In March 1996, the Company's shareholders adopted the 1996 Stock Incentive Plan
(the "Incentive Plan") and the 1996 Stock Option Plan for Non-Employee Directors
(the "Outside Directors' Plan").
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 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 was 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. At December 31, 1996,
the Company had granted a total of 5,000 options under the plan with an exercise
price of $11.75 per share, none of which were exercisable at December 31, 1996.
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 terminate in
March 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. At December 31, 1996, the Company had granted a total of 109,375
non-qualified stock options under this plan with an exercise price of $9.875 per
share, none of which were exercisable at December 31, 1996. These options have a
term of seven years.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, Accounting for Stock-Based Compensation. This statement defines a fair
value based method of accounting for employee stock options whereby compensation
cost is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
However, companies may elect to continue to use the intrinsic value based method
as prescribed by Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25), and provide pro forma disclosures as if the
Company had accounted for its employee stock options under the fair value based
method. Under the intrinsic value based method, compensation cost is the excess,
if any, of the market price of the stock at the grant date over the exercise
price.
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options. If the Company had accounted for its
employee stock options under the fair value based method pro forma net income
would have decreased $ 29,000 and pro forma earnings per common share would have
decreased by $.01 for the year ended December 31, 1996. These pro forma amounts
are not indicative of future effects of applying the fair value based method
since a 4 year vesting period was used
-24-
<PAGE>
NOTE 6. SHAREHOLDERS' EQUITY (Continued)
to measure pro forma compensation expense. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model
assuming a risk-free interest rate of 5.6%, dividend yield of 0.0%, volatility
factors of .20, and a weighted-average expected life of the option of 6 years.
The weighted average fair value of options granted during 1996 was $3.39 per
share.
NOTE 7. INCOME TAXES
Prior to the Company's initial public offering of common stock in June 1996, the
Company had elected by consent of its shareholders to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under these provisions,
the Company did not pay federal and state income taxes on its corporate income.
Instead the Company's income was included in the income of its shareholders for
federal and state income tax purposes. The Company revoked its S Corporation
election effective May 31, 1996 and a deferred tax asset of $21,000 and related
benefit was recognized representing cumulative temporary differences at that
date. The undistributed balance of retained earnings of $137,000 as of May 31,
1996 was reclassified to additional capital.
The provision for income taxes for the year ended December 31, 1996 is comprised
of the following (in thousands $):
Current:
Federal $ 282
State 48
-----------------
330
Deferred:
Federal 62
State 5
-----------------
67
Deferred tax asset recognized at
S Corporation termination (21)
-----------------
$ 376
=================
A reconciliation of the provision for income taxes for the year ended December
31, 1996 and the amount computed by applying the U.S. statutory federal income
tax rate of 34% to income before income taxes is as follows (in thousands $):
Income tax at U.S. statutory rates $ 788
State taxes, net of federal benefit 37
Tax effect on earnings during S Corporation period (468)
Deferred tax asset recognized at S Corporation termination (21)
Amortization of goodwill 20
Other, net 20
------------------
Total provision for income taxes $ 376
==================
The net deferred tax liability at December 31, 1996 consisted of the following
(in thousands $):
Deferred tax assets
Accounts receivable allowances $ 44
Other 8
Deferred tax liabilities:
Tax over book depreciation (106)
==================
$ (54)
==================
The net deferred tax liability is classified in the accompanying consolidated
balance sheets as a current asset of $52,000 and a noncurrent liability of
$106,000.
-25-
<PAGE>
NOTE 8. COMMITMENTS AND CONTINGENCIES
During 1995, the Company entered into capital lease agreements to purchase two
trucks with an aggregate cost of $81,000. The net book value of these trucks was
$59,000 and $73,000 at December 31, 1996 and 1995, respectively. Amortization of
these trucks is included in depreciation expense.
The Company leases office space and production facilities in Richmond and
Lansing. The Richmond lease expires in July 1999 and provides for an option to
renew for an additional three years. The Lansing lease expires in December 1998.
In addition, the Company leases its sales offices under operating lease
agreements expiring in various periods through December 2001. Automobiles are
also leased under terms not exceeding three years. All of the aforementioned
leases are accounted for as operating leases.
Future minimum lease payments under the above leases were as follows at December
31, 1996 (in thousands $):
Year Capital Operating
----------------------------
1997 $ 26 $ 861
1998 19 782
1999 13 355
2000 10 28
2001 - 28
----------------------------
Total minimum lease payments 68 $ 2,054
=============
Amounts representing interest 12
---------------
Present value of total minimum lease payments $ 56
===============
The above amounts have been reduced by expected sublease rentals of $78,000 in
1997, $78,000 in 1998 and $26,000 in 1999.
Rent expense amounted to $747,000 in 1996 and $596,000 in 1995.
In 1995 and during part of 1996, the Company guaranteed certain bank borrowings
of 5 shareholders aggregating $270,000 at December 31, 1995. The loans bore
interest at the prime rate plus 1.5% and were scheduled to be repaid by April
1999. During 1996, the guarantee was released and the Company has no obligations
with regards to the loans at December 31, 1996.
NOTE 9. 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.
Additionally, the Company's wholly-owned subsidiary maintains a similar plan for
its employees. The plan allows participants to contribute a specified portion of
their compensation to the plan on a tax deferred basis. The Company matches a
pre-determined amount. According to the terms of the purchase agreement,
participants of the subsidiary's plan would be eligible to participate in the
Company's plan at the first plan entry date after the first annual anniversary
date of the complete distribution of assets from the subsidiary's plan.
The Company recorded total expense related to these plans of $75,000 in 1996 and
$53,000 in 1995.
-26-
<PAGE>
NOTE 10. RELATED PARTY TRANSACTIONS
Prior to the consummation of its initial public offering the Company advanced
funds to certain shareholders from time to time. At December 31, 1995, these
advances bore interest at rates ranging from 6.58% to 8.19% per annum. All
outstanding advances were repaid in May 1996. Interest income recognized on
these advances amounted to $10,000 in 1996 and $29,000 in 1995.
The Company incurred legal fees of $306,000 in 1996 to a law firm in which one
of the Company's directors is a partner.
In connection with the Company's initial public offering, the Company paid
underwriting fees of $606,000 to an investment banking firm in which one of the
Company's directors is an officer. The Company's revolving line of credit, its
notes payable and certain of the operating bank accounts are with a bank in
which one of the Company's director is an officer (see Note 5).
NOTE 11. CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents and accounts receivable. The
Company's temporary cash in invested in short-term money market accounts.
The Company markets its products and services to customers located primarily in
the Southeastern, Mid-Atlantic and Mid-West 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.
NOTE 12. PRO FORMA INFORMATION (UNAUDITED)
The accompanying pro forma income data 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 years presented.
Pro forma earnings per common share are based on the weighted average common
shares outstanding increased by 270,000 shares of common stock deemed to be
outstanding, which represents the approximate number of common shares deemed
sold by the Company at the initial public offering of $10 per share to fund the
final S Corporation distribution of $2,695,000 to the Company's shareholders.
-27-
<PAGE>
NOTE 13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Results of operations for each of the quarters during the years ended December
31, 1996 and 1995 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------
March June Septmeber December
31st 30th 30th 31st
------------ -------------- --------------- ------------
Year ended December 31, 1996
<S> <C> <C> <C> <C>
Net sales $ 5,580 $ 4,965 $ 4,402 $ 7,451
Operating income $ 963 $ 577 $ 227 $ 407
Income before income taxes $ 914 $ 564 $ 363 $ 476
Pro forma net income $ 558 $ 344 $ 216 $ 269
Pro forma earnings per common share $ .21 $ .11 $ .05 $ .06
Year ended December 31, 1995
Net sales $ 4,574 $ 3,091 $ 3,382 $ 4,431
Operating income $ 738 $ 362 $ 396 $ 516
Income before income taxes $ 714 $ 335 $ 363 $ 473
Pro forma net income $ 431 $ 202 $ 220 $ 285
Pro forma earnings per common share $ .16 $ .07 $ .08 $ 11
</TABLE>
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<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
The Company, during the two most recent fiscal years or any subsequent
interim period, has not dismissed an independent accountant nor has one resigned
based on any disagreement regarding accounting and financial disclosure. 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.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders to be filed within 120 days of the end of the 1996
fiscal year.
Item 10. Executive Compensation
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders to be filed within 120 days of the end of the 1996
fiscal year.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders to be filed within 120 days of the end of the 1996
fiscal year.
Item 12. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its 1997 Annual
Meeting of Shareholders to be filed within 120 days of the end of the 1996
fiscal year.
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<PAGE>
PART IV
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed on behalf of the Company as
part of this report:
3(i) Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit 3(i) of the
Registrant's Form SB-2 Registration Statement, as
amended, File No. 333-3188.
3(ii) Amended and Restated Bylaws, incorporated by
reference to Exhibit 3(ii) of the Registrant's Form
SB-2 Registration Statement, as amended, File No.
333-3188.
4 Form of Stock Certificate, incorporated by reference
to Exhibit 4 of the Registrant's Form SB-2
Registration Statement, as amended, File No.
333-3188.
10.1 Deed of Lease, as amended, dated April 6, 1992,
between Lingerfelt and Carpenter and Open Plan
Systems, Inc., incorporated by reference to Exhibit
10.1 of the Registrant's Form SB-2 Registration
Statement, as amended, File No. 333-3188.
10.2 Commercial Lease Contract, dated May 4, 1993, between
M.D. Hodges Enterprises, Inc. and Open Plan Systems,
Inc., incorporated by reference to Exhibit 10.2 of
the Registrant's Form SB-2 Registration Statement,
as amended, File No. 333-3188.
10.3 Commercial Note made by Open Plan Systems, Inc. in
favor of Crestar Bank as of May 9, 1996, incorporated
by reference to Exhibit 10.3 of the Registrant's Form
SB-2 Registration Statement, as amended, File No.
333-3188.
10.4 Security Agreement, dated May 7, 1996, between
Crestar Bank and Open Plan Systems, Inc.,
incorporated by reference to Exhibit 10.4 of the
Registrant's Form SB-2 Registration Statement, as
amended, File No. 333-3188.
10.5 Open Plan Systems, Inc. 1996 Stock Incentive Plan, as
amended, incorporated by reference to Exhibit 4.4 of
the Registrant's Form S-8 Registration Statement,
File No. 333-15217.
10.6 Open Plan Systems, Inc. 1996 Stock Option Plan For
Non-Employee Directors, as amended, incorporated by
reference to Exhibit 4.4 of the Registrant's Form S-8
Registration Statement, File No. 333-15219.
10.7 Buy-Sell Agreement, dated May 24, 1996, between the
Company and Stan A. Fischer, incorporated by
reference to Exhibit 10.7 of the Registrant's Form
SB-2 Registration Statement, as amended, File No.
333-3188.
10.8 Buy-Sell Agreement, dated May 15, 1996, between
the Company and Gregory P. Campbell, incorporated by
reference to Exhibit 10.8 of the Registrant's Form
SB-2 Registration Statement, as amended, File No.
333-3188.
10.9 Tax Sharing Agreement, dated May 1, 1996, between the
Company and each of the shareholders named therein,
incorporated by reference to Exhibit 10.9 of the
Registrant's Form SB-2 Registration Statement, as
amended, File No. 333-3188.
10.10 Form of Employee Non-Qualified Stock Option
Agreement*
10.11 Form of Non-Employee Director Non-Qualified Stock
Option Agreement*
10.12 Stock Purchase Agreement, dated September 24, 1996,
between Open Plan Systems, Inc., Immaculate Eagle,
Inc., Paul A. Covert, Todd A. Thomann and Siimon,
Inc., incorporated by reference to Exhibit 2.1 of
the Registrant's Form 8-K filed October 16, 1996,
File No. 0-20743.
-30-
<PAGE>
10.13 Lease, dated August 8, 1993, between Quality Dairy
Company and Immaculate Eagle, Inc.*
10.14 Open Plan Systems, Inc. Bonus Program for Officers*
11 Statement re: Computation of Earnings Per Share*
16 Letter from Martin, Dolan & Holton, Ltd. regarding
change in accountants, incorporated by reference to
Exhibit 16 of the Registrant's Form SB-2
Registration Statement, as amended, File No.
333-3188.
21 Subsidiaries of the Registrant*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of Ernst & Young LLP*
27 Financial Data Schedule * (filed electronically only)
--------
* Filed herewith
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on October 16,
1996 to report under Items 2 and 7 thereof the acquisition on October
1, 1996 of Immaculate Eagle, Inc., d/b/a TFM Remanufactured Office
Furniture, a Michigan corporation, as a wholly owned subsidiary of the
Company.
-31-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
OPEN PLAN SYSTEMS, INC.
By: /s/ Stan A. Fischer
--------------------------------
Stan A. Fischer
March 24, 1997 President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stan A. Fischer President and Director (principal March 24, 1997
- ---------------------------- executive officer)
Stan A. Fischer
/s/ Gary M. Farrell Chief Financial Officer and Secretary March 24, 1997
- ---------------------------- (principal financial officer)
Gary M. Farrell
/s/ Neil F. Suffa Corporate Controller March 24, 1997
- ---------------------------- (principal accounting officer)
Neil F. Suffa
/s/ Troy A. Perry, Jr. Director March 24, 1997
- ----------------------------
Troy A. Peery, Jr.
/s/ Anthony F. Markel Director March 24, 1997
- -----------------------------
Anthony F. Markel
/s/ Theodore L. Chandler, Jr. Director March 24, 1997
- -----------------------------
Theodore L. Chandler, Jr.
/s/ Robert F. Mizell Director March 24, 1997
- -----------------------------
Robert F. Mizell
/s/ C. T. Hill Director March 24, 1997
- -----------------------------
C. T. Hill
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- --------
<S> <C> <C>
3(i) Amended and Restated Articles of Incorporation, incorporated by reference to Exhibit 3(i) of
the Registrant's Form SB-2 Registration Statement, as amended, File No. 333-3188.
3(ii) Amended and Restated Bylaws, incorporated by reference to Exhibit 3(ii) of the Registrant's
Form SB-2 Registration Statement, as amended, File No. 333-3188.
4 Form of Stock Certificate, incorporated by reference to Exhibit 4 of the Registrant's Form SB-2
Registration Statement, as amended, File No. 333-3188.
10.1 Deed of Lease, as amended, dated April 6, 1992, between Lingerfelt and Carpenter and Open Plan
Systems, Inc., incorporated by reference to Exhibit 10.1 of the Registrant's Form SB-2
Registration Statement, as amended, File No. 333-3188.
10.2 Commercial Lease Contract, dated May 4, 1993, between M.D. Hodges Enterprises, Inc. and Open
Plan Systems, Inc., incorporated by reference to Exhibit 10.2 of the Registrant's Form SB-2
Registration Statement, as amended, File No. 333-3188.
10.3 Commercial Note made by Open Plan Systems, Inc. in favor of Crestar Bank as of May 9, 1996,
incorporated by reference to Exhibit 10.3 of the Registrant's Form SB-2 Registration Statement,
as amended, File No. 333-3188.
10.4 Security Agreement, dated May 7, 1996, between Crestar Bank and Open Plan Systems, Inc.,
incorporated by reference to Exhibit 10.4 of the Registrant's Form SB-2 Registration Statement,
as amended, File No. 333-3188.
10.5 Open Plan Systems, Inc. 1996 Stock Incentive Plan, as amended, incorporated by reference to
Exhibit 4.4 of the Registrant's Form S-8 Registration Statement, File No. 333-15217.
10.6 Open Plan Systems, Inc. 1996 Stock Option Plan For Non-Employee Directors, as amended,
incorporated by reference to Exhibit 4.4 of the Registrant's Form S-8 Registration Statement,
File No. 333-15219.
10.7 Buy-Sell Agreement, dated May 24, 1996, between the Company and Stan A. Fischer, incorporated
by reference to Exhibit 10.7 of the Registrant's Form SB-2 Registration Statement, as amended,
File No. 333-3188.
10.8 Buy-Sell Agreement, dated May 15, 1996, between the Company and Gregory P. Campbell,
incorporated by reference to Exhibit 10.8 of the Registrant's Form SB-2 Registration Statement,
as amended, File No. 333-3188.
10.9 Tax Sharing Agreement, dated May 1, 1996, between the Company and each of the shareholders named
therein, incorporated by reference to Exhibit 10.9 of the Registrant's Form SB-2 Registration
Statement, as amended, File No. 333-3188.
10.10 Form of Employee Non-Qualified Stock Option Agreement*
10.11 Form of Non-Employee Director Non-Qualified Stock Option Agreement*
10.12 Stock Purchase Agreement, dated September 24, 1996, between Open Plan Systems, Inc., Immaculate
Eagle, Inc., Paul A. Covert, Todd A. Thomann and Siimon, Inc., incorporated by reference to
Exhibit 2.1 of the Registrant's Form 8-K filed October 16, 1996, File No. 0-20743.
10.13 Lease, dated August 8, 1993, between Quality Dairy Company and Immaculate Eagle, Inc.*
10.14 Open Plan Systems, Inc. Bonus Program for Officers*
11 Statement re: Computation of Earnings Per Share*
16 Letter from Martin, Dolan & Holton, Ltd. regarding change in accountants, incorporated by
reference to Exhibit 16 of the Registrant's Form SB-2 Registration Statement, as amended, File
No. 333-3188.
21 Subsidiaries of the Registrant*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of Ernst & Young LLP*
27 Financial Data Schedule * (filed electronically only)
</TABLE>
- --------
* Filed herewith
Exhibit 10.10
OPEN PLAN SYSTEMS, INC.
EMPLOYEE
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the ___ day of __________, 199_, between
Open Plan Systems, Inc., a Virginia corporation (the "Company"), and
_______________ ("Optionee"), is made pursuant and subject to the provisions of
the Company's 1996 Stock Incentive Plan (the "Plan"), a copy of which is
attached. All terms used herein that are defined in the Plan shall have the same
meaning given them in the Plan.
1. Grant of Option. Pursuant to the terms of the Plan, the
Company, on _________, 199_, granted to Optionee, subject to the terms and
conditions of the Plan and subject further to the terms and conditions herein
set forth, the right and option to purchase from the Company all or any part of
an aggregate of _____ shares of the common stock of the Company (the "Common
Stock") at the option price of $______ per share. Such option is to be
exercisable as hereinafter provided.
2. Terms and Conditions. This option is subject to the following
terms and conditions:
(a) Expiration Date. The Expiration Date of this option
is ___________, 200_.
(b) Exercise of Option. Except as provided in paragraphs
3, 4, 5 and 6 below, this option shall become exercisable with respect to
twenty-five percent (25%) of the total number of shares covered by this option,
as set forth in paragraph 1 above, on the date that is six (6) months after the
date of this Agreement and at the end of each twelve (12) month period
thereafter, up to a total of three (3) such periods, that Optionee continues to
be employed by the Company after the date of the granting of this option. Once
this option has become exercisable with respect to a particular number of shares
in accordance with the preceding sentence, it shall continue to be exercisable
with respect to such shares until the earlier of the termination of Optionee's
rights hereunder pursuant to paragraph 3, 4, 5 or 6, or the Expiration Date. A
partial exercise of this option shall not affect Optionee's right to exercise
this option subsequently with respect to the remaining shares that are
exercisable subject to the conditions of the Plan and this Agreement.
<PAGE>
(c) Method of Exercising and Payment for Shares. This
option may be exercised only by written notice delivered to the attention of the
Company's Secretary at the Company's principal office in Richmond, Virginia. The
written notice shall specify the number of shares being acquired pursuant to the
exercise of the option when such option is being exercised in part in accordance
with subparagraph 2(b) hereof. The exercise date shall be the date upon which
such notice is received by the Company. Such notice shall be accompanied by
payment of the option price in full for each share either in cash in United
States Dollars, or by the surrender of shares of Common Stock to the Company or
the Company's withholding shares of Common Stock from Optionee upon exercise, or
by cash equivalent acceptable to the Company or any combination thereof having
an aggregate fair market value equal to the option price.
(d) Cashless Exercise. To the extent permitted by
applicable laws and regulations, at the request of Optionee, the Company will
cooperate in a "cashless exercise" in accordance with Section 8.05 of the Plan.
(e) Nontransferability. This option is nontransferable
except, in the event of Optionee's death, by will or by the laws of descent and
distribution subject to the terms hereof. During Optionee's lifetime, this
option may be exercised only by Optionee.
3. Exercise in the Event of Death. This option shall become
exercisable in full in the event that Optionee dies while employed by the
Company or an Affiliate prior to the Expiration Date of this option. In that
event, this option may be exercised by Optionee's estate, or the person or
persons to whom his rights under this option shall pass by will or the laws of
descent and distribution. Optionee's estate or such persons must exercise this
option, if at all, within two (2) years of the date of Optionee's death or
during the remainder of the period preceding the Expiration Date, whichever is
shorter, but in no event may the option be exercised prior to the expiration of
six (6) months from the date of the grant of the option.
4. Exercise in the Event of Permanent and Total Disability. This
option shall be exercisable in full if Optionee becomes permanently and totally
disabled (within the meaning of Section 22(e)(3) of the Code) while employed by
the Company or an Affiliate prior to the Expiration Date of this option. In such
event, Optionee must exercise this option, if at all, within two (2) years of
the date on which he terminates employment with the Company due to permanent and
total disability or during the remainder of the period
<PAGE>
preceding the Expiration Date, whichever is shorter, but in no event may the
option be exercised prior to the expiration of six (6) months from the date of
the grant of the option.
5. Exercise After Retirement or Other Approved Circumstance. In
the event that Optionee retires from employment with the Company or in any other
circumstance approved by the Committee in its sole discretion, this option shall
become exercisable in full but must be exercised by Optionee, if at all, within
two (2) years following his retirement date, in the event of his retirement, or
within the period prescribed by the Committee, in an approved circumstance, or
during the remainder of the period preceding the Expiration Date, whichever is
shorter, but in no event may the option be exercised prior to the expiration of
six (6) months from the date of the grant of the option.
6. Exercise After Termination of Employment. In all events,
other than those events addressed in paragraphs 3, 4 and 5, in which Optionee
ceases to be employed by the Company or an Affiliate other than for cause,
Optionee may exercise this option, in whole or in part, with respect to that
number of shares which are exercisable under Paragraph 2(b). above at the time
of the termination of his employment; provided that this option must be
exercised, if at all, within ninety (90) days following the date upon which he
ceases to be employed by the Company or during the remainder of the period
preceding the Expiration Date, whichever is shorter, but in no event may the
option be exercised prior to the expiration of six (6) months from the date of
the grant of the option. If Optionee's employment is terminated for cause, his
right to exercise this option shall terminate immediately. For the purposes of
this Agreement, "cause" shall mean conduct that is unprofessional, unethical,
immoral or fraudulent as determined in the sole discretion of the Compensation
Committee.
7. Fractional Shares. Fractional shares shall not be issuable
hereunder, and when any provision hereof may entitle Optionee to a fractional
share such fraction shall be disregarded.
8. No Right to Continued Employment. This option does not confer
upon Optionee any right with respect to continuance of employment by the Company
or an Affiliate, nor shall it interfere in any way with the right of the Company
or an Affiliate to terminate Optionee's employment at any time.
9. Investment Representation. Optionee agrees that, unless such
shares shall previously have been registered under the Securities Act of 1933,
(a) any shares purchased by him hereunder will be purchased for investment and
not with a view to distribution or resale, and (b) until such registration,
<PAGE>
certificates representing such shares may bear an appropriate legend to assure
compliance with such Act. This investment representation shall terminate when
such shares have been registered under the Securities Act of 1933.
10. Change in Control or Capital Structure. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by this option, and the price per share thereof, shall be
proportionately adjusted and its terms shall be adjusted as the Committee shall
determine to be equitably required for any increase or decrease in the number of
issued and outstanding shares of Common Stock of the Company resulting from any
stock dividend (but only on the Common Stock), stock split, subdivision,
combination, reclassification, recapitalization or general issuance to holders
of Common Stock of rights to purchase Common Stock at substantially below its
then fair market value or any change in the number of such shares outstanding
effected without receipt of cash or property or labor or services by the Company
or for any spin-off, spin-out, split-up, split-off or other distribution of
assets to shareholders.
In the event of a Change in Control, the provisions of Section 13.03 of
the Plan shall apply to this option. In the event of a change in the Common
Stock of the Company as presently constituted, which is limited to a change of
all of its authorized shares with par value into the same number of shares with
a different par value or without par value, the shares resulting from any such
change shall be deemed to be the Common Stock within the meaning of the Plan.
The grant of this option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Virginia, except to the extent that federal law shall be deemed to apply.
12. Conflicts. In the event of any conflict between the provisions
of the Plan as in effect on the date hereof and the provisions of this
Agreement, the provisions of the Plan shall govern. All references herein to the
Plan shall mean the Plan as in effect on the date hereof.
<PAGE>
13. Optionee Bound by Plan. Optionee hereby acknowledges receipt
of a copy of the Plan and agrees to be bound by all the terms and provisions
thereof.
14. Binding Effect. Subject to the limitations stated above and
in the Plan, this Agreement shall be binding upon and inure to the benefit of
the legatees, distributees, and personal representatives of Optionee and the
successors of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and Optionee has affixed his signature hereto, as
of the date and year first above written.
OPTIONEE: OPEN PLAN SYSTEMS, INC.
___________________________ By:__________________________
Exhibit 10.11
OPEN PLAN SYSTEMS, INC.
NON-EMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of _______, 199_, between Open Plan Systems,
Inc., a Virginia corporation (the "Company"), and _______________ ("Optionee"),
is made pursuant and subject to the provisions of the Company's 1996 Stock
Option Plan for Non-Employee Directors (the "Plan"), a copy of which is
attached. All terms used herein that are defined in the Plan shall have the same
meaning given them in the Plan.
1. Grant of Option. Pursuant to the terms of the Plan, the
Company hereby grants to Optionee, subject to the terms and conditions of the
Plan and subject further to the terms and conditions herein set forth, the right
and option to purchase from the Company all or any part of an aggregate of One
Thousand (1,000) shares of the Common Stock of the Company (the "Common Stock")
at an option price per share of $______. Such option is to be exercisable as
hereinafter provided.
2. Terms and Conditions. This option is subject to the following
terms and conditions:
(a) Expiration Date. The Expiration Date of this option
is ________, 200_.
(b) Exercise of Option. This option shall be exercisable
with respect to the total number of shares covered by this option after the
expiration of six (6) months from the granting of the option. Once this option
has become exercisable with respect to the total number of shares in accordance
with the preceding sentence, it shall continue to be exercisable with respect to
such shares until the termination of Optionee's rights hereunder pursuant to
paragraph 3, 4 and 5 or, otherwise, until the Expiration Date. A partial
exercise of this option shall not affect Optionee's right to exercise
subsequently this option with respect to the remaining shares that are
exercisable, subject to the six month vesting period set forth in the first
sentence of this subparagraph (b) and the conditions of the Plan and this
Agreement.
(c) Method of Exercising and Payment for Shares. This
option may be exercised only by written notice delivered to the attention of the
Company's Secretary at the Company's principal office in Richmond, Virginia. The
written notice shall specify the number of shares being acquired pursuant to the
exercise of the option when such option is being exercised in part in accordance
with subparagraph 2(b) hereof. The exercise date shall be the date upon which
such notice is received by the Company. Such notice shall be
<PAGE>
accompanied by payment of the option price in full for each share either in cash
in United States Dollars, or by the surrender of shares of Common Stock, or by
cash equivalent acceptable to the Company or any combination thereof having an
aggregate fair market value equal to the total option price for all the shares
being purchased.
(d) Cashless Exercise. To the extent permitted by
applicable laws and regulations, at the request of the Optionee, the Company
will cooperate in a "cashless exercise" in accordance with Section 7.03 of the
Plan.
(e) Nontransferability. This option is nontransferable
except, in the event of the Optionee's death, by will or by the laws of descent
and distribution subject to the terms hereof. During Optionee's lifetime, this
option may be exercised only by Optionee.
3. Exercise in the Event of Death. Subject to the six month
exercisability requirement set forth in Section 2(b) hereof, this option shall
remain exercisable with respect to any shares yet unexercised in the event that
Optionee dies prior to exercising this option in full and prior to the
Expiration Date of this option. In that event, this option may be exercised by
Optionee's estate, or the person or persons to whom his rights under this option
shall pass by will or the laws of descent and distribution. Optionee's estate or
such persons must exercise this option with respect to the remaining shares
subject to the option, if at all, within two years of the date of Optionee's
death or during the remainder of the period preceding the Expiration Date,
whichever is shorter.
4. Exercise in the Event of Permanent and Total Disability.
Subject to the six month exercisability requirement set forth in Section 2(b)
hereof, this option shall remain exercisable with respect to any shares yet
unexercised if Optionee becomes permanently and totally disabled (within the
meaning of Section 105(d)(4) of the Code) while serving on the Board prior to
exercising this option in full and prior to the Expiration Date of this option.
In such event, Optionee must exercise this option with respect to the remaining
shares subject to the option, if at all, within two years of the date on which
he ceases serving on the Board due to permanent and total disability or during
the remainder of the period preceding the Expiration Date, whichever is shorter.
5. Exercise After Resignation, Non-Election or Other Approved
Circumstance. Subject to the six month exercisability requirement set forth in
Section 2(b) hereof, in the event that Optionee resigns from or is not
re-elected or does not stand for re-election to the Board or in any other
circumstance approved by the Board in its sole discretion, this option shall
remain exercisable with respect to any shares yet unexercised but must be
exercised by Optionee, if at all, within two years following the date of his
resignation or cessation of service on
<PAGE>
the Board, or within the period prescribed by the Board in an approved
circumstance, or during the remainder of the period preceding the Expiration
Date, whichever is shorter.
6. Fractional Shares. Fractional shares shall not be issuable
hereunder, and when any provision hereof may entitle Optionee to a fractional
share such fraction shall be disregarded.
7. Investment Representation. Optionee agrees that, unless such
shares shall previously have been registered under the Securities Act of 1933,
(a) any shares purchased by him hereunder will be purchased for investment and
not with a view to distribution or resale, and (b) until such registration,
certificates representing such shares may bear an appropriate legend to assure
compliance with such Act. This investment representation shall terminate when
such shares have been registered under the Securities Act of 1933.
8. Change in Capital Structure. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by this option, and the price per share thereof, shall be proportionately
adjusted and its terms shall be adjusted as the Committee shall determine to be
equitably required for any increase or decrease in the number of issued and
outstanding shares of Common Stock of the Company resulting from any stock
dividend (but only on the Common Stock), stock split, subdivision, combination,
reclassification, recapitalization or general issuance to holders of Common
Stock of rights to purchase Common Stock at substantially below its then fair
market value or any change in the number of such shares outstanding effected
without receipt of cash or property or labor or services by the Company or for
any spin-off, spin-out, split-up, split-off or other distribution of assets to
shareholders.
In the event of a change in the Common Stock of the Company as
presently constituted, which is limited to a change of all of its authorized
shares with par value or without par value, the shares resulting from any such
change shall be deemed to be the Common Stock within the meaning of the Plan.
The grant of this option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
9. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Virginia, except to the extent that federal law shall be deemed to apply.
<PAGE>
10. Conflicts. In the event of any conflict between the provisions
of the Plan as in effect on the date hereof and the provisions of this
Agreement, the provisions of the Plan shall govern. All references herein to the
Plan shall mean the Plan as in effect on the date hereof.
11. Optionee Bound by Plan. Optionee hereby acknowledges receipt
of a copy of the Plan and agrees to be bound by all the terms and provisions
thereof.
12. Binding Effect. Subject to the limitations stated above and
in the Plan, this Agreement shall be binding upon and inure to the benefit of
the legatees, distributees, and personal representatives of Optionee and the
successors of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and Optionee has affixed his signature hereto.
OPTIONEE: OPEN PLAN SYSTEMS, INC.
________________________ By:__________________________
Exhibit 10.13
LEASE
This Lease made this 8th day of August, 1993, by and between, QUALITY DAIRY
COMPANY a Michigan Corporation, having its principal offices at 111 W. Mt. Hope
Ave., Lansing, MI 48910, hereinafter called "Landlord" and IMMACULATE EAGLE,
INC. D.B.A. TOTAL FACILITIES MANAGEMENT a Michigan Corporation having its
principal office at 13520 Bauer Road, Eagle, MI 48822, hereinafter called
"Tenant".
WITNESSETH:
1. LEASED PREMISES - Landlord, in consideration of the rent to be paid
and convenants to be performed by Tenant, does hereby demise and lease unto
Tenant, and the Tenant hereby rents from Landlord, those certain premises
located at 2110 South Washington Ave., Lansing, MI 48910 which property is
legally described as:
See attached Exhibit "A", "B", and "C", hereby made a part of
this lease document.
2. TERM - The term of this Lease shall commence on January 1, 1994, at
which time occupancy shall begin and shall be for five (5) year(s) ending
December 31, 1998 at 12:00 midnight. Tenant shall have the option to continue
and renew this lease under the following terms and conditions:
1) Tenant must notify Landlord ninety (90) days before the
termination of this lease of its intention to exercise its
option to renew the same.
2) The option to renew this lease shall be: No options to
renew. Tenant has right of first refusal to lease 13,050 sq.
ft. "west adjacent space". Tenant has ten (10) days to
accept our written proposal to lease.
3. LEASE YEAR DEFINED - The term "lease year" as used herein shall be
defined to mean a period of twelve (12) consecutive calendar months. The first
lease year shall being on the commencement date of the term of this Lease. Each
succeeding lease year shall commence on the anniversary date of the first lease
year.
4. MINIMUM ANNUAL RENT - Tenant shall pay the Landlord as minimum rent
during the term of this lease the sum of Forty Six Thousand Six Hundred Forty &
00/100 ($46,640.00) Dollars annually which is to be paid at the rate of Three
Thousand Eight Hundred Eighty Six and 66/100 ($3,886.66) Dollars monthly in
advance on the first day of each month. This minimum rent is calculated at the
rate of $2.12 per square feet for the 22,000 leaseable square feet.
Tenant shall pay -0- security deposit.
Tenant shall pay $3,886.66 first months rent
Tenant shall pay -0- last months rent
5. deleted.
6. USE OF PREMISES - Tenant shall use premises for General offices,
showroom, storage and reconditioning of office furniture. Tenant shall conduct
no other business from the premises. Tenant must
<PAGE>
notify Landlord in writing of any intended change in use at least thirty (30)
days prior to such change in use and Tenant shall not make such change without
Landlord's written permission which permission will not be unreasonably
withheld. There shall be no storage of toxic substances within the leased area.
7. MAINTENANCE - Tenant shall be liable for the removal of its trash,
interior cleaning and cleaning of the exterior grounds within fifty (50) feet
radius of the leased premises.
8. PARKING AREA - Tenant, its employees and agents shall restrict their
parking of any vehicle only to that area designated by the Landlord for such
parking. Tenant shall be responsible for the snow removal and cleaning of
parking area.
9. LIABILITY INSURANCE - Tenant shall procure and keep in force, during
the term of this lease, a policy of public liability and property damage
insurance with respect to the leased premises and any foreseeable damage
resulting from Tenants occupancy of the leased premises. The amount of the
insurance shall not be less then $250,000.00 per accident or occurrence, with
property damage coverage of at least $500,000.00. Landlord shall be named as a
beneficiary on this insurance.
10. REPAIR AND MAINTENANCE - Landlord agrees during the term of this Lease,
at Landlord's cost and expense, to properly maintain and make necessary exterior
walls and structural portions of the leased premises. Tenant agrees to maintain
and repair, ceilings, floor cover, wall finish, glass windows and doors,
Heating, Ventilating, Air Conditioning System, rest rooms. Landlord agrees to
maintain all utility connections from the exterior walls of the premises to the
utility connections. Tenant agrees to maintain and repair all utility systems,
pipes, lines, etc. on the interior of the leased premises at his own cost.
Landlord agrees to maintain the parking lots and landscaping. Landlord will
repair all nontenant utility connections in the leased premises unless damages
by tenant.
11. FIRE OR CASUALTY - If the leased premises shall be damaged or
destroyed in whole or in part by fire, the elements or other casualty during the
term hereof, Landlord shall, at its own cost and expense promptly repair and
restore the entire leased property to a condition substantially equal to the
condition of the leased property before the damage. The minimum rents, and all
other charges shall abate from the date of such damage until the date thirty
(30) days after the date the Landlord shall have repaired and restored the
leased premises as outlined.
In the event the Landlord has not completed the repairs and restoration of the
leased premises within three (3) months after the date of the damage, the Tenant
at its option, may cancel and terminate this Lease upon ten (10) days written
notice.
12. EMINENT DOMAIN - If the whole of the leased premises shall be taken for
any public or quasi-public use under any statute or by right of eminent domain,
then this Lease shall automatically terminate as of the date the title shall be
taken. If any part of the leased premises shall be taken so that it interferes
with the right of Tenant in carrying out its general business, then the Tenant
shall have the right to terminate this Lease upon thirty (30) days written
notice to Landlord giving within ninety (90) days after the date of such taking
and upon termination the parties hereto shall be released from all their
respective obligations hereunder. Landlord shall be entitled to claim all
damages and award for damages and all compensation for the diminution in value
of the fee of the leased premises.
13. RE-RENTING - Tenant hereby agrees that for a period commencing sixty
(60) days prior to the expiration of this Lease, Landlord may show the leased
premises to prospective tenants during Tenant's normal business hours.
2
<PAGE>
14. HOLDING OVER - In the event Tenant holds over after the expiration of
the term of this Lease, including any extensions thereof, thereafter the tenancy
will be deemed to be from month to month at the rents specified (prorated on a
monthly basis) and shall otherwise be on the terms and conditions herein
specified as applicable.
15. UTILITIES AND TAXES - Tenant shall be responsible for the payment of
all utility costs and personal property taxes. Landlord shall pay annual real
estate taxes assessed against this property when due.
16. TENANT'S DEFAULT - Tenant shall be deemed in default for failure to
timely pay the rent or other charges due hereunder. After seven day written
notice of these charges has been given to Tenant and the allotted time for
payment has lapsed and Tenant has failed to correct the default, Landlord shall
be entitled to start eviction procedures for the removal of Tenant from the
leased premises. Tenant shall be deemed to be in default of other provisions of
this Lease if written notice of such violation has not been corrected within
thirty (30) days of the date such written notice is given to Tenant.
17. RIGHT TO RE-ENTER - In the event any rent shall be due and unpaid, and
such default shall not have been cured after written notice and within the time
herein provided, or if the leased premises shall be abandoned, then it shall be
lawful for Landlord, its certain attorney, representative or assigns, upon ten
(10) days written notice to Tenant, to either terminate this Lease or to
lawfully re-enter into and repossess the leased premises and Tenant and each and
every occupant to remove and put out.
18. ASSIGNMENT - Tenant may not assign this Lease or any interest in it
without the prior written approval of Landlord, which approval will not be
unreasonably withheld.
19. CONDITION OF PREMISES UPON TERMINATION - At the expiration of this
Lease Tenant will quit and surrender the leased premises in as good a condition
as it was when entered into.
20. IMPROVEMENTS - Tenants may not alter, make improvements or change
the property or its improvements, without the prior approval of Landlord.
21. SUCCESSORS - All rights and liabilities herein given or imposed upon
the parties hereto shall extend to and bind the heirs, executors,
administrators, successors and assigns of the said premises.
22. ENTIRE AGREEMENT - This Lease and the Exhibits attached hereto, set
forth all the covenants, promises, agreements, conditions and understandings of
the parties hereto and there exist no other oral or written covenants, promises,
agreements, conditions or understandings between them. No change or amendment to
the Lease can be made or be binding unless it is in writing and signed by both
parties.
23. PARTIAL INVALIDITY - The invalidity or unenforceability of any
provision of this Lease shall not effect or impair the validity of any other
provision. The Lease shall be governed by the laws of the State of Michigan.
24. NOTICE - Any notice, demand, request, or other instrument which may be
or is required to be given under this lease shall be sent by United States
certified mail, return receipt requested, postage prepaid to the respective
parties at the addresses given hereto or in this Lease.
3
<PAGE>
25. ARBITRATION - Should there be a conflict arise out of this lease, the
parties hereto agree to submit such conflict to arbitration for settlement.
26. That the premises have been examined and have been received in
good condition and further agrees to maintain the premises in the same condition
as when received and will not allow any waste, misuse or neglect or should
waste, misuse or neglect occur on the leased premise, that the responsibility
therefore shall be that of the Lessee, unless damage occurs through the fault of
the Lessor.
27. Tenant will inform landlord in writing within 30 days of commencement
of the lease of any defects in the operation of the air, heat, electric and
plumbing. Landlord will bring these systems into good operating condition within
seven days of receipt of tenants written correspondence.
28. Landlord reserves one loading dock for movement of materials from the
basement or second floor.
29. Tenant agrees to effectively prevent odors from vaporized paints,
solvents or other materials used in the restoration of office furniture or any
other operations in the leased premises to contaminate the air space in any
building area above, below or to the sides of the leased premises. Tenant will
reimburse landlord or its tenants for loss due to the violation of this
provision.
30. Landlord will blacktop additional parking area for tenants employees
if required to do so by City of Lansing. Blacktop cost to be paid by landlord.
31. For office improvements Tenant will pay in addition to warehouse
rent $1.50 per sq. ft. per year for four years. Starting January 1, 1998 the
office rate will be 50(cent) per sq. ft. per year in addition to the warehouse
rate then in effect.
32. For showroom improvements Tenant will pay in addition to warehouse
rent 50(cent) per sq. ft. per year for four years. Starting January 1, 1998 the
showroom rate will return to the warehouse rate then in effect.
33. Landlord will pay from invoices provided by vendors of tenant a maximum
of $40,000.00 in improvements to the leased premises as agreed to. Tenant shall
contract for all improvements including the obtaining of all necessary
governmental approvals. Landlord will not pay for labor provided by Tenant or
its employees for the improvements. No approved sanitary sewer exists at or near
the east wall of the leased premises and Landlord is not required to provide
such a sanitary sewer.
34. All exterior windows, steps and ramps added to the leased premises
must be done in a tasteful and workmanlike manner which meets with the approval
of the Landlord.
35. Monthly warehouse rental schedule:
January 1, 1994 $2.12 sq. ft
January 1, 1995 2.22 sq. ft.
January 1, 1996 2.32 sq. ft.
January 1, 1997 2.42 sq. ft.
January 1, 1998 2.52 sq. ft.
36. December 1993 warehouse rent shall be One Thousand Nine Hundred Forty
Three and 33/100 ($1,943.33) Dollars. Tenant may have use of leased premises
from October 1, 1993.
37. Flexible short term use of additional space shall be at the same rate
in effect for the leased area.
4
<PAGE>
38. Retention of Right of First Refusal on west adjacent space by Tenant.
Tenant shall pay Landlord the following fees:
January 1, 1997 $13,833
January 1, 1998 $13,833
If the above payments are not received by the due date it is agreed that Tenant
shall have no right to first refusal of the additional area.
39. Lease cancellation provision. Tenant may cancel this lease after
December 31, 1996 or December 31, 1997 upon the following conditions:
1. Written notice of lease cancellation and $10,750.00 is
received by the Landlord before October 1, 1996. This action
would cancel the lease as of December 31, 1996.
2. Written notice of lease cancellation and $6,250.00 is
received by the Landlord before October 1, 1997. This action
would cancel the lease as of December 31, 1997.
40. Landlord shall install one 250 watt light fixture for ever 800 sq. ft.
of leased space.
IN WITNESS WHEREOF, Landlord and Tenant have signed their names and affixed
their seals (if any) as of this day and year first above written.
In the Presence of: Landlord
/s/ BY: /s/
- --------------------------------- ------------------------------------
/s/ ITS: /s/
- --------------------------------- ------------------------------------
Tenant
/s/ BY: /s/
- --------------------------------- ------------------------------------
/s/ ITS: /s/
- --------------------------------- ------------------------------------
5
<PAGE>
EXHIBIT "A"
CERTIFICATE OF SURVEY
LEGAL DESCRIPTION:
PARCEL 1: That part of the NW 1/4 of Section 28, T4N, R2W, Lansing
Township, Ingham County, Michigan, described as: Commencing at the
North 1/4 corner of Section 28, I4N, R2W; thence S89(Degree)10'00"E,
59.94 feet along the North line of said Section 28 to the centerline of
South Washington Avenue (66 feet wide); thence S31(Degree)56'55"W,
633.80 feet along said centerline; thence 89(Degree)10'00"W, 38.55 feet
to the Northwesterly right of way line of said South Washington Avenue
and the point of beginning of this legal description; thence
S31(Degree)56'55"W, 411.06 feet along said right of way line; thence
N89(Degree)10'00"W, 1019.17 feet to the Southeasterly right of way line
of the New York Central Railroad (66 feet wide); thence
N53(Degree)59'45"E, 884.33 feet along said right of way line; thence
S89(Degree)10'00"E, 256.30 feet; thence S80(Degree)50'60"W, 178.28 feet
along a line which is an extension of and is the East side of a
foundation wall to the South side of a foundation wall, said wall being
on the North side of Open Courtyard No. 1 thence S89(Degree)10'00"E,
267.5 feet along said South side of said North courtyard wall, its
extension to the point of beginning. Contains 8.730 acres (380,290 Sq.
Ft.).
<PAGE>
EXHIBIT "C"
Space located on the first floor of 2110 South Washington Ave., Lansing,
Michigan containing 37,940 gross square feet of floor area being 271 feet East
and West by 140 feet North and South, from which the following areas are
excluded and reserved by Landlord for use by Landlord and/or other Tenants:
A. Basement ramp (12'x100') 1,200 sq. ft.
B. Third floor ramp (12'x40') 480 sq. ft.
C. Third floor staging area (20'x40') 800 sq. ft.
D. Building #60 ramp area (20'x20') 400 sq. ft.
for an excluded and reserved area totaling 2,880 sq. ft. which results in a net
leaseable area of 35,060 sq. ft. A sketch of this leased area is shown on
Exhibit "B" being a part of and attached hereto.
<PAGE>
July 29, 1993
Additional notice on utilities:
Electrical use is billed at $.049 K.W.H.
Water and Sewage charges will be a minimum of $60.00 per month for five people.
Fire Protection Cost - each riser monthly is $26.29, you have use of 4 risers or
$105.12 per month.
Water for fire risers if $28.20 per month.
Snow Plowing could be $40 - $50 per occurrence.
<PAGE>
[QUALITY DAIRY LETTERHEAD]
111 W. Mt. Hope Ave.
Lansing, MI 48910
July 5, 1994
Total Facilities Management
Attn: Paul Covert
2100 S. Washington Ave.
Lansing, MI 48910
Dear Paul,
During a meeting with Todd Thoman on June 22, 1994 it was agreed that
T.F.M. would hire in its own snow plowing contractor for the 1994-95 season and
into the future. The reason for this is to allow you to directly have control
over the snowplowing and among other reasons avoid overcharges from your
landlord.
The East end of the parking lot on the North side of the building is
your responsibility along with the drive and parking lot along 66% of south wall
of 2120 South Washington. Please avoid piling snow on other adjacent areas. If
you have any questions do not hesitate to call.
Sincerely,
/s/ Alan S. Martin
Alan S. Martin
<PAGE>
ADDENDUM #2
This shall serve as an agreement to change the leased area of a lease originally
signed August 8, 1993 for a 35,050 sq. ft. portion of a building located at 2110
South Washington Avenue, Lansing, Michigan, 48910, between Quality Dairy Company
as Landlord and Immaculate Eagle, Inc., D.B.A. Total Facilities Management as
Tenant.
1. This addendum shall be effective May 1, 1995.
2. The minimum annual rent shall be calculated as follows:
35,050 Sq. Ft. Main Floor at $2.22 sq. ft. $ 77,811.00 per year
3,000 Sq. Ft. Office use at $1.50 sq. ft. $ 4,500.00 per year
1,500 Sq. Ft. Showroom at $ .50 sq. ft. $ 750.00 per year
24,480 Sq. Ft. Basement at $1.11 sq. ft. $ 27,172.80 per year
Total per year $ 110,233.80
Total per month $ 9,186.15
3. Paragraphs 37 and 38 of the lease are cancelled and of no effect.
4. Parking for tenant is described as:
A. 35 employee parking spaces
B. 5 customer parking spaces
C. 5 truck or trailer parking spaces
All Tenants parking for employees is to the South of 2120 South
Washington Ave.
Any additional parking spaces needed by Tenant are at Tenants expense.
This would mean either the Tenant procuring this additional parking
space off site or the Landlord doing so and billing the Tenant for such
additional costs on a monthly basis. Landlord shall not bill Tenant for
on site available parking.
5. Landlord grants Tenant the right of first refusal to lease an
additional 14,520 sq. ft. in basement of 2110 South Washington and
32,000 sq. ft. in basement of 2100 South Washington Ave. This right
must be exercised within ten (10) day of notification by Landlord. Any
partial lease of space by Tenant shall not terminate this right of
first refusal.
6. Landlord reserves a 3,200 sq. ft. area in the North East corner of the
basement of 2110 South Washington Ave. for access to various utility
connections.
7. Tenant shall become current on all rents and utilities due Landlord by
May 1, 1995.
8. Basement space cost of living $.03 sq. ft. per year due yearly. The
first increase shall be due January 1, 1997.
<PAGE>
9. All storage of products in basement are on pallets or any other
material raised 2 inches or more off floor.
10. Landlord shall make a continuing reasonable effort to eliminate storm
drainage overflow in basement.
11. The rental rate of the basement area of 2100 and 2110 South Washington
shall be $1.11 Sq. Ft. for the 32,000 sq. ft. and 14,520 sq. ft.
areas.
12. Use of one common truck dock to North of basement area shall be made
available to Tenant. This dock area is not under lease to Tenant, it is
a non-dedicated common use dock.
13. Landlord will change locks in basement area.
14. Landlord will paint walls and ceiling, provide one 8 ft. fluorescent
light fixture for each 400 sq. ft. of basement and West main floor
space of approximately 12,000 sq. ft. Ramp to basement shall be
lighted with four florescent fixtures.
15. Landlord shall power wash basement floor.
16. Landlord shall install two (2) 8,000 CFM exhaust fans on North wall
of basement if existing fans prove inadequate.
17. Ramp repairs made by Landlord will allow the use of the ramp by fork
trucks.
18. Occupancy and rent shall start May 1, 1995. Alterations and repairs
will be completed by Landlord on or before May 12, 1995.
19. Landlord will install a metal fence in basement raceway so as to
restrict Tenant access to the building at 2100 S. Washington Avenue.
20. Landlord shall install a metal door (86" tall by 8' wide) to the North
of the leased space in the entry way to the basement raceway. Tenant
shall keep this door locked except when actively loading or unloading
freight.
Witness for Landlord QUALITY DAIRY COMPANY
/s/ /s/
- ------------------------------ ----------------------------------
Witness for Tenant IMMACULATE EAGLE, INC.
/s/ /s/
- ------------------------------ ----------------------------------
<PAGE>
ADDENDUM #3
This shall serve as an agreement to change the leased area of a lease originally
signed August 8, 1993 for a 35,050 sq. ft. portion of a building located at 2110
South Washington Avenue, Lansing, Michigan, 48910, between Quality Dairy Company
as Landlord and Immaculate Eagle, Inc., D.B.A. Total Facilities Management as
Tenant.
1. This addendum shall be effective December 1, 1995.
2. The minimum annual rent shall be calculated as follows:
35,050 Sq. Ft. Main Floor at $2.22 sq. ft. $77,811.00 per year
3,000 Sq. Ft. Office Use at $1.50 sq. ft. $4,500.00 per year
1,500 Sq. Ft. Showroom at $ .50 sq. ft. $750.00 per year
32,100 Sq. Ft. Basement at $1.11 sq. ft. $35,631.00 per year
---------
Total per year $118,692.00
Total per month $9,891.00
3. The basement floor area at 2110 South Washington Ave., Lansing, MI
contains 37,940 gross square feet of floor area being 271 feet East and
West by 140 feet North and South.
The North East floor area measuring 40 feet North and South by 110
feet East and West containing 4,880 sq. ft. is excluded from the
leased area.
The ramp on North wall being an area 12 feet by 80 feet containing
960 sq. ft. is for Tenant use but excluded from the leased area.
Witness for Landlord QUALITY DAIRY COMPANY
/s/ Jean M. Holda /s/ Alan L. Martin
- ------------------------------ ----------------------------------
Martin
Witness for Tenant IMMACULATE EAGLE, INC.
/s/ Deborah Graham /s/ Todd Thomann
- ------------------------------ ----------------------------------
<PAGE>
ADDENDUM #4
This shall serve as an agreement to change the leased area of a lease originally
signed August 8, 1993 for a 35,050 sq. ft. portion of a building located at 2110
South Washington Avenue, Lansing, Michigan, 48910, between Quality Dairy Company
as Landlord and Immaculate Eagle, Inc., D.B.A. Total Facilities Management as
Tenant.
1. This addendum shall be effective April 1, 1997.
2. The minimum annual rent shall be calculated as follows:
35,050 Sq. Ft. Main Floor at $2.42 sq. ft. $84,821.00 per year
3,000 Sq. Ft. Office Use at $1.50 sq. ft. $4,500.00 per year
1,500 Sq. Ft. Showroom at $ .50 sq. ft. $750.00 per year
32,100 Sq. Ft. Basement at $1.14 sq. ft. $36,594.00 per year
32,000 Sq. Ft. Basement at $1.14 sq. ft. $36,480.00 per year
8,000 Sq. Ft. Main Floor at $3.00 sq. ft. $24,000.00 per year
----------
Total per year $187,145.00
Total per month $15,595.00
Note: April 1997 rent shall be $13,595.00.
3. The basement floor area at 2100 South Washington Ave., Lansing, MI
contains 32,000 gross square feet of floor area being 320 feet East
and West by 100 feet North and South. Cost of living is .03(cent) sq.
ft. per year.
The Main Floor Receiving Area at 2100 South Washington Ave. measures
100 feet North and South by 80 feet East and West containing 8,000 sq.
ft. Cost of living is .10(cent) sq. ft. per year.
The Main Floor Raceway at 2100 S. Washington Ave. being an area 160
feet by 40 feet may be used by Tenant to move materials to adjacent
leased areas.
4. Landlord will paint basement area, sweep floors, and install one
fluorescent light fixture for every 400 sq. ft. Tenant shall install
floor sealer on basement floor of 32,000 sq. ft. area..
5. Occupancy of basement area subject to rights of existing Tenants in
possession.
6. Tenant agrees to pay all rents and utility payments when due.
Rent payable first day of month, utilities 30 days from invoice date.
Exhibit 10.14
[GRAPHIC OMITTED]
TITLE: BONUS PROGRAM FOR OFFICERS
OBJECTIVE: The objective of the Open Plan Bonus Plan is to reward officers of
the company for meeting or exceeding performance goals.
POLICY: The criteria for bonus consideration is pre-determined performance goals
of Earnings Per Share and Pre-Tax profit. Therefore, the bonus total amount
available is determined based on the pre-set goals of EPS and Pre-Tax profit.
If the goals are not met at the threshold level, there will be no bonus
consideration no matter what individual performance evaluation factors have been
met.
The payout bonus is determined based on the basis of a group of component
factors, each determined separately. For each category of officers (e.g., Chief
Executive Officer, Vice Presidents of Sales and Manufacturing, and CFO, etc.), a
percentage of salary is assigned to each of the component factors as indicated
in the table below. The total of an officer's percentages earned for each
component is then multiplied by the officer's salary to determine his or her
bonus.
The Bonus Performance Targets are as follows:
1. Pre-Tax Profit
a. If the pre-tax profits of Open Plan Systems increase by
less than 10% over those of the previous fiscal year, an
officer will receive no award for this component.
b. If the pre-tax profits of Open Plan Systems increase by 10%
over those of the previous year, this component equals the
threshold percentage.
c. If the pre-tax profits of Open Plan Systems increase by
more than 10% over those of the previous fiscal year, but are
less than the budgeted pre-tax profits, this component is
graded pro-rata between the threshold percentage and the
target percentage.
d. If the pre-tax profits of Open Plan Systems equal the
budgeted pre-tax profits, this component equals the target
percentage.
<PAGE>
e. If the pre-tax profits of Open Plan Systems exceed the
budgeted pre-tax profits by less than 20% , this component is
graded pro-rata between the target percentage and the excess
percentage.
f. If the pre-tax profits of Open Plan Systems exceed the
budgeted pre-tax profits by at least 20%, this component
equals the excess percentage.
2. Earnings Pre Share
a. If the earnings per share of Open Plan Systems increase by
less than 10% over those of the previous fiscal year, an
officer will receive no award for this component.
b. If the earnings per share of Open Plan Systems increase by
10% over those of the previous year, this component equals the
threshold percentage.
c. If the earnings per share of Open Plan Systems increase by
more than 10% over those of the previous fiscal year, but are
less than the budgeted earnings per share, this component is
graded pro-rata between the threshold percentage and the
target percentage.
d. If the earnings per share of Open Plan Systems equal the
budgeted earnings per share, this component equals the target
percentage.
e. If the earnings per share of Open Plan Systems exceed the
budgeted earnings per share by less than 20%, this component
is graded pro-rata between the target percentage and the
excess percentage.
f. If the earnings per share of Open Plan Systems exceeded the
budgeted earnings per share by at least 20%, this component
equals the excess percentage.
3. Outstanding Performance Percentage
If the company performance in pre-tax profit and earning per share
exceeds the target by more than 10%, the special salary percentage will
be added to the Bonus Calculation. This will only apply to the top
officer category.
<PAGE>
Based on the above objectives, the percentages assigned for each
category of officer bonus possibility is listed below.
Factor Category
A B C
Earnings per share
Threshold 6.25% 4.375% 3.125%
Target 12.5% 8.75% 6.25%
Excess 25% 17.5% 12.5%
Pre-tax income
Threshold 6.25% 4.375% 3.125%
Target 12.5% 8.75% 6.25%
Excess 25% 17.5% 12.5%
Outstanding Performance 10%
The categories of officers are:
A. CEO
B. Vice President - Sales
CFO
C. Vice President - Manufacturing
Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
-------------------------------------------------
<S> <C> <C>
Weighted average shares outstanding during the period 3,565 2,446
Average number of shares assumed outstanding during the
period approximating the number of shares sold (at
the initial offering price of $10) to fund the final
S Corporation distribution 111 270
Total 3,676 2,716
=================================================
Net income used in earnings per common share calculation
$ 1,387 $ 1,138
=================================================
Earnings per common share $ .38 $ .42
=================================================
</TABLE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
The Registrant has one wholly owned subsidiary, Immaculate Eagle,
Inc., d/b/a TFM Total Facilities Management and TFM Remanufactured Office
Furniture. Immaculate Eagle, Inc. is a Michigan corporation.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8, No. 333-15219) pertaining to the Open Plan Systems, Inc. 1996 Stock Option
Plan for Non-Employee Directors of our report dated February 13, 1997, with
respect to the consolidated financial statements of Open Plan Systems, Inc.
included in the Annual Report (Form 10-KSB) for the year ended December 31,
1996.
ERNST & YOUNG LLP
Richmond, Virginia
March 24, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8, No. 333-15217) pertaining to the Open Plan Systems, Inc. 1996 Stock
Incentive Plan of our report dated February 13, 1997, with respect to the
consolidated financial statements of Open Plan Systems, Inc. included in the
Annual Report (Form 10-KSB) for the year ended December 31, 1996.
ERNEST & YOUNG LLP
Richmond, Virginia
March 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF OPEN PLAN SYSTEMS, INC. AS OF DECEMBER 31, 1996
AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE YEAR
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0001011738
<NAME>Open Plan Systems, Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,066
<SECURITIES> 0
<RECEIVABLES> 5,371
<ALLOWANCES> (119)
<INVENTORY> 6,807
<CURRENT-ASSETS> 15,993
<PP&E> 3,403
<DEPRECIATION> (705)
<TOTAL-ASSETS> 23,710
<CURRENT-LIABILITIES> 2,721
<BONDS> 0
0
0
<COMMON> 20,088
<OTHER-SE> 703
<TOTAL-LIABILITY-AND-EQUITY> 23,710
<SALES> 22,398
<TOTAL-REVENUES> 22,398
<CGS> 15,160
<TOTAL-COSTS> 15,160
<OTHER-EXPENSES> 4,780
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141
<INCOME-PRETAX> 2,317
<INCOME-TAX> 376
<INCOME-CONTINUING> 1,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,941
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
